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TMI Blog1957 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sales Tax Officer rejected the petitioners' claim on the ground that the impugned sales were completed at Bargarh in the district of Sambalpur inside the State of Orissa before they were despatched to the mills outside. Against this order of the Sales Tax Officer, the dealers preferred an appeal to the Assistant Collector of Sales Tax, Sambalpur, who by his order dated 15th December, 1952, dismissed the appeal holding that the transaction of sales between Messrs Paluram Dhandhania and Co. and the purchasing jute mills outside the State of Orissa may come under inter-State trade, but not the transaction between the petitioners and Messrs Paluram Dhandhania. Accordingly, he negatived the contention of the petitioners and held that the sales of jute to Messrs Paluram Dhandhania were not in the course of inter-State trade and as such they attract sales tax in this State. Against this order of the Assistant Collector, the petitioners filed a revision petition before the Collector which was also rejected by him. The Collector of Sales Tax, however, held that the petitioners purchased most of the jute from other dealers in the State of Orissa. The goods were actually resold in this Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. His first contention was that the petitioners should have been given an opportunity to adduce evidence to show that the purchases were made under the instructions of Messrs Paluram Dhandhania under commission basis and thus it assumed the complexion of inter-State trade from the very inception of the transaction. He not having been given any such opportunity, this Court should call upon the Member, Board of Revenue, to restate the case after recording the necessary evidence. His next contention was that the petitioners are exempt from taxation by the local authorities by virtue of Article 286(2) of the Constitution. 4.. The local Act under section 24(4) provides for the re-statement of a case by the Revenue Commissioner on certain specified grounds. Sub-section (4) to section 24 lays down that if the High Court is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, it may refer the case back to the Revenue Commissioner to make such additions thereto or alterations therein as the Court may direct in that behalf. Thus, sub-section (4) does not empower this Court to remand a case for re-state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the regular procedure under which it is for the Tribunal to state formally the question that arises and it is for the High Court to decide the question of law so raised from the assessment orders. Hence, there is no merit in the first contention of Mr. Mohanty. 5.. Turning to his second contention, Mr. Mohanty relied upon the First Travancore-Cochin case[1952] 3 S.T.C. 434; A.I.R. 1952 S.C. 366. , and the Second Travancore-Cochin case[1953] 4 S.T.C. 205. 6.. In the First Travancore-Cochin case (State of Travancore-Cochin and Others v. Bombay Company Ltd.,(1)) the facts were that the Bombay Company Ltd., were dealing in coir products, lemon grass oil and tea and were assessed on the turnover of the sales of these commodities which were exported to foreign buyers on c.i.f. or f.o.b. terms as per their contract. The company claimed exemption from assessment in respect of the sales effected by them on the ground, inter alia, that such sales took place "in the course of the export of the goods out of the territory of India" within the meaning of Article 286(1)(b) of the Constitution. The Revenue Authorities negatived the contention of the company, since in their view the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nverting them by means of certain processes into edible kernels, they exported the same to other countries, mainly, to America. The oil pressed from the shells removed from the cashewnuts was also exported. A question, after the enforcement of the Constitution on 26th January, 1950, arose if the respondent-factory can be allowed exemption under Article 286 from 29th May, 1950, to the end of the accounting year. The Sales Tax Authorities negatived the claim of the respondent-factory whereas the High Court under Article 226 of the Constitution upheld the claim and quashed the assessments so far as they related to the period mentioned above. On appeal to the Supreme Court, the majority took the view that the language of clause (1)(b) of Article 286 clearly requires as a condition of the exemption that the export must be of the goods whose sale or purchase took place in the course of export. Where the respondents who were dealers of certain goods in the State of Travancore-Cochin, purchased goods from the neighbouring districts of the State of Madras and their own paid servants took deliveries of the goods outside the State of Travancore-Cochin, the provisions of Article 286(1)(a) woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxing power of those other States with respect to such sale or purchase. The Explanation does not operate as an exception or a proviso but only explains sub-clause (a). Its purpose is not to confer any taxing power on any State, and it cannot be resorted to for any such extraneous or collateral purpose. It does not convert an inter-State sale or purchase into an intra-State sale for any purpose other than the limited purpose of subclause (a). The non-obstante clause in the Explanation clearly implies that the framers of the Constitution adopted the view that a sale or purchase has a situs and that it ordinarily takes place at the place where the property in the goods passes. If, therefore, a sale or purchase takes place outside the State either under the general law or by virtue of the fiction created by the Explanation, then that State cannot, under clause (1)(a) tax such sale or purchase. If a sale or purchase takes place within a State, either under the general law or by reason of the Explanation, then if such a sale or purchase takes place "in the course of" inter-State trade and commerce, no State, not even the State where the sale or purchase takes place as aforesaid, can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under Article 286(1)(b) was ultra vires the Legislature. The High Court, however, granted to the State of Madras a certificate under Article 134(1)(c) of the Constitution. On appeal to the Supreme Court, Das, Acting Chief Justice (as he then was), held that even conceding, without deciding it, that section 16A did not prevent the respondent from questioning the validity of the assessment, it was impossible to hold, on the evidence adduced by the respondents, that the purchases were exempt from sales tax by virtue of Article 286(1)(b). Accordingly, the order of acquittal as passed by the High Court of Madras was reversed and the Supreme Court restored and confirmed the orders of conviction, sentence and the directions as passed by the trial Court. While coming to this conclusion, the majority view in the Second Travancore-Cochin case[1953] 4 S.T.C. 205. appears to have been accepted. As I have stated above, the majority had taken the view that if the purchases were made in the neighbouring districts of Madras and deliveries were effected through ordinary commercial channels by employing commission agents who made the purchases and arranged for the deliveries at the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the ambit of clause (2). The dominant, if not the sole, purpose of Article 286 is to place restrictions on the legislative powers of the States, subject to certain conditions in some cases and with that end in view Article 286 imposes several bans on the taxing powers of the State in relation to sales or purchases viewed from different angles and according to their different aspects. In some cases the ban is absolute [clause (1)(a) read with the Explanation and clause (1)(b)] and in some cases it is conditional [clause (2)]. Again, in some cases, the bans may overlap but nevertheless they are distinct and independent of each other. The operative provisions of the several parts of Article 286, namely, clause (1)(a), clause (1)(b), clauses (2) and (3), are intended to deal with different topics and one cannot be projected or read into another. Therefore, except in so far as Parliament may by law provide otherwise, no State law can impose or authorise the imposition of any tax on sales or purchases when such sales or purchases take place in the course of inter-State trade or commerce and irrespective of whether such sales or purchases do or do not fall within the Explanation to Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes place outside the State of Orissa; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide; (2) The explanation to clause (1) of Article 286 of the Constitution shall apply for the interpretation of sub-clause (i) of clause (a) of subsection (1)." 13.. Thus, according to my discussions above, the sale to the mills outside the State of Orissa had nothing to do with the sale by the dealer to Messrs Paluram Dhandhania. Further, the sale having been completed at Bargarh, it cannot be held that it had itself occasioned the export and thus assumed a complexion of inter-State trade at its inception. Besides, the sale to outsiders was the result of a separate contract with the outsider millers, and, accordingly, it cannot be said that the sale by the dealer to Messrs Paluram Dhandhania and Co., was in the course of inter-State trade. Thus, the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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