TMI Blog1975 (2) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were produced or which were available to the Sales Tax Officer or the certified copies or agreed copies thereof to enable the Tribunal to draw up a proper statement of the case. These references now again come up before us after the Tribunal, in pursuance of the aforesaid directions given by the High Court, has drawn up a fresh statement of the case. We regret to observe that the fresh statement of the case is only in some negligible degrees less unsatisfactory than the statement of the case as originally drawn up by the Tribunal. Fortunately, however, the copies of all the relevant documents which were produced before the sales tax authorities have been forwarded to this court with the fresh statement of the case and we have been able to gather the facts which have given rise to these references with the assistance of counsel for both the parties and the documents, and it transpires that the facts really are not in dispute and we fail to see why the Tribunal could not have drawn up a fresh statement of the case setting out these facts. Fortunately, the parties are in agreement as to what the facts which have given rise to these references are, and we will now proceed to relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd price. During the assessment period 1st April, 1958, to 31st March, 1959, the applicants purchased goatskins of the aggregate value of Rs. 4,68,041 from registered dealers and of the aggregate value of Rs. 2,34,963 from unregistered dealers, and during the assessment period 1st April, 1959, to 31st December, 1959, the applicants purchased goatskins of the aggregate value of Rs. 10,40,091 from registered dealers and of the aggregate value of Rs. 6,90,846 from unregistered dealers. All these goatskins were sold and delivered by the applicants to Raznoexport in fulfilment of their said contract. The dispute between the revenue and the applicants is with respect to the purchases of goatskins made by the applicants from unregistered dealers during the aforesaid two periods. According to the department, the applicants were liable to pay purchase tax on these purchases under section 7A of the Bombay Act, while according to the applicants the said purchases were not exigible to tax by reason of the provisions of Notification No. STA. 1058-G-1 dated 7th October, 1958, and Notification No. STR. 1058-(xiii)-G-1 dated 10th September, 1959, by which the said notification of 7th October, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to claim exemption under Notification No. STA 1058-G-1 dated 7th October, 1958, and Notification No. STR. 1058-(xiii)-G-1 dated 10th September, 1959?" Sales Tax Reference No. 20 of 1968 relates to the assessment period 1st April, 1958, to 31st March, 1959, and Sales Tax Reference No. 21 of 1968 relates to the assessment period 1st April, 1959, to 31st December, 1959. In order to appreciate the rival submissions advanced at the Bar it is first necessary to set out certain relevant statutory provisions. Section 14 of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Central Act"), declares certain goods to be of special importance in inter-State trade or commerce. These goods are known as "declared goods" and are so defined in section 2(c) of the Central Act. Section 15 of the Central Act imposes certain restrictions and conditions in regard to the levy of a State tax on the sale or purchase of declared goods within a State. At the relevant time, the said section provided as follows: "Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State-Every sales tax law of a State shall, in so far as it imposes or authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification. The said entry provided as follows: "Goods Rate Stage Hides and Two (i) Sale to a person who is not a registered dealer skins, whether naye or to a registered dealer who purchases the in a raw or paise goods for a purpose other than resale, or dressed state. in the (ii) Purchase by a dealer who is liable to pay tax rupee. under the Act for any purpose other than resale from a person who is not a registered dealer: Provided that in either case no tax has been paid or is payable on an earlier sale or purchase of the goods." The said notification was amended by Notification No. STR. 1058-(xiii)G-1 dated 10th September, 1959. The only amendment made in the said entry No. 3 was to add the following explanation thereto: "In the case of goods purchased for resale, 'resale' means resale of the goods in the same form in which they were purchased or after processing or altering them in such manner that the goods produced after such process or alteration continue to be goods falling under the same entry under which they fell before such process or alteration." There is no dispute between the parties that the goatskins purchased by the applicants from unregistered deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bombay General Clauses Act, 1904, provides as follows: "Construction of orders, etc., issued under Bombay Acts or Maharashtra Acts.-Where, by any Bombay Act or Maharashtra Act, a power to issue any notification, order, scheme, rule, by-law or form is conferred, then expressions used in the notification, order, scheme, rule, by-law or form, if it is made after the commencement of this Act, shall, unless there is anything repugnant in the subject or context, have the same respective meanings as in the Act conferring the power." The expression "resale" in the said two notifications must, therefore, in our opinion, bear the same meaning as given to it by clause (13) of section 2 of the Bombay Act, inasmuch as it is an expression cognate to the expression "sale". It was, however, submitted by Mr. Kotwal, the learned counsel for the respondent, that the meaning to be given to the expression "resale " in the said notifications must be the one contained in the said clause (13) of section 2 of the Bombay Act without the explanation thereto. In order to appreciate this submission it is necessary to set out sections 3, 4 and 5 of the Central Act. These sections provide as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India." In Mr. Kotwal's submission, if a sale took place in the course of interState trade or commerce or had occasioned the export of the goods out of the territory of India, such a sale could not at the same time come under section 4 of the Central Act and could not be termed as "an intra-State sale". Mr. Kotwal has further submitted that the legislative powers of a State do not extend to levying any tax on the sale or purchase of goods taking place in the course of inter-State trade or commerce or in the course of the import of the goods into or the export of the goods out of the territory of India, since under article 286 of the Constitution there is a constitutional ban on the levy of tax on these classes of sales and purchases. According to Mr. Kotwal, the State has no power to exempt a transaction of sale or purchase from a State levy unless it has the power to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale or a purchase can be said to have taken place outside the State is to be determined by the principles formulated by the Parliament in section 4 of the Central Act. A sale or a purchase must take place at some place and when it takes place at a particular place, it obviously takes place outside all other places. Therefore, in order to determine when a sale or a purchase should be considered as an outside State sale or purchase, the Parliament under section 4 of the Central Act has formulated principles for determining the State inside which such sale or purchase should be deemed to take place. Once on an application of the said principles it is determined that the sale or purchase has taken place within a particular State, both according to ordinary notions and by the express words of sub-section (1) of section 4 of the Central Act it should be deemed to have taken place outside all other States and thereafter in respect of such sale or purchase no State other than the State inside which such sale or purchase has taken place, by reason of the principles enunciated by section 4 of the Central Act, can impose any tax on such sale or purchase. Mr. Kotwal, the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 4 of the Central Act. It, however, preferred a briefer and a more logical form of draftsmanship by stating that such a sale should be determined "in accordance with the principles specified in sub-section (2) of section 4 of the Central Sales Tax Act, 1956". Thus, what the legislature has done is to incorporate the provisions of sub-section (2) of section 4 of the Central Act by referring to that sub-section in the explanation to clause (13) of section 2 of the Bombay Act. The effect of the incorporation of the provisions of one Act into another Act fell to be considered by the Court of Appeal in In re Wood's Estate: Ex parte Her Majesty's Commissioners of Works and Buildings(1886) 31 Ch. D. 607. In that case the question was of the incorporation of certain provisions of an earlier Statute of 1840, namely, Act 14 and 15 Vict. c. 42, into the Downing Street Public Offices Extension Act, 1855 (18 19 Vict. c. 95), by section 9 of the Act of 1855. Lord Esher, M.R., thus explained the effect of the said incorporation (at pages 615-616): "The material sections of the Act of 1855 are the 9th and the 11th. By the 9th section certain sections of the Act of 1840 are incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from taxation. We really fail to see how this submission at all arises or is justified. No tax has been sought to be levied on any sale made by the applicants to Raznoexport nor by the said notifications is such a sale made exempt from taxation. What is sought to be exempted by the said notifications is not a sale made in the course of the export of the goods or which occasioned the export of the goods but the preceding purchase made by the exporter. It is not disputed that the preceding purchase made by the exporter could have been made subject to the levy of a purchase tax under section 7A of the Bombay Act, but for the exemption granted by the said notifications, provided the notifications applied. The notifications, therefore, do not relate to the taxability or otherwise of the sales made by the applicants but to the taxability of the purchases made by the applicants, which indisputably the State Legislature had the power to tax. It was next submitted by Mr. Kotwal, the learned counsel for the respondent, that the tax levied by section 7A of the Bombay Act in accordance with the restrictions and conditions imposed by section 15 of the Central Act was a single point levy and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the applicants for their purchases from unregistered dealers is that the goods should have been resold. As we have seen, "resold" means "resold within the State". The only question, therefore, is whether these goods have been resold by the applicants inside the State as provided by the explanation to clause (13) of section 2 of the Bombay Act. It was, however, submitted by Mr. Kotwal that if a sale had occasioned an export of the goods out of the territory of India, that sale could never be said to be an intra-State sale even if, according to the principles formulated by section 4 of the Central Act, it would otherwise be an intra-State sale; for, according to Mr. Kotwal, no sales tax could be levied by the State Legislature on a sale which occasioned the export. This submission is based upon the same fallacy, namely, that by incorporating sub-section (2) of section 4 of the Central Act into the explanation to clause (13) of section 2 of the Bombay Act the Legislature has incorporated therein all the provisions of sections 3, 4 and 5 of the Central Act. The fallacy lies in the approach adopted by the revenue authorities. The approach was to see whether the transaction was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the ambit of section 4 of the Central Act so far as the State's power to levy tax in respect of it is concerned, but that is a question wholly different from the one with which we are concerned. In this connection, it will be useful to refer to the decision of the Supreme Court in Bengal Immunity Company Limited v. State of Bihar(1). Article 286 of the Constitution prior to its amendment by the Constitution (Sixth Amendment) Act, 1956, imposed a ban on a State's power to levy tax on sales and purchases of goods taking place outside the State or in the course of the import of the goods into the territory of India or their export out of the territory of India as also, except in so far as the Parliament might by law provide, upon any sales or purchases taking place in the course of inter-State trade or commerce. The explanation to clause (1) of the unamended article 286 provided that a sale should be deemed to have taken place in that State in which the goods were actually delivered as a direct result of such sale or purchase for the purpose of consumption therein. The effect of these bans imposed by the unamended article 286 of the Constitution came to be considered by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her aspects of the sale or purchase, e.g., its inter-State character or its export or import character which are entirely different topics. This fixing of situs for a sale or purchase in any particular State either under the general law or under the fiction does not conclude the matter. It has yet to be ascertained whether that sale or purchase which by virtue of the explanation has taken place in the delivery State was made in the course of inter-State trade or commerce. For this purpose the explanation can have no relevancy or application at all." In our opinion, the above observations apply with equal force to the bans imposed by the amended article 286 and the formulation of the principles for ascertaining them prescribed by the Central Act. Each of the bans prescribed by article 286 views a transaction of sale or purchase from a different angle. It prohibits the levy of a State tax if, viewed from one angle, a sale or purchase comes under one of the bans even though, when viewed from a different angle, the sale or purchase would be outside the ban. A State could exercise its taxing power and levy tax on a sale or purchase of goods only if, according to the principles formula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to pay the purchase tax would be that of the Pondicherry mill and not of the assessees. In support of their contention the assessees relied upon clause (n) of section 2 of the Andhra Pradesh General Sales Tax Act, 1957, which defines "sale" and, particularly, upon explanation 11, which reproduces the provisions of section 4(2) of the Central Act. The question which the court had, therefore, to decide in that case was whether the assessees were the last purchasers within the State and, therefore, liable to pay the purchase tax or whether the Pondicherry mill was the last purchaser within the State and, therefore, liable to pay the purchase tax. The court held that though the situs of the sale could be located in Andhra Pradesh, having regard to the terms of explanation 11 it was not determinative of the matter and that to find an answer to the said question the court had first to determine the nature of the sale in the light of the other provisions of both the Andhra Pradesh General Sales Tax Act and the Central Act. After referring to the judgment of Das, Ag. C.J., in the case of Bengal Immunity Company Limited v. State of Bihar[1955] 6 S.T.C. 446 (S.C.)., the court observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to above, arose for the court's determination. In the Madras case(2) also the assessees had purchased cotton Locally and then sold it to dealers outside the State. The relevant provisions of section 9 of the Madras General Sales Tax Act, 1959, were almost identical with the provisions of section 9 of the Andhra Pradesh General Sales Tax Act, 1957, to which we have already referred. On a perusal of the relevant sections of the Madras General Sales Tax Act, including the said section 9, the court held that in respect of declared goods the tax payable by a dealer was only on the sale or purchase, as the case may be, inside the State, preceding the inter-State sale or purchase at the point specified against each in the Second Schedule to the said Act and as the assessees had purchased cotton locally and had then sold the same in the course of inter-State trade or commerce to dealers outside the State, the assessees were the last purchasers of cotton inside the State liable to pay the purchase tax. Mr. Kotwal next relied upon a decision of the Delhi High Court in Fitwell Engineers v. Financial Commissioner, Delhi Administration, Delhi[1975] 35 S.T.C. 66. Under section 5(2)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; but if a State does so, it is open to the State Legislature to select certain classes of transactions of sale or purchase and tax them and either exclude the remaining transactions or give exemptions in respect thereof. As pointed out above, by the scheme of licensing and authorisation introduced by sections 8 and 9 of the Bombay Act, there can be a series of transactions terminating either in a sale taking place in the course of export of the goods out of the territory of India or in the course of interState trade or commerce in which no sales tax or purchase tax is imposed at any stage. An authority relevant to the point which we have to decide is the decision of the Gujarat High Court in Commissioner of Sales Tax v. Godrej Soap Pvt. Ltd.[1969] 23 S.T.C. 489. relied upon by Mr. Surte, the learned counsel for the applicants. This was a case under the Bombay Sales Tax Act, 1959, as applicable to the State of Gujarat. Under that Act a dealer is entitled to obtain an authorisation if the turnover of sales of goods exported by him outside India during the relevant year exceeds the limit of Rs. 30,000. In support of the fact that their turnover exceeded the prescribed limit the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for creating liability to taxation, sales or purchases taking place outside the State or in the course of the import of the goods into or the export of the goods out of the territory of India or in the course of inter-State trade or commerce could not be included because they would not be within the purview of the Act. The explanation to the said section 75 only provided that the principles laid down under sections 3, 4 and 5 of the Central Act would be applied to determine when a sale or purchase took place outside the State or in the course of import or export or inter-State trade or commerce, and which had got to be excluded for the purpose of considering the liability for tax under the Act. The court further observed: "Therefore, the non obstante clause in section 75 would have a very limited effect in so far as it must override any provision of the State law which seeks to impose a tax on such sales, notwithstanding the constitutional embargo. Except for that limited purpose such outside sales or sales in the course of inter-State transport or in the course of import or export would not be excluded from the operation of the Act for all other purposes, especially when the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a covenant or incident of the contract of sale and the property in such goods passes either in India or in the foreign country. This position has been accepted by the Supreme Court in K. G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division, Madras[1966] 17 S.T.C. 473 at 487 (S.C.). In the present case there is no dispute that the terms of the contracts between the applicants and Raznoexport were carried out. Under the terms of the said contract the goatskins were shipped by the applicants from Bombay to a Russian port. Raznoexport had the right to examine the goatskins at the applicants' godown as also at the port prior to the loading of the goods on board the ship. The goods were packed in bales bearing certain specified marks. It is clear from the terms of the contract that these sales were of unascertained goods and at the time of their appropriation to the said contracts they were within the State and accordingly the sale of these goods by the applicants to Raznoexport took place within the State. In the result, in both the said references we answer the question reframed by us in the negative. The respondent will pay to the applicants the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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