TMI Blog1986 (7) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... ch judgment of this Court in Civil Writ Petition No. 1227 of 1982 [Murli Manohar and Company v. State of Haryana (printed at page 165 infra)] decided on 25th November, 1980. The learned counsel for the petitioner, besides impugning the vires of sections 9 and 24(b)(iii) of the Haryana General Sales Tax Act, 1973, contends that the interpretation placed on sub-sections (1) and (3) of section 5 of the Central Sales Tax Act in the abovenoted judgment is not correct. The submission of the learned counsel in this regard is that the sales or purchases which are covered by sub-section (3) of section 5 of the Central Sales Tax Act have to be deemed to be sales or purchases in the course of export of goods outside the territory of India as envisaged by sub-section (1) of this section. He maintains that since the opening words of section 24 of the Haryana General Sales Tax Act exempt the purchase of goods from the payment of sales tax if the same is made in the course of export of goods outside the territory of India, within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, the purchases made by the petitioner-though not a direct exporter-for purposes of supplying goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thumb-nail sketch of the facts will help in understanding and determining the forensic controversy raised in these writ petitions. Messrs. Saraswati Udyog, Jagadhri (petitioner in C.W.P. No. 1397 of 1984) is a partnership concern engaged in the business of manufacture and sale of aluminium utensils. It is registered under the Haryana Act and the Central Sales Tax Act, 1956 (for short the "Central Act"). The petitioner sells the utensils to the exporters who, in turn, export these finished goods out of the territory of India. The petitioner filed returns for the assessment year 1982-83 and disclosed its gross turnover. No tax liability was created under the Haryana Act in relation to the sales to the tune of Rs. 69,174.57 as the same were accepted to be made in the course of the export out of India under sub-section (3) of section 5 of the Central Act and they were admissible for exemption under section 27(1)(a)(ii)(iv) of the Haryana Act. However, later on, relying on the recent decision of this Court in Murli Manohar and Company v. State of Haryana (printed at page 165 infra); STI 1981 P H 112, the Assessing Authority, Jagadhri, assessed the petitioner-firm on the estimated p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on the purchases made by petitioner and directed the petitioner to pay interest thereon. It has also held the petitioner liable to pay penalty under section 50 of the Haryana Act. The petitioners challenge the orders of the Assessing Authorities imposing purchase tax on the goods purchased by them in the State of Haryana because such goods were used by the petitioners in Civil Writ Petitions Nos. 1397 and 3186 of 1984 for the manufacture of aluminium utensils and guar gum respectively and had sold the finished goods to exporters at Bombay who, in turn, had exported those goods out of the country. The petitioner in the other writ petitions, (i.e., Civil Writ Petitions Nos. 2748, 2948 and 2949 of 1985), who is a trader in cotton, had purchased cotton bales in the State of Haryana on the strength of form H certificates of export issued by the exporters under the Regulations without paying any purchase tax. They had sold these bales of cotton to exporters at Bombay who, in turn, had exported them out of the country. These purchases by the petitioner were inextricably connected with the ultimate export of the goods by the exporters and had taken place in the course of trade as def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace in the course of export within the meaning of sub-section (1) of section 5 of the Central Act are exigible to purchase tax, does not lay down correct law and needs reconsideration and is liable to be set aside. The respondents have resisted these writ petitions and have filed separate returns. They have controverted the main pleas raised by the petitioners. It has been clarified that in all these cases the petitioners made the purchases of goods within the State of Haryana and sold those very goods or finished goods manufactured out of those goods to exporters who, in turn, had exported them out of the territory of India within the meaning of sub-section (3) of section 5 of the Central Act. These purchases were, therefore, not exempt from purchase tax and were exigible to tax under section 9 of the Haryana Act. The provisions of sections 9, 24 and 27 of the Haryana Act were perfectly legal and valid. They fully accord with the provisions of article 286 of the Constitution. They are not in conflict with the provisions of articles 14, 19 and 300-A of the Constitution. There was no conflict, inconsistency, hiatus or repugnancy between the provisions of sections 9, 24 and 27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (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. (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." Sections 9, 12, 24 and 27 of the Haryana Act are in the following terms: "9. Liability to pay purchase tax.-(1) Where a dealer liable to pay tax under this Act,- (a) purchases goods, other than those specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods out of, the territory of India; or (iii) where such sale or purchase takes place in the course of inter-State trade or commerce. 24.. Rights and liabilities of registered dealers.-(1) Every dealer registered under this Act shall be entitled to purchase, without payment of sales tax, the following goods within the State, on the authority of his certificate of registration by giving to the dealer, from whom the goods are purchased, a declaration, duly filled and signed by him, containing such particulars, on such form, obtained from such authority, as may be prescribed, and in case such form is not available with such authority, in such manner as may be prescribed,(a) any goods, other than those leviable to tax at first stage of sale under section 17 or section 18, for the purpose of- (i) resale in the State; or (ii) sale in the course of inter-State trade or commerce Provided that a dealer registered under this Act, shall also be entitled to purchase barley, without payment of sales tax on the authority of his certificate of registration, on furnishing to the selling registered dealer, a declaration referred to above, for sale by him in the course of export outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that part of a dealer's gross turnover during any period which remains after deducting therefrom his turnover during that period- (a) on account of- (i) .................. (ii) .................. (iii) .................. (iv) sale of goods falling under section 12: Provided that in the case of sale falling under sub-section (3) of section 5 of the Central Sales Tax Act, 1956 the dealer effecting such sale shall furnish to the assessing authority a declaration duly filled and signed by the dealer transacting the sale falling under sub-section (1) of section 5 of the Central Sales Tax Act, 1956 containing such particulars, on such form andobtained from such authority by the dealer transacting the sale falling under sub-section (3) of section 5 of that Act, as may be prescribed and in case such form is not available with such authority, in such manner, as may be prescribed: Provided further that no such deduction shall be admissible to the dealer transacting sale falling under sub-section (3) of section 5 of the Central Sales Tax Act, 1956, if it is found that the particulars furnished in the declaration were incorrect or incomplete or the person making purchase from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excludes taxation by the States." This formulation by the Division Bench did not find favour with the Full Bench in Des Raj Pushap Kumar Gulati v. State of Punjab [1985] 58 STC 393 (P H). The Bench posed a question-"as to whether section 9(1)(b) of the Haryana Act and the corresponding provisions of the Punjab Act envisage levying of tax on the purchases of goods or, inter alia, on the despatch of such goods within the State of Haryana otherwise than by way of sale in the course of inter-State trade or commerce?" Their Lordships after exhaustively examining and analysing the history of the legislation, the provisions of the statutes and decisions of various High Courts and the Final Court having a direct bearing on the issues, more particularly, the decision of the Supreme Court in State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191 (SC) given in the context of the provisions of section 7 of the Madras General Sales Tax Act, 1959, the relevant portion whereof in substance is in pari materia with section 9 of the Haryana Act, came to the conclusion: "The judicial consensus as already noticed in regard to the identical provision of the taxing statutes of other States that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te regarding taxes on the purchase and sale of goods as enumerated in entry 54 of List II of the Seventh Schedule to the Constitution of India. They are not repugnant to section 5(3) of the Central Act. The incidence of taxation under the two sections is entirely different. It has not been shown as to how sections 9, 24 and 27 of the Haryana Act infringe articles 19(1)(g) and 300-A of the Constitution of India. It is wellsettled that imposition of reasonable sales or purchase tax does not violate the provisions of articles 19(1)(g) and 300-A of the Constitution of India. Section 9 of the Haryana Act does not in any way violate article 14 of the Constitution of India. A concession has been extended by this provision to dealers who directly export goods out of the territory of India. Such dealers do not utilise the services of any other agency or export house for exporting their goods out of the territory of India. The State Legislature in its wisdom exempted the raw material used in the manufacture of goods exported out of India within the meaning of sub-section (1) of section 5 of the Central Act and have not extended this benefit to the purchase of raw material used in the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power of the State to levy taxes for the purpose of governance and for carrying out its welfare activities is a necessary attribute of sovereignty and, in that sense, it is a power of paramount character. There is another decision of the final Court in T.G. Venkataraman v. State of Madras [1969] 24 STC [Short Notes (SC) 1]* which has a direct bearing on the issue. In that case, the assessee had challenged the notifications issued by the State Government under sections 59(1) and 17(1) of the Madras General Sales Tax Act, 1959, whereby the transactions of sale of cane jaggery became liable to sales tax and sale of palm jaggery remained exempt from liability to pay sales tax with effect from 1st January, 1968. The notification under section 59(1) received legislative sanction by Madras Act No. 2 of 1968. These notifications were challenged on the ground that they discriminated between sales of similar articles. This contention was not accepted and their Lordships of the Supreme Court held that: "cane jaggery and palm jaggery were not commodities of the same class; the methods of their production were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulated another principle and incorporated the same in section 5 in the form of sub-section (3). It was devised to mitigate the difficulties of small and medium manufacturers and traders who, for the export of their goods, have to depend on so experienced trade houses who possess the special expertise of carrying on export trade. It was provided that the last sale or purchase preceding the sale or purchase occassioning the export of goods out of the territory of India shall also be deemed to be a sale or purchase in the course of export. This principle is not a corollary of the first one incorporated in section 5(1). It deals with an entirely different situation. The apex Court had held that sales by the manufacturers or traders to the exporters, who sold those goods to the foreign buyers, even if inextricably connected with the final sales, were not sales and purchases in the course of export. It was thereafter that the second principle declaring the last sale or *For full reports: See [1970] 25 STC 196 (SC). purchase preceding the sale or purchase of goods occasioning their export out of the territory of India was deemed to be sales in the course of export was framed. This princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislative competence of the State Legislature. This express taxation policy of the State Legislature, which is otherwise valid, cannot be defeated by resort to any abstract rules of construction. For the foregoing reasons, we find no merit in these writ petitions. We also affirm the ratio in Murli Manohar's case (printed at page 165 infra); STI 1981 P H 112. The writ petitions are dismissed but with no order as to costs. Writ petitions dismissed. Appendix [The judgment of J.M. TANDON, J., of the Punjab and Haryana High Court in Murli Manohar and Company and Another v. The State of Haryana and Another (Civil Writ Petition No. 1227 of 1980 decided on 25th November, 1980) is printed below: ] MURLI MANOHAR AND COMPANY v. STATE OF HARYANA J.M. TANDON, J.-This order will dispose of Civil Writ Petitions Nos. 1227 (Murli Manohar and Company v. State of Haryana), 1922 (Bharat Carpet Manufacturers v. Assessing Authority) and 2390 of 1980 (Bharat Carpet Manufacturers v. Assessing Authority) wherein the point involved is common. The petitioners in all the petitions are registered dealers under the Haryana General Sales Tax Act, 1973 (hereinafter the Sales Tax Act). They purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods, other than those specified in Schedule B, from any source in the State and- (a) uses them in the State in the manufacture of,- (i) goods specified in Schedule B, or (ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of interState trade or commerce or in the course of export out of the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956: (b) exports them, in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15." The petitioners are registered dealers under the Sales Tax Act. Section 24 of this Act deals with the rights of registered dealer. It reads: "24. Every dealer registered under this Act shall be entitled to purchase, without payment of sales tax, the following goods within the State, on the authority of his certificate of registration by giving to the dealer, from whom the goods are purchased, a declaration, duly filled and signed by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." Article 286 of the Constitution which has also been heavily relied upon may also be noticed at this stage. It read: "286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) ................................." The words "sale or purchase which occasions export of the goods" have been interpreted by their Lordships of the Supreme Court in Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 (SC), to mean the last sale effected by the actual exporter who exported the goods out of the territory of India. In other words, only such exporter who actually exported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration certificate without payment of any tax. The petitioners manufactured the goods and sold the same to a party who in turn exported them out of India. The sale of manufactured goods by the petitioners to the exporter will be covered by subsection (3) of section 5 and the export thereof by the exporter by sub-section (1) of section 5 of the Central Sales Tax Act. The petitioners have been made liable for the payment of purchase tax on the purchase of raw material. The transaction per se relating to the purchase of raw material is neither covered by subsection (3) nor sub-section (1) of section 5 of the Central Sales Tax Act. Article 286 of the Constitution has thus no relevancy in the matter of charging of tax on the purchase of raw materials by the petitioners, nor is the ratio of George Maijo's case [1980] 46 STC 41 (AP) applicable to the facts of the case under consideration. Section 5(1) of the Central Sales Tax Act as interpreted by their Lordships of the Supreme Court in Mod. Serajuddin's case [1975] 36 STC 136 (SC) is restricted to the sale effected by actual exporter whereas section 5(3) of this Act makes the sale or purchase preceding the sale or purchase occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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