TMI Blog1997 (8) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... State and the petitioner is thus entitled for the benefits under the notification dated December 30, 1985 (annexure 2) in respect of interState sales. The writ petition was dismissed by the judgment under review. 2.. The learned counsel for the petitioner has contended thus: The question was whether the concession or partial exemption could be made subject to or dependent upon an illegal or unconstitutional condition. The partial exemption granted under section 4(2) of the Act could not have been restricted to the sales of goods manufactured and sold within the State. Such a restriction was ultra vires of the Constitution of India. He relied upon the cases referred in para No. 4 of the judgment under review and also Loharn Steel Industries Ltd. v. State of Andhra Pradesh [1997] 105 STC 30 (SC); (1997) 2 SCC 37 and State of Uttar Pradesh v. Laxmi Paper Mart [1997] 105 STC 1 (SC); (1997) 3 SCC 697. InterState sales and export sales effected by the petitioner had situs within the State and, therefore, partial exemption could not be denied to it under the notification dated December 30, 1985. He relied upon Onkarlal Nandlal v. State of Rajasthan [1985] 60 STC 314 (SC). 3.. In rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Gazette, and subject to such conditions as may be specified therein, direct, (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in subsection (1) or sub-section (2) as may be mentioned in the notification; (b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made in the course of interState trade or commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as may be mentioned in the notification. Similarly, the State Government has no power to grant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative competence of the State Legislatures and will have to be excluded while assessing the tax liability under the State legislation. The same is true of sales which are outside the State and sales in the course of import and export. The State Legislature cannot so frame its law as to convert an outside sale or a sale in the course of import and export into a sale inside the State. The question whether a sale is an outside sale or a sale inside the State or whether it is a sale in the course of import or export will have to be determined in accordance with the principles contained in sections 4 and 5 of the Central Sales Tax Act and the State Legislature while enacting the sales tax legislation for the State cannot make a departure from those principles. 7.. In Loharn Steel Industries Ltd. v. State of Andhra Pradesh [1997] 105 STC 30 (SC) at page 34, para 8; (1997) 2 SCC 37, para 7, it has been observed as under: 8. Article 304 thus enables the Legislature of a State to impose tax on goods manufactured within the State as also goods imported from other States into the State. But in doing so the State cannot discriminate between goods so imported and goods manufactured or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State was reduced to augment sale of cement to other States. In Video Electronics Pvt. Ltd. v. State of Rajasthan [1988] 71 STC 304 (SC), rate of tax was reduced on the sales of units manufactured in Rajasthan only. 9.. Thus there is no force in the review petition, it deserves to be dismissed. 10.. Accordingly, the review petition is dismissed. R.K. Nair (Technical Member).-I have carefully gone through the judgment prepared by my esteemed colleague, the Honourable Chairman. With respect I disagree. To err is human. In my view we were in error in dismissing the writ petition by our judgment dated October 29, 1996 inasmuch as we failed to take into account the law as laid down by the Supreme Court in Onkarlal Nandlal v. State of Rajasthan [1985] 60 STC 314. This in my opinion is an error apparent on the face of the record. 12.. The petitioner-dealer is a manufacturer of carpet woollen yarn located in Rajasthan and is registered under the Rajasthan Sales Tax Act, 1954 ( the RST Act , for short) as well as under the Central Sales Tax Act, 1956 ( the CST Act , for short). Of the goods dealt in there are two which are relevant. One is raw wool which is the raw material. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1986, in so far as relevant reads: S.O. 155.-In exercise of the powers conferred by section 8(5), Central Sales Tax Act, 1956, the State Government.......... hereby allows with immediate effect a dealer who manufactures goods in the State of Rajasthan for sale by him of such goods either in the State or in the course of inter-State trade or commerce, to claim partial exemption from tax payable by him in respect of turnover of such goods sold in the course of inter-State trade or commerce in the manner and subject to the conditions as follows: 1.. Such partial exemption shall be allowed only in relation to his purchases of goods specified in the list below utilised by him as raw material in the manufacture of goods sold in the course of inter-State trade or commerce; Here italicised. 2.. Such partial exemption shall be allowed only where he has in respect of his purchases suffered tax under the Rajasthan Sales Tax Act, 1954 higher than that payable under section 5C or 5CC of that Act, as the case may be; 3.. Such partial exemption shall not be more than the amount of tax in excess of the tax payable under section 5C or 5CC of the Rajasthan Sales Tax Act, 1954, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Suffice it to say that by the notifications in question the concessional rates provided for in sections 5C and 5CC, RST Act became the rates at which RST became payable by manufacturers of carpet woollen yarn on the purchase of raw wool for the manufacture of carpet woollen yarn and sold within the State and subsequently also in the course of inter-State trade or commerce. Sections 5C and 5CC, RST Act spoke of goods for sale whereas the notification of December 26, 1986 also speaks of goods sold . Sections 5C and 5CC, RST Act spoke also in terms of sale within the State, in the course of inter-State trade or commerce, and in the course of export outside the territory of India. 18.. Explanation II to the definition of sale as given in section 2(o), RST Act as it stood prior to April 1, 1987 and at the relevant time read: Explanation II.-A transfer of property in goods shall be deemed to have been made within the State if it fulfils the requirements of sub-section (2) of section 4 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956). 19.. Section 4, CST Act reads: 4. When is a sale or purchase of goods said to take place outside a State.-(1) Subject to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner claimed a set-off equivalent to the difference between the Rajasthan sales tax paid at full rate of 4 per cent on the purchase of raw wool and the concessional rate of 2 per cent under section 5C, RST Act under the notification of December 30, 1985 clarified according to the petitioner, by the notification of December 26, 1986. The assessing authority by its impugned orders of January 31, 1990 disallowed this claim and framed a demand. An application for rectification under section 17, RST Act was rejected by an order dated February 28, 1990. 21.. The main reliefs prayed for by the petitioner are: (i) The impugned assessment order dated January 31, 1990 and of the order dated February 28, 1990 rejecting the application for rectification be quashed. (ii) The set-off claimed be allowed. (iii) The respondents be restrained from recovering the demand raised pursuant to the disallowance of the set-off. (iv) It be held that the notification dated December 26, 1986 only clarifies the notification of December 30, 1985. (v) The situs of the sale in the case of sales made in the course of interState trade by the petitioner during the period in question be held to be with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct while purchasing the raw materials. If the petitioner has not availed the benefits under section 5C or 5CC while making purchases of raw wool, the respondents cannot be directed to refund excess amount of tax paid by the petitioner while purchasing the raw wool. [Words in parenthesis () and emphasis* added]. 23.. There has obviously been another error apparent on the face of the record. The notification of December 26, 1986 though purportedly issued under section 8(5), CST Act does not exempt Central sales tax. The question of exemption under the CST Act does not arise in the instant case. As has been explained earlier, and it bears repetition, there are two taxable events. The first event, taxable as far as the notifications in question are concerned only under the RST Act, occurs when the petitioner buys raw wool from registered dealers within the State. Under both the notifications of December 30, 1985 and December 26, 1986 the partial exemption covers this transaction which precedes manufacture. The second event, is the sale of carpet woollen yarn made out of the raw wool which can occur either under the RST Act or the CST Act depending on whether the sale is in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase [1985] 60 STC 314 (SC), to be inapplicable. 27.. In Onkarlal Nandlal s case [1985] 60 STC 314 the Supreme Court had before it a matter which arose under the RST Act. The assessee was a dealer registered under the RST Act and the CST Act and was located at Bhawani Mandi, in Rajasthan. He purchased certain goods against declarations in form ST-17 furnished to the selling dealers which stated that the goods purchased were for the purposes of resale within the State. The assessee after purchasing these goods against these declarations resold them to different buyers under contracts executed by and between the assessee and the buyers at Bhawani Mandi. That on the date See [1999] 113 STC 514 supra. on which these contracts were made the goods were specific goods in deliverable condition situate in Bhawani Mandi and the property in these goods accordingly passed to the buyers in Bhawani Mandi was not in dispute. The resale of these goods was according to the assessee sales within the State and it could not be said that the goods purchased by the assessee were used by it for any purpose other than the one mentioned in the declarations. The Commercial Taxes Officer, while making asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of inter-State trade or commerce cannot be taxed by a State Legislature even if its situs is within the State, because the State Legislature has no legislative competence to impose tax on sale in the course of inter-State trade or commerce. That can be done only by Parliament. If therefore a question arises whether a sale is exigible to tax by the State Legislature, it may have to be considered whether it is a sale in the course of inter-State trade or commerce. The same sale in another context may have to be examined from a different point of view for determining where its situs lies and whether it is a sale inside the State or outside the State. There is therefore no incompatibility in the same sale being both a sale in the course of inter-State trade or commerce within the meaning of section 3 of the Central Act as also a sale inside the State in accordance with the principles laid down in sub-section (2) of section 4 of the Central Act. (emphasis added) Thereafter the Supreme Court examined the expression resale within the State with reference to the meaning given to it by the RST Act and in this connection considered explanation II to section 2(o) of the RST Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State in such a manner that such sale becomes exigible to tax under the RST Act. This ruling of the Supreme Court in Onkarlal Nandlal s case [1985] 60 STC 314 applies with full force to the case in hand and it is in this context that the situs of the sale becomes relevant. 29.. It may also be noted that by this notification the State Government sought to extend the benefits under sections 5C and 5CC to such dealers who purchased raw wool but had failed to avail of the benefits of sections 5C and 5CC of the RST Act at the time of such purchase. Sections 5C and 5CC, RST Act, as has been noted in terms include sale made in the course of inter-State trade or commerce in addition to sale within the State very much as form ST17 did. 30.. The 5-Member Bench of the Supreme Court in Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204, referred to and quoted from the judgment in Onkarlal Nandlal s case [1985] 60 STC 314 (SC), in the context of the discussion by it of the definition of sale . The observations in that case to the effect that the situs of the sale or purchase being wholly irrelevant as regards its inter-State character was made in that context and it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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