TMI Blog2001 (8) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of article 286 of the Constitution and sections 5 and 15(ca) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the 1956 Act"), the State cannot levy purchase tax on the paddy purchased by it for sale of rice to the exporter. 3.. The petitioner filed sales tax returns for four assessment years, viz., 1996-97 to 1999-2000 in accordance with the provisions of section 25 of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as "the 1973 Act"). It deposited the tax which fell due in accordance with the return. The petitioner claimed that no purchase tax was leviable on the paddy which was shelled to fulfil the contract of sale of rice by the exporter to the foreign buyer. This claim was made on the basis of the provisions of section 15(ca) and section 5 of the Central Sales Tax Act, 1956. 4.. On August 16, 1999, the Sales Tax Tribunal accepted a similar claim made by a dealer from Sirsa, viz., M/s. Veerumal Monga Sons in the matter of Sales Tax Appeal No. 698 of 1998-99. However, the State of Haryana filed a review petition under section 41 of the Haryana General Sales Tax Act, 1973 and claimed that the order was contrary to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable Court without exhausting the remedy of appeal...." On this basis, it is maintained that the writ petition is not maintainable. 10.. On merits, it has been pointed out that the purchase of paddy in the circumstances of the case is exigible to the levy of tax. The effect of section 15(ca) is only to "override the effect of this honourable court's judgment in United Riceland's case [1997] 104 STC 362 [FB] inasmuch as the purchase of paddy by the rice millercum-direct exporter by virtue of legal fiction of section 5(3) became purchases in the course of export under section 5(3) of the Central Act. But this legal fiction does not extend further to the present petitioner who purchased paddy from the market in his own right and milled it. The sale of rice by the petitioner to the direct exporter is sale in the course of export out of India. Section 5(3) does not protect the purchase of paddy by the petitioner. Thus, the claim as made by the petitioner has been controverted. It has been further pointed out that the petitioner's claim that its representative had appeared before the Assessing Authority on June 26, 2000 or that it had sought permission to place "H" forms or S.T. 15A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods can be intra-State or inter-State. When sale or purchase takes place in the course of inter-State trade by virtue of the provisions of article 269(1)(g), the tax can be levied and collected by the Government of India. However, it has to be assigned to the States in accordance with "such principles of distribution as may be formulated by Parliament by law". Under article 286, certain limitations have been placed on the power of the State to levy tax on the sale or purchase which takes place "in the course of import into or export out of India". The Parliament has the power to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in article 286(1) by promulgating law. Still further, by virtue of entry 54 in List II, the power to impose taxes on "sale or purchase of goods other than newspapers" vests in the State. This power is subject to entry 92A in List I which empowers the Parliament to levy "taxes on imports and exports*". The obvious purpose is to ensure that the tax imposed by the State does not interfere with the foreign as well as inter-State trade and commerce as these are matters of national importance. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addy is exported out of India, then, for the purposes of sub-section (3) of section 5, the paddy and rice shall be treated as a single commodity." 18.. A perusal of the above provisions shows that while interpreting a State law which imposes a tax on the sale or purchase of declared goods, the restriction contained in clause (ca) has to be kept in view. What is the restriction? When a tax on sale or purchase of paddy is leviable under the State law and the rice "procured out of such paddy is exported out of India, paddy and rice shall be treated as a single commodity for the purposes of sub-section (3) of section 5". The Parliament has introduced a limited fiction. It is only in respect of the transaction covered by sub-section (3) of section 5 that rice and paddy are treated as a single commodity. 19.. Mr. Sarin was at pains to point out that the primary reason for amendment of section 15 by introducing clause (ca) was to grant the "benefit of exemption from tax" and to avoid indirect taxing of rice. This was intended to promote export. Thus, the counsel contended that the respondents cannot be permitted to treat paddy and rice as two separate commodities. Is it so? 20. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f export. 23.. What is the position in the present case? The petitioner is a miller. It buys paddy from the commission agent for milling. Having processed it, the petitioner sells rice to the exporter. Then the exporter sells the rice to the foreign buyer. Clause (1) exempts the sale by the exporter to the foreign buyer. Clause (3) which was introduced in the year 1976 exempts the penultimate sale which occasions the export, viz., the sale of rice by the miller to the exporter or the purchase by the exporter from the miller. However, the sale of paddy by the commission agent to the petitioner is not covered by any of the provisions of section 5. 24.. Mr. Sarin contended that such an interpretation would completely defeat the object of the Parliament in introducing clause (ca) in section 15. Is it so? 25.. On August 17, 1995, a Full Bench of the High Court decided the case of United Riceland Limited v. State of Haryana [1997] 104 STC 362. It was, inter alia, held that paddy and rice are declared goods under section 14 of the Central Sales Tax Act, 1956. These are two different commodities subject to tax under section 6 read with sections 15A and 17 of the Haryana General Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case are not covered by section 12. 28.. Mr. Sarin submitted that paddy and rice are goods of special importance. A special provision obliterating the distinction having been made, the fiction must be given full effect. He referred to the decisions in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1951] 2 All ER 587, State of Andhra Pradesh v. Vallabhapuram Ravi (1984) 4 SCC 410, Commissioner of Income-tax, Patiala v. Saroop Krishan [1985] 153 ITR 1 (P H); (1985) 2 PLR 109 and Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 (SC); (1993) 1 SCC 364. 29.. Under section 17 of the Haryana Act, the tax on declared goods is leviable at the stage indicated in Schedule "D". On a perusal of the Schedule, it is clear that the taxable event when the commodity is imported into the State, is at the stage of "first sale within the State by a dealer liable to pay tax under this Act". When the goods are purchased within the State, the stage of levy is "last purchase within the State by a dealer liable to pay tax..." This provision would have been relevant if the fiction introduced by section 15(ca) was not limited to the transaction covered by clause (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were competitive with other countries. Consequently, we should not give a restricted meaning to the provision. 35.. It is undoubtedly true that the nation needs foreign exchange. Thus, it takes steps to encourage and promote exports. However, it is equally relevant to remember that even the revenues of the State are important. One cannot sacrifice the State's interests totally. Keeping in view the need to strike a balance, the Parliament appears to have introduced a limited fiction. It has treated rice and paddy as one commodity for a limited purpose. By this amendment, it has enabled the millers who are direct exporters to avoid payment of tax on the purchase of paddy. However, this benefit has not been made available to those millers who sell to an exporter and do not export directly. The Parliament is the best judge of the interests of the people. It enacts statutes on the basis of needs made manifest by experience. The provision introducing limited fiction is within the constitutional parameters. It strikes a reasonable balance. We are unable to extend this fiction beyond what the express words of the statute provide. 36.. In view of the above, the first question is answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. This matter cannot be dealt with in proceedings under article 226 of the Constitution. In any event, the purely legal issue having been decided, the matter should now be examined by the appropriate authority under the statute. In this situation, we direct that in case, the petitioners have any grievance against the orders of provisional assessment, they would be entitled to file an appeal within 30 days from the date of the receipt of a certified copy of this order. In case, such an appeal is filed, it shall be considered and decided by the appropriate authority under the statute on merits. It shall not be rejected on the ground of limitation. Thus, even the second question is answered against the petitioners. 40.. Mr. Jhingan, counsel for the petitioner in C.W.P. No. 5856 of 2001 raised an additional ground. He urged that vide letter dated November 29, 2000, annexure P2, with the petition, the State Government has issued instructions to the quasi-judicial authorities that they have to consider the cases for assessment and levy of sales tax in the light of the decision in Veerumal's case [2001] 123 STC 158 (P H). He submitted that the action of the authority in giving d ..... 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