TMI Blog2009 (1) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... the CST Act, 1956 which expressly provides that a "sale" inside a particular State shall be deemed to have been made outside all other States. It also contravenes the provision of section 1 of the OVAT Act, which expressly provides that the Act extends only to the State of Orissa and assessment order is in violation of the true spirit of the definition of "sale" and "purchase" contained in section 2 of the OVAT Act. Thus the levy of tax by the State of Orissa under section 12 of the OVAT Act on such purchases is not sustainable in the eye of law. W.P. allowed. - W.P. (C) No. 14753 of 2008 - - - Dated:- 19-1-2009 - CHAUHAN B.S. DR. C.J. AND MAHANTY I. , JJ. DR. B.S. CHAUHAN C.J. This writ petition has been filed challenging the validity of assessment order dated July 8, 2008 passed by the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur (hereinafter referred to as, the assessing officer ) under section 43 of the Orissa Value Added Tax Act, 2004 (hereinafter referred to as, the OVAT Act ) on various grounds including the jurisdiction of the assessing officer to levy tax under section 12 of the OVAT Act on the raw materials purchased from outside the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er article 245 of the Constitution of India and any attempt by over-stepping the limits of its legislative field through laws that affects men and property outside the State would be invalid for extra territorial operation. Relying on the provisions of entry 54 of List II of the Seventh Schedule, articles 245 and 286 of the Constitution and section 4 of the Central Sales Tax Act, 1956, learned counsel submitted that neither the State Legislature much less the assessing officer had any power to impose tax on raw materials purchased from outside the State of Orissa. According to him, section 12 of the OVAT Act would operate only in respect of purchase made within the State of Orissa. The present purchases from outside the State of Orissa are transactions that took place outside the State of Orissa in terms of section 4 of the Central Sales Tax Act, 1956 (hereinafter called, the CST Act, 1956 ). Thus, the petition deserves to be allowed. Per contra, Mr. R.P. Kar, learned counsel for the Revenue, submitted that the writ petition raises pure question of law, thus, he prays to be permitted to advance argument on behalf of the State without filing the counter-affidavit, though time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cash, deferred payment or other valuable consideration, and includes,... ... Explanations: (a) A sale or purchase of goods shall be deemed to have taken place inside the State if the goods are within the State, (i) In the case of specific or ascertained goods, at the time the contract of sale is made, and (ii) In the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller, or by the buyer, whether assent is prior or subsequent to such appropriation. (b) ... Note: A sale or purchase of goods shall not be deemed to have taken place inside the State, if the goods are sold, (i) In the course of inter-State trade or commerce, or (ii) Outside the State, or (iii) In the course of import into or export out of the-territory of India; ... 12.. Levy of tax on purchase. Every dealer who, in the course of his business, purchases or receives any goods, (i) from a registered dealer, in the circumstances in which no tax under section 11 is payable by that registered dealer on such goods, or (ii) from any person other than a registered dealer, shall be liable to pay tax on the purchase price or preva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 12 of the OVAT Act the assessing officer assumes jurisdiction to levy tax on value of raw materials purchased from outside the State. Section 12 of OVAT Act enables the assessing officer to levy tax on purchases effected by a dealer in course of his business from a registered dealer in the circumstances in which no tax under section 11 is payable by that registered dealer on such goods or from any person other than the registered dealer, if after such purchase the goods are not sold within the State, or in course of inter-State trade or commerce or in course of export out of the territory of India but are sold or disposed of otherwise or consumed or used in manufacture of goods declared to be exempted from tax under this Act or after their use or consumption in manufacture of goods such manufactured goods are disposed of otherwise by way of sale in the State or in course of inter-State trade or commerce or export out of the territory of India or used or consumed otherwise. Such tax shall be levied at the same rate at which tax under section 11 would have been levied on the sale of such goods within the State on the date of such purchase or receipt. The contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entry itself which makes the said power subject to the provisions of entry 92A of the List I and the other flowing from prohibitions contained in article 286 of the Constitution. Article 246 of the Constitution says that Parliament has exclusive power to make laws with respect to any matter enumerated in List I in the Seventh Schedule, which is known as Union list entry 92A. It authorizes the Parliament to make law on taxation on sale or purchase of goods other than newspapers where such sale or purchase takes place in course of inter-State trade or commerce. Article 286(1) of the Constitution says that no law of the State shall impose or authorize the imposition of tax on sale or purchase of goods where such sale or purchase takes place: (a) outside the State or (b) in course of import of goods into or export of goods outside territory of India. Thus, section 12 of the OVAT Act cannot be construed in such manner that it can authorize the State of Orissa, much less the assessing officer to impose tax on raw materials purchased/received from outside State by the petitioner. Section 12 of the OVAT Act is a charging section as well as remedial provision and its main object is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not include purchases outside the respective States. In Onkarlal Nandlal v. State of Rajasthan [1985] 60 STC 314; AIR 1986 SC 2146, the apex court considered the meaning of sale / purchase outside the State and while interpreting the provisions of section 4(2) of the Central Sales Tax Act, held that the provision has been enacted laying down the principles for determining that when a sale or purchase of goods would be deemed to have taken place inside the State. Therefore, when it is determining that the sale or purchase of goods has taken place inside a particular State, it must be deemed to have taken placed outside all other States. Such sale or purchase can then fixed only by the State even in which, it must be deemed to have been taken place on the application of the principles set out in the said provision and no other State can impose tax on such sale or purchase as it would be barred by the provision of article 286 of the Constitution. In State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191; AIR 1975 SC 1871, the apex court considered the provision of section 7A(1) of the Madras General Sales Tax Act, 1959 for the purpose of imposition of purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been decided interpreting the provisions of the Bihar Act in a different context. The ratio of the said judgment cannot be attracted in the present case. The Legislature dealt with the properties of the trust in Bihar and the fact that said trust also possesses properties outside the State of Bihar did not take away the competence of the Bihar Legislature which it acquired on account of territorial nexus. In the Tata Iron Steel Co., Ltd. v. State of Bihar [1958] 9 STC 267 (SC); AIR 1958 SC 452, dealing with the issue of extra territoriality of legislation the apex court held that sufficiency of the territorial connection involve a consideration of two elements, namely, (a) the connection must be real and not illusory, and (b) the liability sought to be imposed must be pertinent to that connection. The court further held as under: (page 282 of STC) ...It is not necessary for us on this occasion to lay down any broad proposition as to whether the theory of nexus, as a principle of legislation, is applicable to all kinds of legislation. It will be enough, for disposing of the point now under consideration, to say that this court has found no apparent reason to confine its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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