Full Judgment Text
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CASE NO.:
Appeal (civil) 1811-1815 of 1977
PETITIONER:
STATE OF ORISSA
RESPONDENT:
MINERALS AND METALS TRADING CORPORATION OF INDIA LTD.
DATE OF JUDGMENT: 18/07/1994
BENCH:
KULDIP SINGH & DR. A.S. ANAND
JUDGMENT:
JUDGMENT
1994 SUPPL.(1) SCR 762
The Judgment and Order of the Court was delivered by
KULDIP SINGH, J. The Sales Tax Tribunal, Orissa referred the following
question under Section 24(1) of the Orissa Sales tax Act 1947 (the Act) for
the opinion of the High Court of Orissa, Cuttack :-
"(1) Whether on the facts and in the circumstances of the case, the
Tribunal is correct in holding that there has been no contravention of the
declaration given under Rules 27(2) of the Orissa Sales Tax Rules thus
attracting the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax
Act?
(2) Whether in the facts and circumstances of the case, the learned
Tribunal having held that there was no contravention of section 5(2)(A)(a)
(ii) of the Act acted within its jurisdiction in remanding the appeal?
(3) Whether in the facts and circumstances of the case, the sale by the
petitioner-Company to the Japanese Buyer comes within the ambit and scope
of Article 286(1) (b) of the Constitution of India read with section 5 of
the Central Sales Tax Act?"
A three Judge-Bench of the High Court by its judgment dated May 11, 1976
answered the questions as under : -
"(1) on the facts and in the circumstances of the case, the Tribunal was
correct in holding that there was no contravention of the declarations
given under Rule 27(2) of the Orissa Sales Tax Rules and, therefore, the
proviso to section 5(2) (A) (a)(ii) of the Orissa Sales Tax Act was not
attracted.
(2) In the fact and circumstances of the case, the sales by the assessee to
the Japanese buyer are covered by the embargo under Article 286(l)(b) of
the Constitution of India read with section 5 of the Central Sales Tax Act
and, therefore, are not exigible to sales-tax under the Orissa Act.
The remaining question,-in view of what we have already stated, does not
survive for answer."
These appeals by the State of Orissa are against, the full Bench judgment
of the High Court.
The Minerals and Metals Trading Corporation of India Limited, respondent in
the appeals herein, is a government company within the meaning of Section
617 of the Companies Act, 1956. The respondent-assessee is registered as a
dealer under the Act. During the years 1966-67, 1967-68 and the quarters
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ending June, September and December 1968, the respondent purchased mineral
ores from the mine owners, who were registered dealers under the Act. While
purchasing mineral ores from the mine owners the respondent gave
declarations in terms of Rule 27 of the Orissa Sales Tax Rules, 1947 (the
Rules) to the effect that the said mineral Ores would be resold within the
State of Orissa. The Sales Tax Officer while examining the accounts
relating to the relevant period found that the respondent has sold the
mineral ores in the course of export to the Japanese buyers with whom the
assessee had pre-existing export contracts. The Sales Tax Officer came to
the conclusion that the mineral ores were sold in violation of the
declarations furnished by the respondent and, as such, contravened the
provisions of Section 5(2)(A)(a)(ii) of the Act. The Sale Tax Officer added
the amount of the relevant sales to the taxable turnover of the respondent
and issued a demand for payment of the tax. The respondent filed an appeal
before the first appellate authority, which was dismissed. Aggrieved by the
order of the first appellate authority, the respondent filed a second
appeal before the Sales Tax Tribunal. It was contended before the Tribunal
that the goods were resold in Orissa and the transaction with the Japanese
buyers being sale in the course of export, it was not liable to tax by
virtue of Article 286(1)(b) of the Constitution of India. The Tribunal came
to the conclusion that the sale by the respondent in favour of the Japanese
buyers, was within the State of Orissa and, as such there was no violation
of the terms of the declarations. The Tribunal, however, did not agree with
the other contention that the transactions were in the course of export
and, therefore, not exigible to sales tax. The Tribunal rejected the second
contention. The net result was that the assessee was not found liable on
account of violation of the undertaking in the declarations but the
assessee’s sale in favour of the Japanese buyers was found liable to tax.
As the accounts had to be re-verified to ascertain the correct, figures,
the Tribunal remanded the matter. The Tribunal stated the cases and
referred the questions at the instance of both the Revenue as also the
assessee for the opinion of the High Court. We have already set out the
answers given by the High Court. Sections 2(g) and 5(2)(A)(a)(ii) of the
Act and Rule 27(2) of the Rules are reproduced hereunder : -
"Section 2(g) Sale means, with all its grammatical variations and cognate
expression, any transfer of property in goods for cash or deferred payment
or other valuable consideration, but does not include a mortgage,
hypothecation, charge or pledge and the words ’buy1 and ’purchase’ shall be
construed accordingly.
Explanation-(a) A sale or purchase of goods shall be deemed to take 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 of the other party is prior or subsequent to such
appropriation;
(iii) where there is a single contract or sale or purchase of goods
situated at more places than one, the provisions of this Explanation shall
apply as if there were contracts in respect of the goods at each of such
places.
Section 5(2)(A) In this Act the expression "taxable turnover" means that
parts of a dealer’s gross turnover during any period which remains after
deducting therefrom: -
(a) his - turnover during that period on -
(ii) Sales to a registered dealer of goods specified in the purchasing
dealer’s certificate of registration as being intended for resale by him in
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Orissa and on sales to a registered dealer of containers and other
materials for the packing of such goods",
Provided that when such goods are used by the registered dealer for
purposes other than those specified in his certificate of registration, the
price of goods so utilised shall be included in his taxable turnover.
Rule 27(2)(i) Claim for deduction of turnover under item (ii) of sub-clause
(a) of clause (A) of sub-section (2) of Section 5:- A dealer who wishes to
deduct from his gross turnover the amount of a sale on the ground that he
is entitled to make such deduction under item (ii) of sub-clause (a) of
clause (A) of sub-section (2) of Section 5 of the Act, shall, on demand,
produce a copy of the relevant cash receipt or bill according as the sale
is a cash sale or a sale on credit, and a declaration in Form XXXIV duly
filled up and signed by the purchasing dealer or by such responsible
persons as may be authorized in writing in this behalf by the purchasing
dealers."
It would be useful to have before us Article 286(l)(b) of the Con-stitution
of India and Section 5(1) of the Central Sales Tax Act, 1956 which are as
under : -
"286. Restrictions as to imposition of tax on the sale or purchase of
goods.-(l) 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).
(b) in the course of the import of the goods into, or export of the goods
out of the territory of India.
(2)..................................
(3)..................................
Section 5(1) A sale or purchase of goods shall be deemed to take place in
the course of 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
frontier of India."
The undisputed scheme of the Act is that a dealer becomes liable to pay tax
at the time of purchase but being a registered dealer under the Act a
facility is given to him and the liability to pay the tax is deferred to a
later stage, when he resells the goods. To ensure that the sale does not
escape tax altogether a declaration is taken from the dealer to the effect
that the goods are meant for resale within the State. In other words, the
Act has adopted a single point tax. Under the scheme, the taxable event is
postponed until a registered dealer sells the goods to an unregistered
dealer, a consumer or in breach of the undertaking diverts the goods for
other purposes. The proviso to section 5(2) of the Act operates when the
purchasing dealer violates his undertaking and he becomes liable to pay the
tax which he had avoided on the basis of the declaration.
It is not disputed that the assessee purchased mineral ores from the mine
owners - who were registered dealers under the Act - upon furnish-ing
declaration as provided in rule 27(2) of the Rules. The assessee had not
paid sales tax on those purchase. The declaration makes it obligatory for
the assessee to resell the mineral ores, so purchased, within the State of
Orissa.
The learned counsel for the appellant has not challenged before us the
finding of the High Court that the sale by the assessee to the Japanese
buyers is covered by the embargo under Article 286(l)(b) of the Constitu-
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tion of India read with section 5 of the Central. Sales Tax Act and,
therefore, is not exigible to sales tax under the Act. The learned counsel
very fairly concedes that the sale by the assessee to the Japanese buyers
is in the course of the export of the goods out of the territory of India.
The contention of the learned counsel for the appellant, however, is that
what is sought to be taxed is the purchase by the assessee from the mine
owners and not the sale by it to the Japanese buyers. It is contended that
the assessee deliberately gave incorrect declaration to the effect that the
goods were meant for resale in Orissa fully knowing that the goods were not
meant for such resale. It is further contended that the assessee had
already entered into agreements to export the mineral ores to the Japanese
buyers. It was to their knowledge that the goods were not meant for resale
within the State of Orissa. According to the learned counsel the
declaration was deliberately given to avoid the tax liability.
The High Court analysed the various terms of the contract under which the
assessee effected the sale in favour of the Japanese buyers. The High Court
concurred with the findings of the Tribunal that the sale to the Japanese
buyers was effected at Paradeep (a port within the State of Orissa). The
High Court reached the said finding on the following reason-ing :-
"Assessee claims that it effected sales in favour of the Japanese Buyers at
Paradeep. The terms of the contract under which sales are said to have
taken place are available on the record and it is stated that more or less
the contracts are of a uniform pattern. At the time of hearing parties
have, therefore, referred to us a contract dated 1st of June, 1965, which
has been printed in the paper book. An analysis of the terms of the
contract may now be made. Article 6 provides for analysis of the ore at the
loading port. Article 10 provides that each shipment shall be deemed as
delivered when it is loaded on board the vessel and trimmed. Under Article
12, Paradeep is a port of delivery. Insurance cover in terms of Article 9
after the ore is loaded on board the vessel is to be arranged by the Buyer
at its expense. Under Article 13, risk with respect to the shipment passes
from the seller to the buyer when ore has been loaded and trimmed on board
the vessel. The heading of this article is "title and risk" and the obvious
intention is that title passes to the Buyer with the contemplated activity
being over. Under Article 14, in the event of loss of cargo in part or hi
full, the result of the loading port analysis is deemed to be final.
Article 16 obliges the buyer to arrangement ships for transport. Provision
has also been made for payment by irrevocable, transferable, assignable,
divisible and confirmed without recourse to Drawer Letters of Credit to
cover 100 per cent value of each shipment. On the basis of these clauses
which reflect the true intention of the contracting parties, it is claimed
that title in the ores passed at Paradeep and thus there were local sales
within the State..........On the terms of the contract indicated above, we
do not think, the Tribunal can be said to have been wrong in holding that
sales took place at paradeep............We concur with the finding of the
learned Tribunal that the assessee effected resales at Paradeep within the
; state of Orissa."
After holding that the sale by the assessee to the Japanese buyer was
within the State of Orissa, the High Court further examined the question
whether the sale was in the course of export and, as such was protected by
Article 286(l)(b) of the Constitution of India read with Section 5 of the
Central Sales Tax Act. Relying upon the judgment of this Court in Md.
Serajuddin & Ors. v. State of Orissa, [1975] 2 SCC 47, the High Court came
to the following conclusions : -
The analysis of the legal position given in paragraph 25 of the judgment of
the Court makes it clear that the sales effected by the assessee in favour
of the foreign buyer must be held to have been in course of export and is
thus squarely covered by Article 286(l)(b) of the Constitution read with
section 5 of the Central Sales Tax Act. Thus the sale by the assessee in
favour of the Japanese Buyers though completed at Paradeep is yet not
exigible to Orissa Sales Tax in view of the restriction imposed by Article
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286(l)(b) of the Constitution."
We agree with the High Court that the sale effected by the assessee in
favour of the Japanese buyers is the sale in the course of the export of
the goods out of the territory of India and, as such, is not exigible to
sales tax. As stated above the learned counsel for the State of Orissa has
also not questioned the findings of the High Court on this point. We are,
however, of the view that the High Court fell into patent error in holding
that sai to the Japanese buyers was made within the State of Orissa. A sale
"in the course of the export of the goods" and a sale "within the State of
Orissa" are two distinct events. A sale "in the course of the export of the
goods" cannot be a sale within the State of Orissa. The assessee entered
into contracts with the Japanese buyers for "export sale" of the mineral
ores. An "export sale" has an entirely different legal concept. In the
"export sale", the "sale" and the "export" are so interwined and intermixed
that both begin and end together. The various clauses of the contract
entered into by the assessee and the Japanese buyers are wholly irrelevant
and are of no consequence. Even if on the construction of the contract of
"export sale" the sale part of it is completed within the State it would
still not be considered as legally complete because till the time the
"sale" and the "export" both are completed none can be taken to be
complete. It is, therefore, inherent in the concept of" export sale" that
both the "sale" and the "export" are completed when the goods are
appropriated by the foreign buyer."
Patanjali Sastri, C J., speaking for this Court in State of Travancore-
Cochin & Ors. v. The Bombay Co. Ltd., [1952] SCR 1112, examining the scope
of the " export sale" under Article 286(l)(b) of the Constitution of India
observed as under : -
"We are clearly of opinion that the sales here in question, which
occasioned the export in each case, fall within the scope of the exemption
under article 286(l)(b). Such sales must of necessity be put through by
transporting the goods by rail or ship or both out of the territory of
India, that is to say, by employing the machinery of export. A sale by
export thus involves a series of integrated activities commencing from the
agreement of sale with a foreign buyer and ending with the delivery of the
goods to a common carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the export without which it cannot
be effectuated, and the sale and resultant export form parts of a single
transaction. Of these two integrated activities, which together constitute
an export sale whichever first occurs can well be regarded as taking place
in the course of the other. Assuming without deciding that the property in
the goods in the present cases passed to the foreign buyers and the sales
were thus completed within the State before the goods commenced their
journey as found by the Sales Tax Authorities, the sales must,
nevertheless, be regarded as having taken place in the course of the export
and are, therefore, exempt under article 286(l)(b)."
M. Hidayatullah, C.J. speaking for this Court in Coffee Board, Ban-galore
v. Joint Commercial Tax Officer, Madras & Anr., [1970] 3 SCR 147,
interpreted the phrase "sale in the course of export" in the following
words:-
"The phrase ’sale in the course of export’ comprises in itself three
essential: (i) that there must be a sale (ii) that goods must actually be
exported and (iii) the sale must be a part and parcel of the
export.......... The export results from the sale and is bound up with it.
The word ’course’ in the expression ’in the course of means ’progress of
process of, or shortly ’during’. The phrase expanded with this meaning
reads’ in the progress or process of export’ or ’during export’. Therefore
the export from India to a foreign destination must be established and the
sale must be a link in the same export for which the sale is held".
In Md. Serajuddin & Ors. v. State of Orissa, [1975] 2 SCC 47, this Court
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examined the earlier judgments on the interpretation of Article 286(l){b)
of the Constitution of India, It would be useful to refer the following
observations of the Bench in the said case : -
"The expression "in the course" implies not only a period of time during
which the movement is in progress but postulates a con-nected relation.
Sale in the course of export out of the territory of India means sale
taking place not only during the activities directed to be end of
exportation of the goods out of the country but also as part of or
connected with such activities."
It is, therefore, clear that the export sale envisaged under Article 286(1)
(b) of the Constitution of India continue to be in the process of
completion till the goods reach the destination.
The argument of the learned counsel for the respondent that the assessee by
the deposit of the mineral ores at Paradeep Port made a "sale" to the
foreign buyer at the port is fallacious and overlooks the fact that the
purchase had been made by the assessee from the registered dealers, to
satisfy his pre-existing contract with the Japanese buyer and the goods
were deposited or believed at Paradeep Port for transportation, out of the
country, to the destination of the foreign buyer, to satisfy the
requirements of the pre-existing contract, the delivery of the goods at the
Paradeep Port .was thus in discharge of the obligation under the contract
on the part of the exporter-assessee and formed but a single transaction.
It was not a second "sale" to the foreign buyer in the State of Orissa. The
effort to confuse the delivery of goods at Paradeep Port for transportation
to the destination of the foreign buyer with a "sale" at Paradeep Port is a
futile attempt to wriggle out of his mis-declaration. In the declaration
filed by the assessee, he not only mis-stated that the goods were meant for
re-salt within the State of Orissa but also concealed the fact that there
was a pre-existing contract between the assessee and the Japanese buyers to
satisfy which the mineral ores were being purchase, for export, from the
registered dealers. The declaration made by the assessee concealed more
than what is revealed. The assessee, therefore, made a declaration which
was palpably incorrect. The assessee thus contravened the provisions of
Section 5(2)(A)(a)(ii) of the Act and rendered itself liable under the
proviso to the said Section.
We, therefore, hold that the sale by the respondent-assessee was in
contravention of the declaration given by the assessee under rule 27(2) of
the Rules and, as such, attracts the proviso to Section 5(2)(A)(a)(ii) of
the Act. We allow the appeals partly. We uphold answer No. 2 given by the
High Court but we set aside answer No. 1 of the High Court and in that
place substitute the following answer.
1. On the facts and circumstances of the case the Tribunal was wrong in
holding that there was no contravention of the declaration given under rule
27(2) of the Rules. The assessee contravened the said declaration and, as
such, the proviso to Section 5(2)(A)(a)(ii) of the Act was attracted.
The appeals are allowed in the above terms. The appellant shall be entitled
to the costs which we quantify as Rs. 20,000.
Civil Appeals Nos. 343-347 of 1987.
With
Civil Appeal No. 868 of 1987.
Order
These appeals are sequel to a batch of writ petitions filed before the
Orissa High Court challenging the validity of the amended Section 5(2)(A)
(a)(ii) of the Orissa Sales Tax Act, 1947 (the OST Act) as sub-stituted by
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the Orissa Sales Tax (Amendment) Act, 1978 with retrospective effect. The
High Court upheld the validity of the OST Act.
The High Court classified the batch of petitions into the following three
categories :
1. Assessments in which unamended declarations in Form No.XXXIV under rule
27(2) of the Orissa Sales Tax Rules, 1947 were given and purchases were
made without payment of tax,
2. Assessment and imposition of tax on sale or purchase of declared goods
in violation of Section 15 of Central Sales Tax Act, 1956 and Section 14-B
of the OSt Act read with Rule 42-A of die OST Rules.
3. Assessment and imposition of tax after the amendment of Form No.XXXIV,
that is, after 26.4.1978. Declarations in amended form were given and
purchases were made with out payment of tax.
The High Court allowed the writ petitions falling under category Nos. (1)
and (2) above and the assessment and imposition of tax in respect of those
petitioners was quashed. So far as the writ petitions falling under
category No. (3) above are concerned, those were dismissed with no order as
to costs. The appellants before us are those petitioners who were in
category No. (3) before the High Court. The State of Orissa has not come up
in appeal against the judgment of the High Court allowing the writ
petitions of the petitioners falling under category Nos. (1) and (2) before
the High Court. We are not expressing any opinion in respect of the part of
the judgment of the High Court which is not under appeal before us.
We have today pronounced judgment in Civil Appeals Nos. 1811-1815 of 1977
titled State of Orissa v. Minerals & Metals Trading Corporation of India
Limited
We allow the appeals in the above terms with costs. We further hold that
the orders of the Tribunal in these cases shall be non-est and inopera-tive
to the extent the said order are contrary to the law laid down by this
Court. We quantify the costs as Rs. 5000 to be paid by each of the assessee
in each of the cases.
Special Leave Petition (C) No. 14571 of 1992.
Order
We have today pronounced judgments in Civil Appeals Nos. 1811-15 of 1977
titled State of Orissa v. Minerals and Metals Trading Corporation of India
Limited and also in the Civil Appeals Nos. 343-347 of 1987 titled M/s.
Industrial Minerals & Metals and Anr. v. The Sales Tax Officer &. Anr. for
the reasons recorded and the conclusions reached in the above judgments, we
dismiss the Special Leave Petition.
Civil Appeal No. 654 of 1991.
Order
The appellants challenged the validity of Section 5(2)(A)(a)(ii) of the
Orissa Sales Tax, 1947 (the OST Act) as amended by Section 2(c) of the
Orissa Sales Tax (Amendment) Act, 1978 by way of a writ petition under
Article 226 of the Constitution of India before the Orissa High Court. The
order of the Sales Tax Officer, Cuttack III Circle pertaining to the
assess-ment year 1982-83 was also sought to be quashed in the writ
petition. The challenge to the validity of Section 5(2)(A)(a)(ii) of the
OST Act was on the following grounds : -
"(i) that it is beyond the legislative competence of the State legislature
to enact the provision since the tax relates to inter-State sale/export
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sale in respect of which the Parliament has the exclusive competence to
legislate. In this connection reliance is placed on Article 286 of the
Constitution and Entry 54 of List II of the Seventh Schedule of the
Constitution;
(ii) that the provision is repugnant to sections 3, 4 and 5 of the C.S.T.
Act and hence it is hit by Articles 254 and 269 of the Constitution.;
(iii) that they levy of tax is discriminatory and therefore hit by Article
14 of the Constitution; and
(iv) that it affects the petitioners’ right of freedom of trade and
commerce embodied in Article 19(1) (g)."
In addition to the above grounds it was also contended that while selling
the goods in the course of inter State sale the appellants-petitioners did
not contravene the declaration in as much as the sale took place within the
State of Orissa and, as such, could not be exigible to tax under the OST
Act but for the supervening circumstance of the constitutional bar as
provided under the Central Sales Tax Act. The High Court by its well
reasoned judgment dated July 30, 1990 dismissed the writ petition. This
appeal by way of special leave is against the judgment of the High Court.
We have been taken through the judgment of the High Court wherein all the
points raised by the appellants-petitioners have been dealt with by giving
detailed reasons in respect of each of the points. We see no ground to
interfere with the judgment of the High Court. We agree with the reasoning
and the conclusions reached therein.
We have today pronounced judgments in civil Appeals Nos. 1811-15(NT) of
1977 titled State of Orissa v. Minerals and Metals Trading Corporation of
India Limited and also in Civil Appeal Nos.343-347 of 1987 titled A/A.
Industrial Minerals & Materials & Anr. v. The Sales Tax Officer Anr. Even
on the force of the reasoning and conclusions in these judg-ments, this
appeal has to be dismissed. We, therefore, dismiss the appeal with costs.
We quantify the costs as Rs. 5000.
Civil Appeals Nos. 2947-50 (NT) of 1977.
KULDIP SINGH, J. The Sales Tax Tribunal, Orissa (the Tribunal) stated a
case and referred the following question for the opinion of the High
Court:-
"Whether on the facts and in the circumstances of the case, the Member
Sales Tax Tribunal is correct in holding that even sales in course of
inter-state trade and commerce, can be sale inside the State if the goods
are inside the State of Orissa, and whether his interpretation of the
definition of ’sale’ as given in section 3(g) of the Orissa Sales Tax Act,
1947 and the Explanation Attached to the definition ’sale is correct?"
The High Court answered the question in the affirmative and in favour of
the assessee. These appeals by the State of Orissa are against the Judgment
of the High Court.
The respondent-assessee is a registered dealer under the Orissa Sales Tax
Act 1947, (the Act). The assessee purchased certain goods from a registered
dealer on the basis of declaration furnished by it for resale of the
purchased goods in the State of Orissa. The goods were however sold in the
course of inter-State trade. The Sales Tax Officer came to the conclusion
that the declaration furnished by the assessee was violated and, as such,
it became liable under the proviso to Section 5(2)(A)(a)(ii) of the Act.
Against the assessment made, the respondent preferred appeals under the Act
before the Assistant Commissioner of Sales Tax which were dismissed. The
assessee thereafter preferred appeals before the Sales Tax Tribunal,
Orissa. The Tribunal by its order dated March 2, 1973 annulled the
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assessment and directed the refund of tax and penalty, if paid. The
Tribunal - at the instance of the appellant - referred the above quoted
question for the opinion of the High Court.
Section 5(2)(A)(a) of the Act, to the extent it is relevant reads as
under:-
"In this Act the expression ’taxable turnover’ means that part of a
dealer’s gross turnover during any period which remains after deducting
therefrom : -
(a) his turnover during that period on-
(i) the sale of any goods notified from time to time as tax free under
section 6 and of the packing materials, if any in respect of such goods;
(ii) sales to a registered dealer of goods specified in the purchasing
dealer’s certificate of registration as being intended for resale by him in
Orissa and on sales to a registered dealer of containers and other
materials for the packing of such goods;
Provided that when such goods are used by the registered dealer for
purposes other than those specified in his certificate of registration, the
price of goods so utilised shall be included in his taxable turnover."
"Sale" is defined in Section 2(g) of the Act to mean as under :
"...........with all its grammatical variations and cognate expressions,
any transfer of property in goods for cash or deferred payment or other
valuable consideration, including a transfer of property in goods involved
in the execution of contract but does not include a mortgage,
hypothecation, charge or pledge and the words ’buy1 and ’purchase’ shall be
construed accordingly;
. Explanation : (a) A sale or purchase of goods shall be deemed to take
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) ...........
(b)..
The High Court answered the question in favour of the assessee on the
following reasoning :
"In this case there is no dispute that specific, or ascertained goods were
the subject-matter of sale because these goods were pur-chased from
registered dealers. There is no material on the record to show that the
goods were not within the State of Orissa when the contract of sale was
made. In the facts before us normally it should be presumed that the goods
were actually within the State unless the Taxing Department established the
contrary. Therefore, in view of the definition of ’sale’, it must be deemed
that the sale took place within the State in regard to the
goods..............Under the scheme of the Act, sales tax is leviable at a
single point and a registered dealer at the point of sale is entitled to
pass on the incidence of sales tax to the buyer. Where the buyer is a
registered dealer, upon furnishing a declaration in terms of section 5(2)
(A)(a)(ii) of the Act he is entitled to exemption from payment of sales tax
and the payment of tax is shifted and deferred to a point where the sale
takes place in favour of a consumer, an unregistered dealer or is a
transaction in respect of which no declaration has been furnished even when
the purchasing dealer is a registered dealer. Section 5(2)(A)(a)(ii)
authorises a dealer to exclude from the ’gross turnover’ the sales to a
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registered dealer of goods specified in the purchasing dealer’s certificate
of registra-tion as being intended for resale by him in Orissa. The proviso
occurring in section 5(2)(A)(a)(ii) requires the sale price of goods used
by the purchasing dealer for the purposes other than those mentioned in his
certificate of registration to be included in his taxable turnover. The
assessee before us had purchased bini from registered dealers and had
furnished declaration. It is not disputed that it was entitled to make such
purchases free of tax on furnishing declarations. Its declarations
contemplated that it would resale the goods so purchased in Orissa. As we
have already found, the goods purchased by the assessee were as a fact
resold in Orissa, but these sales’, by application of the provisions of the
Central Act became the first sales under the Central Act. It is true that
the scheme under the Act collecting Orissa sales tax at the deferred point
has not worked out, but it the facts of the case it cannot be said that the
assessee used the goods purchased by it for a purpose other than that
specified in its certificate of registration which alone would attract the
application of the proviso under which the additional demand has been
raised. It the assessee as a fact resold the goods in Orissa, but on
account of some supervening law that transaction is made taxable under some
other Act and tax under the Orissa Sales Tax Ace was not imposable, it
would not amount to any violation of the declarations by the assessee. We
agree with the contention raised on behalf of the assessee that the Proviso
cannot be applied to a case of this type. In our opinion, the Tribunal came
to the correct conclusion in the matter."
We are of the view that the High Court fell into patent error in holding
that the sales in dispute were made by the assessee within the State of
Orissa. It is not disputed that the said sales were in the course of inter-
state trade. If the goods were to remain within the State of Orissa the
sales could not be in the course of Inter-State trade. To make a sale in
the course of inter-State trade, it is necessary that the contract must
envisage the completion of the sale as well as the movement of the goods to
the other State in the course of inter-State trade. The very fact that the
sales in dispute were the sales in the course of inter-State trade, they
could not be the sales within the state in terms of section 2(g) of the
Act. The Act provides for a single point levy and the tax is payable at one
point or the other. When the assessee purchased the goods free of tax by
giving an undertaking that the goods would be resold within the State of
Orissa and subsequently violates the undertaking by selling the goods in
the course of inter-State trade and commerce, the proviso to section 5(2)
(A)(a)(ii) of the Act is directly attracted and the assessee is liable to
pay tax. A sale cannot be inside Orissa and at the same time in the course
of inter-State trade and commerce. In order that a sale or purchase might
be inter-State, it is essential that there must be transport of goods from
one State to another under the contract of sale or purchase. In Bengal
Immunity Com-pany Limited v. State of Bihar, [1955] 2 SCR 603, occur the
following observations which are apposite : -
"A sale could be said to be in the course of inter- State trade only if two
conditions concur; (1) A sale of goods, and (2) A transport of those goods
from one State to another under the contract of sale. Unless both these
conditions are satisfied, there can be no sale in the course of inter-State
trade."
It is the admitted case of the assessee that the sales in question were the
sales in the course of inter-State trade and if that is the position then
the question of the same sales being the sales within the State did not
arise.
We have, today, pronounced judgment in Civil Appeals Nos. 343-347 of 1987
titled M/s. Industrial Minerals & Metals & Anr, v. The Sales Tax Officer &
Anr., wherein we have held that a sale in the course of the export of goods
out of the territory of India cannot be a sale at the same time within the
State of Orissa. On the principles, a sale in the course of inter-State
trade and commerce cannot be a sale within the State of Orissa.
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There is, thus, patent violation of the undertaking given by the assessee.
This Court in Himatsingka Timber Co. Ltd. v. State of Orissa, (1966) 18 STC
235 dealing with section 5(2)(A)(a)(ii) of the Act held as under :-
"The tax was always leviable on the first sale and it would have been so
levied but for the certificate which was furnished by the company when
making purchases from the local dealers. The certificate was that the
sleepers and timber were for resale in Orissa and when that condition was
not fulfilled, the tax became payable even under section 5(2)(a)(ii) before
the 1951 amend-ment."
In Endurpuri Narasimhan & Son v. State of Orissa & Ors.t (1961) 12 STC 282,
certain sales to the petitioner therein were not included in the taxable
turnover of the seller by reason of the registration certificate which the
petitioner had obtained on a declaration that the goods were to be resold
in Orissa. In violation of the declaration the petitioner sold the goods to
dealers outside the State and he was taxed under section 5(2)(a)(ii) of the
Act. This Court held that the imposition of the tax was not on the sales by
the petitioner to person outside the State but on the purchases by him
inside the State for which he gave an undertaking and violated the same by
not selling the goods within the State of Qrissa.
Even otherwise, the High Court was not justified in holding that the onus
for proving that the goods at the time of the contract were not within the
State of Orissa was on the sales tax authority. The assessee on purchase of
the goods became liable to pay the tax but he did not do so because it was
a sale from a registered dealer to a registered dealer. The assessee saved
the tax and postponed the event by giving an undertaking that he would sell
the goods within the State. True to the undertaking the onus to show that
the goods were actually sold within the State of Orissa was on the
assessee. In any case, a contract of sale by which the goods are sold and
are to be transported from one State to another cannot be made a lever for
the argument that though the sale is in the course of inter-state trade and
commerce but nevertheless it is a sale within the State of Orissa under
Section 2(g) of the Act.
Our answer to the question referred, therefore, on the facts and in the
circumstances of this case, is that the Member, Sales Tax Tribunal, was not
correct hi holding that even the sales in the course of inter-State trade
and commerce can be sales inside the State if the goods were inside the
State of Orissa and for coming to that conclusion, the Tribunal wrongly and
illegally relied upon the definition of "sale" under Section 2(g) of the
Act including the explanation therein:
We allow the appeals, set aside the judgment of the High Court. The
appellant shall be entitled to costs which We assess as Rs. 5,000 in each
of the appeals.
Civil Appeal No. 4840 of 1994.
(Arising out of SLP (C) No. 4889 of 1979).
With
Civil Appeal No. 4842 of 1994.
(Arising out of SLP (C) No. 4969 of 1979).
And
Civil Appeal No. 4841 of 1994.
(Arising out of SLP (C) No. 4970 of 1979).
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KULDIP SINGH, J. Leave granted in all the special leave petitions.
These appeals are sequel to the applications filed by the State of Orissa
under Section 24(2) (b) of the Orissa Sales Tax Act, 1947 (the Act) for a
direction to the Orissa Sales Tax Tribunal to state a case and refer the
questions framed out of the appellate order of the Tribunal for the opinion
of the High Court. The High Court dismissed the, applications on the ground
that the questions formulated for the opinion of the High Court had already
been decided by a Division Bench of the High Court in State of Orissa v.
Johrimal Gajanand, (1976) 37 STC 157 and since the view taken by the
Tribunal was in conformity with the opinion expressed by the High court,
the applications were not competent. These appeals by the State of Orissa
are against the orders of the High Court rejecting the applications of the
State under Section 24(2)(b) of the Act.
We have today delivered judgment in Civil Appeals Nos. 2947-50 (NT) of 1977
wherein the High Court judgment in State of Orissa v. Johrimal Gajanand,
(1976) 37 STC 157 has been reversed. For the reasons recorded and the
conclusions reached by us in Joltrimat Cajanand’s case (supra), we allow
these appeals, set aside the impugned orders of the High Court. The High
Court also fell into patent error in not taking into consideration the
amendment to section 5(2)(A)(a)(ii) of the Act made in the year 1978 with
retrospective effect. We have upheld the validity of the amended section
5(2)(A)(a)(ii) of the Act by our judgment delivered today in Cvil Appeals
where in we have reversed the full-Bench judgment of the Orissa High Court
in Mineral & Metals Trading Corporation of India Limited v. State of
Orissa, reported in (1976) 38 S.T.C. 189. Before the High Court the
appellants had relied upon the Full Bench Judgment of the Orissa High Court
in MMTC case (supra) in support of their contentions. The High Court
rejected the contentions of the appellants and upheld the validity of the
amended Section 5(2)(A)(a)(ii) of the OST Act on the following reasoning :
-
"Under the scheme of the Act, the taxable event is postponed until the
registered dealer sells the goods to an unregistered dealer or a consumer,
or in breach of the undertaking given. Law is well settled that the
competent legislature can enact law after removing the infirmities or
deficiencies as pointed out by the Court. All that is to be seen in such
cases is that the amended law is within the competence of the legislature.
Powers of the State Legislature under Entry 54 of List II of the VII
Schedule to the Constitution are plenary. The impugned amended Act is an
attempt by the State Legislature to ensure the single point levy by
nullifying the effect of the two decisions of this Court. The question is
whether such action is within, the competence of the State Legislature and
is in conformity with Article 286 of the Constitution of India.
It is the contention of the petitioners that the goods were meant for
resale in Orissa and in fact were resold inside Orissa. The State
Legislature has power to impose tax on the sale or purchase of goods other
than news papers. This is subject to the provisions of Entry No. 92 A of
List I. The petitioners would have paid the tax while purchasing the goods
from a registered dealer. But while purchasing the goods, they have avoided
the tax by giving a declaration that the goods purchased were meant for the
purpose of resale in Orissa and such resale should be subject to levy tax
under the O.S.T. Act. But subsequently, in violation of the decla-ration
they have sold the same in course of inter-state trade or commerce or
export and avoided payment of tax. Normally the tax should have been paid
at the first point and the petitioners could not have avoided payment of
such tax and would have paid the tax but for the declaration given by them.
They have sold the goods in violation of the declaration given by them. As
already held, in case of declared goods, they are entitled to reimbursement
by virtue of section 15 of the C.S.T. Act and section 14-B of the O.S.T.
Act and rule 42-A of the O.S.T. Rules. From Section 15 of the C.S.T. Act,
it is abundantly clear that it places restrictions and conditions upon the
local law. Its intention is that declared goods should suffer tax at only
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one point and at a prescribed rate. Section 15 does not bar levy of sales
tax by a State on declared goods, but it provides for refund of such tax to
the persons making such sale in the course of inter-State Trade or
commerce. Therefore, section 15 clearly shows that there is no bar for levy
of charge on decla-ration goods but that is to be refunded. In section 15,
no provision has been made for refund of tax on goods other than declared
goods. From this, it can be gathered that the State has also the power to
impose tax on the declared goods. But by virtue of Section 15, it is to be
reimbursed. If the intention were not to tax goods other than declared
goods, such provision should have been dearly made. Viewed from this angle,
it cannot be said that the assessment and the demand of tax made by the
authorities are bad and should be struck down. The State by the amended
provision has only wanted to impose tax on intra-State sal; and it is
within the competence and powers of the State Legislature under Entry 54 of
List II of Schedule VII of the Constitution of India"
We agree with the above quoted reasoning and the conclusions reached by the
High Court.
We dismiss the appeals with costs. We quantify the costs to be paid by each
of the appellants separately as Rs. 5000.