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The learned Deputy Advocate General of Madhya Pradesh did not seriously contest this position and the result, therefore, is that the order of assessment dated the 30th June, 1953, in Civil Appeal No. 132 of 1955 and the order of assessment dated the 498 9th September, 1953, in Civil Appeal No. 133 of 1955 are liable to... |
The appeals will therefore be allowed, the orders of assessment will be set aside and the matters will go back to the Assessment Officer for re assessment of the Appellants in accordance with law. Ratio |
The Appellants will be at liberty to urge before the Assessment Officer the contentions of law and fact available to them in the fresh assessment proceedings including those adverted to above. Ratio |
The Respondents will pay the costs of these Appellants here as well as in the Court below. Ratio |
Petition No. 567 of 1954. Ratio |
BHAGWATI J. FAC |
This petition under article 32 of the Constitution also involves the interpretation of the proviso to article 286(2) and raises the same question as to the meaning, scope and operation of the proviso as was raised in the Civil Appeals Nos. 132, 133 and 137 of 1955 just disposed of The facts giving rise to this Petition... |
The petitioners are a partnership firm carrying on business of manufacturing bidis at Jabalpur and registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947. Ratio |
The petitioners had their branches at Lucknow, Kanpur, Faizabad, Agra, Bombay and Bhopal. Ratio |
They had also their selling agents at various places in Uttar Pradesh and elsewhere outside the Stae of Madhya Pradesh. Ratio |
They also entered into transactions direct with merchants in Uttar Pradesh. Ratio |
The transactions in. Ratio |
question which were the subject matter of assessment at the instance of the Sales Tax authorities were for the period of assessment 21st October, 1949 to 9th November, 1950., and spread over two periods, viz., (1) the period between 21st October, 1949 to 25th January, 1950, which may be called the pre Constitution peri... |
The petitioners ' gross turn over was determined to be Rs. 49,40,140 6 9 and the 499 amount of Sales Tax assessed on the transactions was Rs. 1,51,291 13 0 as per the order of the Deputy Commissioner, Sales Tax, Madhya Pradesh, Respondent No. 3, dated the 14th July, 1954, in Sales Tax Appeal No. 6/A 1.6.54. Ratio |
The petitioners preferred_a second appeal to the Respondent No. 2 against the said order. Ratio |
The Respondent No. 2, however, refused to admit or register the appeal unless the amount of tax assessed was paid up. Ratio |
The petitioners paid about Rs. 91,000/ towards the amount of tax assessed but finding it difficult to pay the balance filed this Petition against the State of Madhya Pradesh, Respondent No, 1, the Commissioner of Sales Tax, Madhya Pradesh, Respondent No. 2, and the Deputy Commissioner of Sales Tax, Madhya Pradesh, Resp... |
The Respondents filed a return denying the contentions of the petitioners and maintaining that the Sales Tax was lawfully assessed by them against the petitioners. Ratio |
The position as regards the petitioners ' turn over for the period of assessment was as stated below: Nature of the Parties. FAC |
Sales Prices of goods. Ratio |
(a) Direct to selling agents on orders. . . . 6,15,236 3 0 (b) Direct to merchants on orders. Ratio |
3,99,450 2 0 (c) Direct to destinations other than branches or depots but accounted for against branchesand depots. Ratio |
6,20,996 14 0 (d) Direct to Stations or destinations having branches or depots owned by the proprietors of this registered firm Kanpur, Bombay, Lucknow and Faizabad. . . 31,06,739 13 0 500 The Sales Tax authorities treated all these transactions as transactions of sale coming within the definition contained in Explanat... |
The learned Attorney General who appeared for the petitioners contended that the bidis manufactured by the petitioners were all actually delivered as a direct result of the transactions of sale for the purpose of consumption in the State of Uttar Pradesh and that after the inauguration of the Constitution on the 26th J... |
He, therefore, urged that these transactions were sales outside the State of Madhya Pradesh and that the State of Madhya Pradesh was not entitled to impose a tax on such sales. Ratio |
The learned Advocate General of Madhya Pradesh on the other hand contended that these were purely intra state transactions entered into by the petitioners within the State of Madhya Pradesh and that the Explanation to article 286(1)(a) did not come into play at all because the goods were not actually delivered as a dir... |
He, therefore, maintained that even for the post Constitution period there was no ban on the State of Madhya Pradesh imposing the sales tax on what were purely "inside sales". Ratio |
It is necessary in view of these rival contentions to ascertain the true nature of the transactions in question. Ratio |
In paragraph 15 of the Petition,, the petitioners 501 had averred that the bidis manufactured by the firm were all delivered in the State of Uttar Pradesh for consumption in that State and that after the 26th January, 1950, the delivery State, viz., the State of Uttar Pradesh, had alone the right to impose tax on the s... |
They had further submitted that the State of Madhya Pradesh where the bidis were manufactured and from where they were sent could not any more exercise its right to levy a tax on such transactions of sale taking place elsewhere by reason of the inhibition contained in article 286. ARG |
In the return filed by the Respondents, they did not deny the allegation made by the petitioners in their Petition that the bidis manufactured by the firm were all delivered, in the State of 'Uttar Pradesh for consumption in that State. ARG |
In substance, they contended that in spite of the State of Uttar Pradesh being the delivery State within the meaning of the Explanation to article 286 (1) (a), the liability of these transactions to sales tax at the instance of the State of Madhya Pradesh was saved by the President 's order made under the proviso to ar... |
Both the order which was made by the Assistant Commissioner of Sales Tax, Jabalpur, in the original assessment case No. 16 of 1950 51, dated the 7th August, 1953, and the order which was made in Sales Tax Appeal No. 6/A 1.6.54 by the Deputy Commissioner of Sales Tax, Madhya Pradesh, Respondent No. 3, dated the 14th Jul... |
It was never. Ratio |
502 contended before either of them that the sales were purely "inside sales" and that the Explanation to article 286(1)(a) did not come into play at all under the circumstances of the case. Ratio |
The facts as found by the Sales Tax authorities also emphasized that these transactions fell within the definition of sale contained in the Explanation 11 to section 2(g) of the Act and that so far as the post Constitution period was concerned they were saved from the ban of article 286 (1) (a) and the Explanation ther... |
It was, however, urged by the learned Advocate General of Madhya Pradesh that the transactions were pure "inside sales" entered into by the petitioners in Madhya Pradesh on orders received by them from outside the State. Ratio |
These orders were accepted by the petitioners in the State of Madhya Pradesh and goods were appropriated to the contracts and the property in the goods passed within the State of Madhya Pradesh and that, therefore, they were pure intraState sales or "inside sales" which it was within the competence of the State of Madh... |
This contention of the learned Advocate General of Madhya Pradesh is untenable. Ratio |
So far as direct supplies to selling agents on orders and direct supplies to merchants on orders covered by items (a) and (b) above are concerned, it was found that these supplies were made to the merchants buying the goods on commission basis or profit on their previous orders, instructions or indents which were eithe... |
The very fact that the bills and the railway receipts were sent through the scheduled banks went to show that the petitioners reserved the right of disposal of goods covered by those railway receipts and the property in the goods passed in the State of Uttar Pradesh only after the relative bills were either accepted or... |
It is clear, therefore, that 503 in those cases the sales were completed in the State of Uttar Pradesh and were not intra State sales or "inside sales" qua the State of Madhya Pradesh. Ratio |
As regards the direct supplies to destinations other than branches or depots but accounted for against the branches or depots being item (c) above, it was found that the petitioners despatched the goods and billed them to depot managers who were responsible for the collection of the orders and then the railway receipts... |
The managers prepared other bills adding incidental or other charges and delivered the railway receipts to the customers to whom the goods were sent from the State of Madhya Pradesh. Ratio |
Here also the despatches of the goods were made from the State of Madhya Pradesh by the petitioners to their depot managers and it was the depot managers who in their turn prepared and submitted their own bills and handed over the railway receipts to the respective customers appropriating the goods themselves to the co... |
These transactions also were, therefore, sales effected in the State of Uttar Pradesh and did not fall within the category of intra state sales or "inside sales" qua the State of Madhya Pradesh. Ratio |
The direct supplies to Stations or destinations having branches or depots owned by the proprietors of the firm, Kanpur, Bombay, Lucknow and Faizabad being item (d) above, also were outside sales qua the State of Madhya Pradesh inasmuch as the branch managers asked the petitioners to send stocks of goods to execute the ... |
As a matter of fact it was found that several consolidated indents were placed by the depot managers with the petitioners in respect of the previous orders which had been collected by them and the petitioners supplied the goods to the depots or branches in pursuance of such indents. Ratio |
If this was the true position qua these supplies, these sales also were completed in 64 504 the State of Uttar Pradesh by the depots or branches supplying the goods in their turn to several customers. Ratio |
There could be no sales as such between the petitioners on the one hand and their depots or branches on the other hand and the State of Madhya Pradesh could certainly not be at all in a position to tax the same. Ratio |
The whole theory, therefore, of "inside sales" falls to the ground and the only thing which we are left with is that these transactions were inter State transactions in which as a direct result of such sales the goods were actually delivered for the purpose of consumption in the State of Uttar Pradesh. Ratio |
The Explanation to article 286(1)(a) determined the State of Uttar Pradesh to be the State in which the sales took place and which alone was entitled to tax these transactions, the State of Madhya Pradesh becoming an "outside" State for the purpose. Ratio |
Apart from the ban imposed on the State of Madhya Pradesh under article 286(1) (a) and the Explanation thereto, these transactions were also in the course of inter State trade or commerce and were hit by the ban of article 286(2). Ratio |
The President 's order no doubt lifted that ban but was not competent to lift the ban under article 286 (1) (a) and the Explanation thereto with the result that in spite of that order the State of Madhya Pradesh was not in a position to impose a tax on these transactions during the post Constitu tion period. Ratio |
The assessment of these transactions to tax for the post Constitution period, therefore, is invalid and cannot be sustained. Ratio |
The assessment, moreover, is a composite one covering the pre Constitution period as well. Ratio |
The case, therefore, falls within our judgment in Civil Appeals Nos. 132, 133 and 137 of 1955 just delivered, and following the reasoning contained therein, we are of the opinion that the order dated the 14th July, 1954, made by the Deputy Commissioner, Sales Tax, Madhya Pradesh, Respondent No. 3, in Sales Tax Appeal N... |
We accordingly allow the Petition, set aside the 505 said order dated the 14th July, 1954, and the matter will go back to the Assessment Officer for re assessment of the petitioners in accordance with law. RPC |
The petitioners will be at liberty to urge before the Assessment Officer the contentions of law and fact available to them in the fresh assessment proceedings. Ratio |
The Respondents will pay the costs of the petition. Ratio |
JAGANNADHADAS J. I regret I feel constrained to differ from the view taken by my learned brothers as regards the construction of proviso to article 286(2) and the effect of the Presidential order issued there, under. RPC |
There is no dispute that the proviso has to be construed as part of article 286(2). RPC |
It is meant to empower the President to keep the ban arising thereunder in temporary abeyance so that the States may continue to levy taxes on sales by virtue of their preConstitution sales tax laws (if then lawful) for a limited period. RPC |
It is urged, however, that the proviso (meaning thereby also the Presidential order thereunder) is effective to lift only the ban under article 286(2) and that the ban under article 286(1)(a) is operative nonetheless. Ratio |
Now, it may be correct to say that these two bans are imposed from different angles and are in that sense independent. Ratio |
But there can be no doubt that they are substantially overlapping in operation. Ratio |
A transaction which brings about an outside sale is also an inter State transaction (barring, if at all, a few ingeniously conceived and illustrated cases). Ratio |
The effect of each of the bans under article 286 is to demarcate the fields within which the taxing power of the States on sales cannot operate. Ratio |
If, as I conceive, the two bans under articles 286(1) (a) and 286(2), are overlapping, the fact that they are imposed from different angles cannot obscure the result, viz., that they bring about the demarcation of the same or substantially the same field of no taxation. Ratio |
It appears to me that it is in this light that the proviso and the Presidential order issued thereunder have to be construed. Ratio |
Now, the proviso (with the Presidential order) declares the field covered by sales in the course 506 of inter State trade and commerce as taxable for a limited period by stating positively and emphatically that "any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State, imm... |
shall continue to be levied until the 31st day of March, 1951". Ratio |
There is no doubt the non obstante clause which will be dealt with presently, and which only emphasises the fact that this is a proviso to article 286(2). Ratio |
But there is no mistaking the positive and mandatory terms of the proviso. Ratio |
The effect of this is clearly and unequivocally to make the whole field of inter State trade and commerce temporarily taxable in respect of the sales which take place in the course thereof. Ratio |
If this be so, it appears to me to be implicit therein that no other ban on such taxation can operate, for the time being, within that very field. Ratio |
To construe the two bans as independently and cumulatively operative is to impute to them some kind of Picturesque potency and is to miss the reality, viz., that all the bans under article 286 are meant to serve the same purpose, viz., that of imposing restrictions and thereby demarcating the fields of no taxation. Rat... |
The bans and the proviso are parts of the same article and have to be harmoniously construed. Ratio |
The un equivocal and positive language of one part, cannot be taken to have been obliterated by the negative language of the other part so as to rsult in futility. Ratio |
A similar situation as that contemplated by the proviso would also arise with reference to the saving clause in article 286(2). Ratio |
If the proviso is to be construed in the way suggested by the learned AttorneyGeneral, it would seem to follow that when and as the Parliament lifts the ban under article 286(2), the lifting of that ban would equally become futile by virtue of article 286(1)(a). Ratio |
The Parliament has not in terms Veen given the power to lift the latter ban. Ratio |
This, therefore, will lead to the extraordinary result that though the Constitution has in terms provided that the ban on taxation of sales in the course of inter State trade and commerce can be lifted, by the Parliament generally, and by the President for a 507 limited period, the exercise of both these powers would b... |
It appears to me unreasonable to impute any such intention as inevitably arising from the language used. Ratio |
It appears to me, with great respect, that, whether it is by parliamentary legislation or by the Presidential action that the ban on taxing sales in the course of inter State trade and commerce is lifted, the principle of harmonious construction of article 286 taken as an integral whole, requires that the lifting of th... |
No doubt, it has been suggested that so far as lifting of the ban under article 286(2) by the Parliament is concerned, the same would be at least partly operative by virtue of article 286(1) (a) taken with the Explanation under which the consumption delivery State may well be free to tax. Ratio |
This was the view expressed by the learned dissenting Judge in the case in The State of Bombay vs The United Motors (India) Ltd.(1). PRE |
But the majority in the recent decision in the Bengal Immunity Co. Ltd. vs State of Bihar(2) including the said learned Judge, have left that question open. PRE |
It is problematical whether having regard to the inevitable extra territorial operation of the levy of such a tax and the consequent harassment to the business community which looms large, the Explanation will receive that construction again and not receive the strict construction preferred in the dissenting judgment i... |
The result, therefore, of construing the proviso and by parity of reasoning the saving clause, as merely removing the ban of a particular nature leaving another overlapping ban to operate, would be to render both the saving clause in, and the proviso to, article 286(2) virtually nugatory. Ratio |
(1) ; (2) Supreme Court Judgment in Civil Appeal No. 159 of 1958, (3) ; 508 The argument based on the non obstante clause in the proviso, viz. "Notwithstanding that the imposition of such tax is contrary to the provisions of this clause" remains to be considered. Ratio |
It is urged that this clause clearly indicates the intention that the operation of the proviso is to be confined to the sole purpose of lifting the ban arising under article 286(2). Ratio |
With respect, I am unable to agree. Ratio |
The non obstante clause undoubtedly affirms the fact that the 'proviso is operative in respect of article 286(2). Ratio |
But it does not purport to limit the effect of the proviso, which a reasonable construction thereof may justify. Ratio |
A non obstante clause does not normally add to or subtract from the main provision of which it is a part. Ratio |
It is often enough inserted by way of extra caution. STA |
But it does not have the effect of limiting the operation of the main provision. Ratio |
(See Aswini Kumar Ghosh vs Arabinda Bose(1) and The Dominion of India vs Shrinbai A. Irani(2)). Ratio |
The suggestion that the Presidential action lifts the ban only as regards the inter State sales would be to read the phrase "notwithstanding that" as meaning "in so far as". Ratio |
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