Appeals Nos 202 and 203 of 1958
Appeals from the judgment and decree dated October 5 1956 of the Patna High Court in Misc
Judicial Cases Nos 330 and 331 of 1955
K D Chatterjee section N Andley and J B Dadachanji for the appellants
D P Singh for the respondents
October 26
The Judgment of the Court was delivered by AYYANGAR J
These two appeals are from a common judgment of the High Court of Patna dated October 5 1956 in two petitions under article 226 of the Constitution and have been filed pursuant to a certificate granted by the High Court under article 132
The Tobacco Manufacturers India Ltd the appellants in the above appeals are an incorporated company manufacturing cigarettes and tobacco in their factory at Monghyr in the State of Bihar and these 109 appeals are concerned with the legality of the levy of sales tax under the Bihar Sales Tax Act hereafter referred to as the Act on the appellants in respect of sales effected during the financial years 1949 50 and 1950 51
The point urged in these appeals is a very narrow one and relates to the proper construction to be placed on certain orders of the Board of Revenue passed in regard to the tax properly leviable for these two years
The facts relevant to this point are briefly these The assessment of the appellants for both the years was completed by the Superintendent of Sales Tax Monghyr on May 7 1952 and the total tax liability was determined in the sum of Rs 644940 2 6 and Rs 746876 1 3 for the two assessment years 1950 51 and 1951 52 respectively
Before the assessing officer the appellants contended that all sales effected by them as a direct result of which the goods were delivered outside the State of Bihar were exempted from tax liability under article 2861a of the Constitution
This objection was overruled the reason assigned being that the sales were completed in Bihar and that the entire turnover of the appellants was therefore subjected to tax under the Act
In taking this view the assessing authority followed a previous ruling of the Board of Revenue of the State in the Bengal Timber case Case 61 of 1952
An appeal preferred to the Deputy Commissioner of Sales Tax Bihar by the appellants was dismissed on October 8 1952 on the same grounds
The appellants paid the tax demanded for both the years and invoked the revisional jurisdiction of the Board of Revenue
In their petitions to the Board the appellants pointed out that the sales of goods delivered for consumption outside the State of Bihar which involved a tax liability of Rs 123813 0 2 in the earlier year and Rs 710185 12 0 in the later year were made up of two types of transactions a those in which the goods thus delivered were for consumption in the State of first delivery or first destination b those in which the goods thus delivered were 110 for consumption not in the State of first delivery but in
other States
These two classes would be referred to hereafter for convenience as typo a and type b respectively
The appellants claimed that on the proper construction of article 2861  2 they were entitled to have both these types of sales excluded from their taxable turnover
By the date of the hearing of these petitions by the revisional authority this Court had rendered the decision in State of Bombay vs United Motors India Ltd and Others 1 expounding the scope of the explanation to article 2861a and its inter relation to the exemption under article 2862 and naturally this decision was brought to the attention of the member of the Board at the hearing
Without examining whether the decision cited did or did not cover both the two a  b types of sales effected by the appellants the Board passed on August 28 1953 a laconic order in these terms The two points urged in this Court were among those points urged in the Lower Court and they are i No tax should have been levied on the Company s canteen sales
ii that despatches outside the State for consumption in other States should not have been taxed for the period after the Constitution came into force
As regards the admitted despatches of goods out
side the State after the 26th January 1950 when the Constitution came into force the learned Lower Court has been guided by the decision of the Board in the Bengal Timber case Case No 61 of 1952
But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motor s case
According to the decision of the Supreme Court no tax can be levied on despatches to the places outside the State after the 26th January 1950 and on this point the petition are allowed and the 1  111 sales tax officer directed to recalculate the amount of tax payable by the assessee 
Apparently the appellants understood this order as meaning that all sales whereunder goods were delivered outside the State whether or not for consumption in the State of first delivery ie both types a b were exempted from the tax levy
The sales tax authorities however took the order to mean that only those sales in which deliveries were made outside the State for consumption in the State of first destination i e those of type a were intended to be exempted and these rival interpretations were put forward in the correspondence that passed between the appellants and the sales tax authorities
The appellants made an application for the refund of the amount of tax attributable to all the sales under which goods were delivered outside the State but the tax authorities sticking to their interpretation of the order of the Board and of their interpretation of the decision of this Court in the United Motors case 1 refunded the tax collected on the sales falling within type a but refused to refund Rs 20923 15 2 for the 1st year and Rs 129823 50 for the later year these amounts representing the tax on sales of type b
The appellants however persisted in pressing their claim for the refund of these amounts also
In this state of affairs the State of Bihar moved the Board of Revenue to review its order dated August 28 1953 or at any rate clarify it so as to confine its operation to sales falling within type a urging that this would bring it in accord with the interpretation of article 2861 by this Court in the United Motors case 1
The appellants objected to the jurisdiction of the Board of Revenue to review its previous decision and on April 25 1955 it passed the following order   These are what appear to be two miscellaneous petitions filed on behalf of the State of
Bihar seeking certain clarifications regarding the interpretation of the Board s order dated 28 8 1953 in Cases Nos
514 of 1952
After argument was heard it was conceded 1  112 by both parties that there is no provision in the Act under which the parties concerned may move the court to clarify or explain the order passed this function essentially being a matter of legal advice
It was also agreed that no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motor s case
The petitions are therefore rejected
 If the order of the Board dated August 28 1953 was laconic and ambiguous the later order dated April 25 1955 was if anything more obscure
The appellants however considered it an order in their favour because the petition by the State for clarification of the first order on the lines of the interpretation put upon it by the tax authorities had been dismissed and when the refusal to refund the two sums of tax referred to earlier was continued they filed two petitions in the High Court of Patna under article 226 of the Constitution for the issue of writs of mandamus to compel the refund of the tax on the principal ground that a duty to do so had been imposed by the orders of the Board of Revenue though the petition made an incidental reference to the appellants being entitled to such refund on a proper construction of article 2861  2 of the Constitution even apart from the order of the Board of Revenue
The learned Judges of the High Court however in the main considered the question whether on a proper interpretation of the relevant Articles of the Constitution sales under which goods were delivered outside Bihar but for consumption not in the State of first delivery were exempt from tax under the Bihar Sales Tax Act and decided the point against the appellants
They next dealt with the central point urged in the petitions viz that the Board of Revenue by its order dated August 28 1953 had allowed the appellant s revision in regard to  the second point  which included sales of all categories whether or not for the purpose of consumption in the State of first destination outside Bihar and directed the Sales tax Officer to recompute the tax by allowing this exemption and that the officer was therefore statutorily bound to 113 give effect to the order of the Board be the same right or wrong particularly when the Board refused to vary or modify it so as to exclude particular types of sales from the scope of the exemption when moved to do so by the State Government
In regard to this point after stating that the orders of the Board of Revenue were ambiguous the learned Judges proceeded to answer the question on the assumption that the Board of Revenue had directed the officer to recompute the tax on the basis that all the outside sales both the a and the b types were exempted from liability
The learned Judges then pointed out that the order of the Board would be clearly erroneous in regard to the b type sales and that the petitioner in a writ of mandamus could not insist on a manifestly wrong order being enforced
The petitions were therefore dismissed
The appellants applied to the High Court for certificates under articles 132 and 133 but the learned Judges granted a certificate under article 132 alone and it is on the strength of these certificates that the appeals are before us
The principal point that Mr Chatterjee learned Counsel for the appellants argued before us related to the duty of the tax authorities to obey the orders of the Board of Revenue and give effect to them and he submitted that the High Court erred in denying his clients the relief of mandamus on the ground that that order was erroneous
In support of this argument learned Counsel sought reliance on a recent decision of this Court in Bhopal Sugar Mills V Com missioner of Income tax 1 in which it was held that when an order was made by a superior tribunal in that case the Income tax Appellate Tribunal directing the Income tax Officer to compute the income of an assessee on a particular basis and that order had become final the subordinate officer had no right to disregard the direction because it was wrong and that the High Court when approached by the assessee for the issue of a writ of mandamus was bound to 1 1961 1 SC R 474 15 114 enforce the final order of the superior Tribunal and could not refuse to do so because it considered the order of the Tribunal to be wrong
This Court pointed out that when the order which the Tribunal had jurisdiction to pass became final it bound all parties to it and its correctness could not be challenged collaterally in proceedings for enforcing that order
The attempt of learned Counsel for the appellants was to bring this case within the scope of the above ruling
The ratio of this decision is to be found in this passage  By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him
Such refusal is in effect a denial of justice and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts
If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior tribunal yet held that no manifest injustice resulted from such refusal
 To attract the principle thus enunciated it is necessary that there should be an order of a superior tribunal clear certain and definite in its terms and with
out any ambiguity to which the subordinate authority or officer to whom it is addressed could give effect
We are clearly of the opinion that the decision referred to cannot apply to the situation in the present case
Taking the earlier order of the Board first it is to put it at the mildest ambiguous
The Board referred to the Bengal Timber case which had been followed by the lower authorities in disallowing the appellants  claim to exemption to both the a and b type salesinvolving out of State deliver
A reference was then 115 made to the decision of this Court in the State of Bombay vs United Motors India Ltd and others 1 as superseding the previous decision of the Board adding that according to the decision of this Court no tax could be levied on despatches outside the State after the 26th January 1950 and on that point the petitions were allowed
It will be noticed that the member did not set out the precise extent to which the ruling of this Court superseded the previous decision of the Board and this was left in a state of uncertainty
It was suggested by learned Counsel for the appellants that Mr Bakshi the member of the Board drew no distinction between sales of type a or b and bad included both of them as falling within a single category of sales in which delivery had taken place outside the State for consumption in other States and for that reason we should hold that the member had rightly or wrongly treated the decision in the United Motors  case as applicable to all such sales
We find ourselves unable to agree in this construction of the order
We cannot presume that Mr Bakshi did not peruse the judgment in the United Motors  case when he referred to it in his order nor that he did not acquaint himself with the terms of the Explanation to article 2861a of the Constitution the scope and significance of which was analysed and elaborated in that decision
We are rather inclined to agree with the construction which the member himself put on this order in April 1955 that he left it to the Sales tax Officer to decide for himself the relief to which the appellants were entitled on that officer s interpretation of the judgment of this Court
It may be that this was not a satisfactory method of disposing of the revision petition leaving the point which arose for decision by the member of the Board of Revenue to be decided by the Sales tax Officer but we are now only concerned with the simple question whether Mr Bakshi had or had not determined the true scope and effect of the judgment of this Court and decided it as meaning that all sales as a result of which goods were delivered outside the State 1  116 of Bihar were within the Explanation and so were exempt from the tax liability
Notwithstanding the cryptic language used by the Member of the Board we are clearly of the opinion that he did not intend to decide this point in favour of the appellants in the manner contended for by them
It is now common ground that when the Board of Revenue was approached by the State Government to review or clarify this order Mr Bakshi by his order dated April 25 1955 expressed himself as having decided earlier that he had directed the sales tax officer to give effect to the judgment of this Court in the United Motors case and had done nothing further
Learned Counsel for the appellants strongly pressed before us that the member of the Board having accepted the preliminary objection that there was no provision in the Bihar Sales tax Act by which a party concerned might move the Board to clarify or explain the order he had no jurisdiction to effect any clarification of his previous order and that whatever was said by the Board on the second occasion could not be held to modify the earlier order or deny the appellants such benefits as were granted to them by the earlier order of August 28 1953
But as against this it has to be noted that before the Board both the parties ie the State Government as well as the appellants agreed that clarification was not needed because  of the specific reference to the judgment of the Supreme Court in the United Motors case 
As this observation was embodied in the later order with the consent of both the parties we consider that it is too late now for the appellants to raise any technical objection to this sentence being given effect to
In view however of the conclusion that we have reached as to the construction of the earlier order of August 1953 it is unnecessary to pursue the matter any further
If therefore as a result of the order or orders passed by the Board the sales tax officer was directed to give effect to the judgment of this Court in the United Motors case it followed that the interpretation of the judgment was left to that officer
We have already pointed out that to such a situation the principle of 117 the decision of this Court in Bhopal Sugar Mills vs Commissioner of Income Tax 1 is inapplicable
We might also point out that even if the decision applied and the High Court issued an order in the nature of mandamus to the sales tax officer it could only take the form of a direction to effect the reassessment in the light of the decision in the United Motors case 2 an order which would leave the appellants in the same position in which they now find themselves without such an order by the High Court
The next question for consideration is whether on a proper construction of the decision in the United Motors case 2 the exclusion of type b sales from those exempted under article 2861 was erroneous
Mr Chatterjee learned Counsel for the appellants sought to establish that this Court had decided in the United Motors case three points 1 that sales as a result of which goods were delivered in a State for consumption in such State ie the sales falling within the Explanation to article 2861 were fictionally inside that State for all purposes and so within the taxing power of the State in which such delivery took place 2 that sales which by the fiction created by the Explanation were inside a particular State were  outside  all other States and so exempt from tax levy by all such other States 3 that further and beyond  this all sales which did not satisfy the terms of the Explanation but in which goods were delivered outside the State in which title passed were  outside sales  over which no State would have power to levy a tax
In other words the argument was that this Court had laid down that every sale which was not  an Explanation sale  and therefore not an  inside sale  within a particular State was an  outside sale for all States and therefore exempt from the levy of sales tax by every State in India
In support of this submission learned Counsel relied on a passage in the judgment of the learned Chief Justice at page 1081 of the Re port which ran   
The authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving 1 1961 1 SCR 474 2  118 inter State elements which would avoid the doubts and difficulties arising out of the imposition of salestax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution
This they did by enacting Clause 1a with the Explanation and clause 2 of Article 286
Clause 1a prohibits the taxation of all sales or purchases which take place outside the State but a localised sale is a troublesome concept for a sale is a composite transaction involving as it does several elements such as agreement to sell transfer of ownership payment of the price delivery of the goods and so forth which may take place at different places   
To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated and that is what in our opinion the Explanation was intended to do
It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place notwithstanding the property in such goods passed in another State 
An  outside  sale or purchase is explained by defining what is an inside sale and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear
The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test Are the goods actually delivered in the taxing State as a direct result of a sale or a purchase for the purpose of consumption therein  Then such sale or purchase shall be deemed to have taken place in that State and outside all other States
The latter States are prohibited from taxing the sale or purchase  the former alone is left free to do so
Multiple taxation of the same transaction by different States is also thus avoided
 In our opinion this passage explains the scope of the Explanation and deals with what might be termed  Explanation sales 
If there is a sale falling within the terms of the Explanation it is  inside the State of delivery cum consumption and that State alone can levy the tax
Such a sale is outside all other 119 States which are prohibited from taxing such a sale by reason of any territorial nexus however close or cogent
The passage extracted however does not deal with cases where the sale in question does not satisfy the requirements of the Explanation leading to the fixation of the fictional situs of the sale deter mining the State by which the tax might be levied
Whether any and if so which is the State which can levy a tax on a sale not covered by the Explanation is not dealt with by this decision at all
From this it would follow that sales of type a would be exempt from the levy of tax under the Bihar Sales Tax Act by reason or their being inside sales within the State of delivery cum consumption and therefore being  outside sales quoad the State of Bihar
Sales of type b however not having been dealt with by the decision in the United Motors case it would follow that on the orders of the Board of Revenue the previous decision of the Board in the Bengal Timber case would have still held the field and the transactions would be liable to the levy of tax and the tax levied on those sales would continue to be valid
Learned Counsel for the appellants was certainly right in his submission that as the orders of the Board of Revenue had became final as between the parties the liability to tax must be determined on the basis of these orders be they right or wrong
It is therefore unnecessary to consider whether apart from the decision of this Court in the United Motors case the appellants would be entitled to any further relief on the basis of any other decision of this Court interpreting article 2861  2
As already stated the appellants have already been granted a refund in regard to the tax collected in respect of the sales falling within type a
As in our opinion the appellants were not on the orders of the Board of Revenue entitled to a refund of the tax on transactions falling within type b the judgment of the High Court dismissing their petitions is clearly right
The appeals fail and are dismissed but in the circumstances of the case there will be no order as to costs
Appeals dismissed


Summary:
The petitioners who were displaced persons from West Pakistan put forward certain claims in regard to village houses which they had left there but which were rejected by the Rehabilitation authorities
The claims were for amounts above Rs 20000 in the case of some of the petitioners and above Rs 10000 in the case of the others
By r 5 framed under the  claims could be verified provided inter alia that where a claimant had been allotted any agricultural land in India and such land so allotted exceeded four acres the value of the building in respect of which the claim was made shall not be less than Rs 20000 and where it did not exceed four acres the claim made was not less than Rs 10000 Rule 65 of the  provided that any person to whom more than four acres of agricultural land had been allotted shall not be entitled to receive compensation separately in respect of his verified claim for any rural building the assessed value of which was less than Rs 20000 and any person allotted four acres or less was not entitled to receive compensation where the value was less than Rs 10000 The petitioners challenged the validity of the aforesaid rules as being discriminatory and thereby contravening article 14 of the Constitution of India on the grounds that the object of the various Acts and the rules made thereunder was to rehabilitate displaced persons but by the rules classifications had been made with reference to houses in rural areas which were discriminatory as neither the classes were based on intelligible differentia nor was there a rational nexus between that differentia and the object sought to be achieved
It was found that the impugned rules were made in pursuance of an Inter Dominion Agreement between the two Governments with regard to evaluation of evacuee property which had received recognition in article 315 biii of the Constitution
Held that the impugned rules afforded a reasonable justifi cation for the classification and did not contravene article 14 of the Constitution