Appeal No 167 of 1960
Appeal from the judgment and order dated July 16 1956 of the Assam High Court at Gauhati in Civil Rule No 128 of 1954
A V Viswanatha Sastri and Naunit Lal for the appellant
The Respondents did not appear
April 14
The Judgment of the Court was delivered by HIDAYATULLAH J
This appeal has been filed by the State of Assam against a judgment of the High Court of Assam dated July 16 1956
By the judgment under appeal the High Court held that section 15 of the Assam Sales Tax Act 1947 and Rule 80 framed under the Act were ultra vires being a breach of article 2862 of the Constitution
The High Court granted a certificate under article 1321 of the Constitution
R C Dey the answering respondent is a wholesale dealer in tea and has been in business since 1949
He registered himself as a dealer under the Assam Sales Tax Act on January 14 1950
His business consists mainly of buying tea in Assam and selling it either in Assam or in Calcutta
In respect of tea sold in Calcutta R C Dey consigns the tea to himself after purchasing it in Assam
This tea is then approved by prospective purchasers to whom the documents of title are endorsed on receipt of the price
In 1951 the Assam Sales Tax Act was amended by the Assam Sales Tax Amendment Act 1951 4 of 1951
Section 15 of the Act before the amendment provided that in calculating the net turnover of a registered dealer for tax purposes all sales made to another registered dealer of goods specified in the latter s certificate of registration were to be excluded from the gross turnover if the goods were bought for resale
By the amendment in 1951 the section was amended by the addition of the words in the State after the word resale
Thus in calculating the net turnover of a registered dealer the goods intended 988 for resale in the State could alone be excluded from the gross turnover
This amendment was followed by amendment of the Rules
Rule 80 was enacted to provide as follows 80
1 A dealer who wishes to deduct from his gross turnover the amount of sales on the ground that he is entitled to make such deductions under clause b of sub section 1 of section 15 shall on demand produce in respect of such sales the copy of the relevant cash memo or bill according as the sale is a cash sale or a sale on credit and a true declaration in writing by the purchasing dealer or by such responsible person duly authorised by the purchasing dealer in this behalf that the goods in question are specified in the certificate of registration of such dealer
2 For purposes of this rule the declaration shall be in the following form IWe hereby declare that IWe have purchased the goods herein mentioned for the purposes for use in the manufacture of goods for sale in the State or for use in the execution of a contract in the State or for resale in the State and further declare that these goods have been specified inour certificate of registration bearing No in the District of R C Dey filed a petition under article 226 of the Constitution challenging the amendment and the Rule and contended that they offended against article 2862 and Part XIII of the Constitution and were thus ultra vires
He also submitted that the amendment and the Rules were void as offending article 19 1g
The last submission was given up in the High Court and the objection about Part XIII of the Constitution which was decided against him must be taken to have been abandoned because none appeared on his behalf to urge this point
We need not refer to article 19 or Part XIII of the Constitution
The High Court upheld his contention about article 2862
In the High Court separate judgments were delivered by the learned Chief Justice and Ram Labhaya J They both agreed that section 15 as amended and the Rule were ultra vires article 2862
The reasons given 989 by the learned Judges were different
According to the Chief Justice the amendment and the Rule had the effect of taxing sales in the course of inter State trade or commerce and were therefore illegal
Ram Labhaya J held that the sale to R C Dey and the sale by him in Calcutta were separate sales and that the first sale was not in the course of inter State trade or commerce and was taxable
He however held that though by section 3 which is the charging section sales in the course of inter State trade or commerce were excluded from the ambit of the Act this section remained only a pious declaration because its effect was not incorporated in the machinery section namely section 15
According to the learned Judge what was taxable under the Act was the net turnover of a registered dealer
The machinery section showed how the net turnover was to be ascertained and it provided that to arrive at the net turnover certain deductions could be made from the gross turnover
In the original section anything which was sold for resale was so excluded but by the amendment the exclusion was only in respect of the sale of goods for resale in the State
According to the learned Judge if sales which did not lead to resale in the State were not excluded from the gross turnover then the not turnover would comprehend such sales and therefore there was a taxation of sale of goods in the course of inter State trade or commerce
Putting it briefly while the learned Chief Justice felt that the amendment and the Rule directly affected inter State trade or commerce Ram Labhaya J held that they affected inter State trade or commerce indirectly inasmuch as sales outside the State were not excluded from the gross turnover
We shall take up these two points separately
III so far as the decision of the Chief Justice is concerned the point has been before this Court in another case
In Endupuri Narasimham  Son vs State of Orissa and others 1 a similar question had arisen in connection with the Orissa Sales Tax Act 1947
In dealing with transactions such as these this Court pointed out that only sales which affected inter 1  990 State trade or commerce directly and were an integral part thereof were saved under article 2862
On that Occasion reference was made to all the authorities of this Court which had discussed the question from the angle of article 2861 of the Constitution and it was pointed out that the same reasoning applied also to article 2862
It was observed in the case as follows The argument on behalf of the petitioner is that as the goods were purchased for the purpose of being sold to dealers outside the State and they were in fact so sold the purchases were in the course of inter State trade and the levy of tax thereon was within the prohibition enacted by article 2862
We do not agree with this contention
The transactions of sales which have been taxed were wholly inside the State of Orissa
They were sales by persons in the State of Orissa to persons within the State of Orissa of goods which were in Orissa
The fact that the purchaser sold those very goods to dealers outside the State is not relevant as those sales are distinct and separate from the sales on which the taxes in question have been im posed
The present levy is not on the sales by the petitioner to persons outside the State but on the purchases by him inside the State
The former sales are in the course of inter State trade and are not taxable under article 2862 but the latter are purely intrastate sales and tax imposed thereon does not offend article 2862
 These observations are entirely applicable in the context of the facts as are to be found in this appeal
Indeed all that is necessary to apply the above passage to the facts of this case is to substitute Assam in the place of Orissa
In our opinion this point must be held to be concluded against the respondent
That leaves over for consideration the reasons given by Ram Labhaya J in his concurring judgment
Section 3 of the Act which created a liability to tax was amended by Act 4 of 1951 by the introduction of sub section 1A in that section
That sub section reads as follows 1A Nothing in sub section 1 shall except in cases covered by the first proviso to sub section 12 of section 2 of this Act be deemed to 991 render any dealer liable to tax on the sale of goods where such sale takes place i outside the State of Assam ii in the course of the import of the goods into or export of the goods out of the territory of India or iii in the course of inter State trade or commerce except in so far as Parliament may by law otherwise provide
 The introduction of sub section
1A did no more than repeat in the Act the prohibition contained in article 286
The first two clauses of this sub section reiterate the prohibition contained in article 2861 and the third clause reiterates the prohibition contained in article 2862 of the Constitution
The first proviso to section 212 which is referred to in sub section
1A enacts the Explanation to cl
1 of article 286
Now it is quite clear that from the operation of the charging section sales of a particular character are kept out
This provision saves from taxation all those transactions which if they were taxed would have fallen within the ban of article 286
The effect of this saving is to make such transactions immune from taxation and no further amendment of the law in the machinery section was necessary
What section 15 does is to grant an additional exemption in respect of sales in which the goods though sold to a registered dealer are meant for resale in the State itself
It is quite easy to see that unless this exemption was granted it was possible that there would have been sales tax at more than one point namely at the point at which the first registered dealer sold to the second regis tered dealer and again when the second registered dealer sold in his turn
To avoid taxation at multiple points on transactions of sale of the same goods within the State it was provided that the tax shall be paid only on the last sale and not on the previous sales so long as the previous sales were from registered dealers to registered dealers in respect of goods mentioned in the registration certificate of the latter and provided the goods were for resale in the State
When the charging section itself excluded taxation of sales in the course of inter State trade 992 or commerce it was hardly necessary to look for a repetition of the same exemption in the machinery section
It is an error to think that because the machinery section namely section 15 does not repeat the exemption given by the charging section the turnover of a dealer would necessarily include the sales in the course of inter State trade or commerce
Even if the net turnover did so include such sales the dealer would under sub section
1A of section 3 be able to claim that those transactions were not taxable because they fell within the ban of article 2862 as well as section 31A iii of the Act
What has already been excluded by the operation of the Constitution and the Act cannot become taxable because the net turnover has to be calculated in a particular manner
From that net turnover such sales must be excluded by the operation of article 2862 and section 31A of the Act
In our opinion the ban of article 2862 which is again reenacted by section 31A makes it incumbent that the sales falling within those previsions should be excluded from the net turnover
Reference was made to sub section
2 of section 3 and it was said that sub section
2 stated that every dealer to whom sub section
1 did not apply shall be liable to be taxed under this Act and that there was no mention of subs
1A there
No doubt sub section
2 does not mention sub section
1A but sub section
1A is not rendered ineffective by the omission
Sub section 1A speaks of its own force and has to be given effect to along with the remaining sub sections of section 3
Sub section 1A has the added support of article 286 and the Constitution must prevail
Thus both article 286 and sub section
1A of section 3 are there to save from taxation all sales in the course of inter State trade or commerce and there is no need to look further into the Act to see whether they are exempted once again or not
In our opinion the appeal must succeed
The decision of the High Court under appeal is set aside and the petition is ordered to be dismissed with costs here and in the High Court
Appeal allowed


Summary:
Section 15 of the Assam Sales Tax Act 1947 as originally enacted provided that in calculating the net turnover of a registered dealer for tax purposes all sales made to another registered dealer of goods specified in the latter s certificate of registration were to be excluded from the gross turnover if the goods were brought for resale
In 1951 the section was amended by the addition of the words in the State after the word  resale as a result of which the exclusion was confined only to sales of goods for resale in the State
Rule 80 was framed to give effect to the amendment
The petitioner a registered dealer in Assam and whose business consisted mainly of buying tea in Assam and selling it either in Assam or in Calcutta chal lenged the legality of the amendment on the ground that the result of the amendment was that tax could be levied on interState sales and that therefore it contravened article 2862 of the Constitution of India
Held 1 that a sale of goods to a dealer within the State who purchased them for the purpose of selling them to dealers outside the State and who in fact so sold them would not make it a sale in the course of inter State trade as the two sales were distinct and separate
The first sale was an intra State sale and a tax imposed thereon did not offend article 2862 of the Constitution
Endupuri Narasimham vs State of Orissa   followed
2 that section 15 of the Assam Sales Tax Act 1947 and Rule 80 framed under that Act were not ultra vires article 2862 of the Constitution
The object of section 15 of the Act was to avoid taxation at multiple points and the amendment to that section in 1951 or Rule 80 did not enable the levy of tax on sales in the course of inter State trade twice
Such sales were expressly saved from tax by the operation of article 2862 and section 31Aiii of the Act
Once those sales were outside the charging section there was no need to re enact that prohibition in section 15 which was a machinery section and would stand cut down by the limitation placed by the charging section and the Constitution 987