12 of 1959
Petition under article 32 of the Constitution of India for enforcement of fundamental rights
RGopalakrishnan section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the petitioners
CK Daphtary Solicitor General of India B Ganapathy Iyer and T M Sen for the respondents
March 14
The Judgment of the Court was delivered by VENKATARAMA AIYAR J
The petitioner is a joint Hindu family firm carrying on business at Berhampur in the State of Orissa and registered as a dealer under the provisions of the Orissa Sales Tax Act 1947 hereinafter referred to as the Act
Its business consists in the purchase of castor seeds turmeric gingili and other commodities locally and selling them to demlers outside the State
The Sales Tax Officer Berhampur included in the taxable turnover of the petitioner the purchase of goods made by it inside the State but sold as aforesaid to dealers outside the State and imposed a tax of Rs 27161 13 0 on account of such sales during the sixteen quarters commencing from April 1 1952 and ending with March 31 1956
In the present application filed under article 32 the petitioner challenges the validity of the tax on the ground that the purchases in question were made in the course of inter State trade and that a tax thereon was in contravention of article 2862 The impugned tax has be en levied under section 5 of the Act which omitting what is not relevant runs as follows 5
1 The tax payable by a dealer under this 316 Act shall be levied at the rate of one quarter of an anna in the rupee on his taxable turnover       2 In this Act the expression taxable turnover means that part of a dealer s gross turnover during any period which remains after deducting there from 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 Orissa or for use by him in the execution of any contract in Orissa and on sales to a registered dealer of contai ners or 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
It will be seen that under this section when a sale takes place the seller has to include it in his taxable turnover but when the sale is to a registered dealer who declares that his purchases are for resale in Orissa then it is excluded from the seller s turn
If the registered dealer purchaser sells the goods outside the State in breach of the condition the purchases by him are liable to be included in his turnover and assessed to sales tax
That precisely is what has happened in this case
The sales to the petitioner were not included in the taxable turnover of the sellers by reason of the registration certificate which the petitioner had obtained on a declaration that the goods were to be resold in Orissa
But in violation of this declaration he sold the goods to dealers outside the State and so he became liable to be taxed under section 52aii of the Act
The contention of the petitioner is that these purchases were made in the course of inter State trade and that the imposition of sales tax thereon is in 317 consequence ultra vires The provision applicable is article 2862 as it stood prior to the sixth amendment and it ran as follows Except in so far as Parliament may by law otherwise provide no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter State trade or commerce
 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 imposed
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 a tax imposed thereon does not offend article 2862
In support of his contention that the purchases are hit by Art 2862 the petitioner relies on the decision of this Court in Messrs Mohanlal Hargovind Das V
The State of Madhya Pradesh 1
In that case the petitioners who were registered dealers under the Central Provinces and Berar Sales Tax Act 1947 were carrying on business in the manufacture and sale of bidis in Madhya Pradesh
For the purpose of their business they imported processed tobaco from the State of Bombay in large quantities rolled them into bidis and sold them to dealers in other States
1  318 The sales tax authorities imposed a tax on the purchases made by them on the ground that they had in breach of the declaration in the registration certificate sold them to merchants outside Madhya Pradesh
The contention of the petitioners was that the purchases by them were in the course of inter State trade and that the imposition of tax thereon was therefore repugnant to article 2862
It was this contention that was accepted by this Court
It will be noticed that the in this case the assessment of sales tax was on very purchases from dealers in Bombay under which the goods were transported from the State of Bombay to Madhya Pradesh
In the present case the purchases which are sought to be assessed involved no movement of the goods outside the State of Orissa
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 the Bengal Immunity Company Limited vs The State of Bihar 1 occur the following observations which are apposite A sale could be said to be in the course of interState 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 those conditions are satisfied there can be no sale in the course of interstate trade
 With reference to the analogous provision under article 2861b prohibiting the imposition of tax on the sale or purchase of goods in the course of import or export it has been field by this Court that it is only a sale or purchase which occasions the export or import of the goods out of or into the territory of India or a sale in the State by the exporter or importer by transfer of shipping documonts while the goods are beyond the customs barrier that is within the exemption and that a sale which precedes such export or import or follows it is not exempted vide State of Travancore
Cochin vs Shannugha Vilas Cashew Nut Factory 2
On the same principles a purchase made inside a State for sale outside the State cannot itself be held 1 784 785
2  319 to be in the course of inter State trade and the imposition of a tax thereon is not repugnant to article 2862 of the Constitution
In the result this petition is dismissed with costs
Petition dismissed


Summary:
A partnership consisting of four persons was formed on March 31 1949 which was to come to an end on March 31 1954
On July 27 1951 a fifth partner was taken into the partnership
On March 29 1954 a new partnership was entered into taking in a sixth partner will contributed Rs 40000 as his share to the capital
In the partnership deed no express provision was made as to the manner in which profits and losses were to be divided
A deed of rectification was executed on September 17 1955 after the close of the account year 1054 5 5 adding a clause to the partnership deed that the partners shall share in the profits and losses in proportion to their contributions to the capital
Upto the end of the assessment year 1954 55 the old firms were registered under section 26A of the Income tax Act
The new firm applied for registration for the assessment year 1955 56 but registration was refused on the ground that there was no specification of shares of the partners
Held that registration was rightly refused
Section 26A requires that for registration in a particular year there must be an instrument of partnership specifying the shares of the partners in the profits and losses
Though in the present case there was an instrument of partnership in the year of assessment 1955 56 it did not specify the shares
The right of registration can be claimed only in accordance with section 26A and the assessee must bring himself strictly under the terms of that section
Ravula Subba Rao vs The Commissioner of Income tax Madras 1956 SCR 577 and R C Mitter  Sons vs Commissioner of Income tax E1959  referred to