Case: Kurapati Venkatasatyanarayana &amp; Others Vs. The State Of Andhra Pradesh

to a separate assessable item, a Court can sever the items and cut out one or more along with the sum attributed to it, while affirming the residue. But where the assessment consists of a single undivided sum in respect of the totality of property treated as assessable, and when one component (not dismissible as de minimis) is on any view not assessable and wrongly included, it would seem clear that such a procedure is barred, and the assessment is bad wholly. That matter is covered by authority. In Montreal Light, Heat and Power Consolidated v. City of Westmount, (1926) SCR (Can) 515 the Court (see especially per Anglin, C. J.) in these conditions held that an assessment which was bad in part was infected throughout, and treated it as invalid. Here their Lordships are of opinion, by parity of reasoning, that the assessment was invalid in toto."Applying the principle to the special facts and circumstances of the case the Court set aside the orders of assessment and directed that the case should be remanded to the Assessment Officer for re-assessment of the appellants in accordance with law. The same principle was applied but with a different result in the later case the State of Jammu and Kashmir v. Caltex (India) Ltd., 17 STC 612 =(AIR 1966 SC 1350 ) in which the question arose as regards the validity of an assessment of sales-tax of all retail sales of motor spirit. The Petrol Taxation Officer assessed the respondent to pay sales-tax for the period January, 1955 to May, 1959 under Section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005. The respondent applied under Section 103 of the Constitution of Jammu and Kashmir and a single Judge of the High Court held that the respondent was liable to pay sales-tax only in respect of the sales which took place during the period January to September, 1955 and issued a writ restraining the appellants from levying tax for the period October, 1955 to May, 1959. On appeal a Division Bench of the High Court quashed the assessment for the entire period. On appeal to this Court it was held that though there was one order of assessment for the period January 1, 1955 to May 1959 the assessment could be split up and dissected and the items of sale could be separated and taxed for different periods. It was pointed out that the sales-tax was imposed in the ultimate analysis on receipts from individual sales or purchases of goods effected during the entire period, and, therefore, a writ of mandamus could be issued directing the appellant not to realise sales-tax with regard to transactions of sale during the period from September 7, 1955 to May 1959.11. A similar question arose for determination in an American case (Frank Batterman v. Western Union Telegraph Co., (1887) 127 US 411). The question in that case was"whether a single tax, assessed under the Revised Statutes of Ohio, Section 2778, upon the receipts of a telegraph company which receipts were derived partly from inter-State commerce and partly from commerce within the State but which were returned and assessed in gross and without separation or apportionment, is wholly invalid, or invalid only in the proportion and to the extent that the said receipts were delivered from inter-State commerce".It was held unanimously by the Supreme Court of the United States that the assessment was not wholly invalid but it was invalid only in proportion to the extent that such receipts were derived from inter-State commerce. It was observed that where the subjects of taxation can be separated so that which arises from inter-State commerce can be distinguished from that which arises from commerce wholly within the State, the Court will act upon this distinction, and will restrain the tax on inter-State commerce, while permitting the State to collect that upon commerce wholly within its own territory. The principle of this case has been consistently followed in American cases: (see Bowman v. Continental Company, ((1920) 256 US 642). This case has been cited with approval by this Court in 1953 SCR 1069 at p. 1097 = (AIR 1953 SC 252 at p. 263) wherein it was observed that the same principle should be applied in dealing with taxing statutes in this country also.12. In the present case we are of opinion that though there is a single order of assessment for the period from April 1, 1949 to March 31, 1950 the assessment could be split up and dissected and the items of sale separated and taxed for different periods. It is quite easy in this case to ascertain the turnover of the appellant for the pre-Constitution and post-Constitution periods for these figures are furnished in the plaint by the appellant himself. It is open to the Court in these circumstances to serve the illegal part of the assessment and give a declaration with regard to that part alone instead of declaring the entire assessment void. For these reasons we hold that the appellant should be granted a declaration that the order of assessment made by the Deputy Commercial Tax Officer for the year 1949-50 is invalid to the extent that the levy of sales-tax is made on sales relating to goods which were delivered for the purpose of consumption outside the State for the period from January 26, 1950 to March 31, 1950.The result is that the appellant is entitled for refund of the amount illegally collected from him for the period from January 26, 1950 to March 31, 1950. The trial Court has already found that the appellant is entitled to claim exemption with regard to turnover for this period to the extent of Rs. 3,34,107-15-6 and the tax payable on this sum is Rs. 5,220-7-0. The appellant is, therefore, entitled to a decree for the refund of Rs. 5,220-7-0. The appellant is also entitled to interest at 6 per cent per annum from the date of suit till realization of this amount

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]herefore, by incorporating Section 22 of the Madras Act read with Article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale a cumulative fetter of triple dimension was imposed upon the taxing power of the State. The Legislature of the Madras State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of, the territory of India, or on sale of any goods where such sale took place in the course of inter-State trade or commerce. By the Explanation to Article 286 (1) (a) which is incorporated by Section 22 of the Madras Act a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in anotherby incorporating Section 22 of the Madras Act read with Article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale a cumulative fetter of triple dimension was imposed upon the taxing power of the State. The Legislature of the Madras State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of, the territory of India, or on sale of any goods where such sale took place in the course of inter-State trade or commerce. By the Explanation to Article 286 (1) (a) which is incorporated by Section 22 of the Madras Act a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in anotherour opinion the argument is well founded and must be accepted as correct. In India Copper Corporations case 12 STC 56   = (AIR 1961 SC 347  ) it was pointed out by this Court that if the goods were as a direct result of a sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery, the assessee would be entitled to the exemption from sales-tax by virtue of the Explanation to Art. 286 (1) (a) of the Constitution and it would not be necessary for the assessee to prove further that the goods so delivered were actually consumed in the State of first destination.9. In the present case of the Subordinate Judge has, upon a consideration of the evidence adduced by the parties stated in his report dated June 27, 1962 that the intention of the appellant was that the sale and delivery should be for the purpose of consumption in the delivery States. It is true that in his subsequent report date March 22, 1963 the Subordinate Judge gave a different finding. But it is obvious that the subsequent report of the Subordinate Judge is vitiated because the principle laid down by this Court in India Copper Corporations case, 12 STC 56   = (AIR 1961 SC 347  ) has not been taken into account. Having regard to the evidence adduced by the appellant in this case we are satisfied that the part of the turnover which related to sales from January 26, 1950 to March 31, 1950 was not liable to sales-tax and the levy of sales-tax from the appellant to this extent is illegal.In support of this argument reference was made to the decision of this Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax, 6 STC627 at p. 637 = (AIR 1955 SC 765   at p. 770)