Case: State Trade Corporation of India Ltd. &amp; Another Vs. The State of Mysore &amp; Another

Sales Tax Act. 1956 had come into force. During that year, therefore, the State could not tax a sale which was an inter-State sale as defined in S.3 of the Central Sales Tax Act. That section defined an inter-State sale in two ways, one of which is in these terms: A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another. The petitioners contend that the disputed sales were of this variety and the respondents, therefore, could not-Tax them. 9. The question then is did the sales occasion the movement of cement from another State into Mysore within the meaning of the definition ?In Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, 1961-1 SCR 379 at p.391: (AIR 1961 SC 65 at p.72) it was held that a sale occasions the movement of goods from one State to another within S.3 (a) of the Central Sales Tax Act, when the movement is the result of a covenant or incident of the contract of sale. That the cement concerned in the disputed sales was actually moved from another State into Mysore is not denied. The respondents only contend that the movement was not the result of a covenant in or an incident of the contract of sale. 10. The result of this appeal will therefore turn on whether the movement of cement from another State into Mysore was the result of a covenant in the contract of sale or an incident of such contract. This question will depend on the contract and in order properly to appreciate the contract the procedure of the sales, as to which there is no dispute, has to be referred to. Now, at the relevant time cement could be purchased only under a permit issued by the Government and on the terms contained in it. This, it seems, was the result of certain statutory provisions. All the sales with which we are concerned were under such permits. Unfortunately the petitioners did not disclose in their petitions any specimen copy of a permit. As however the existence of the permits was not in dispute and had been mentioned in the petitions the petitioners were allowed at the hearing to produce a specimen copy of a permit which was accepted by the respondents as a correct specimen. It appears from the specimen produced that a cement Factory which was required to supply the cement covered by the permit was named in it. We are concerned with sales in which the permits required supplies to be made from factories outside Mysore. These permits were issued to the purchases and the supplier named in them was the Marketing Company. On receipt of the permit the purchaser placed an order with the Marketing Company and later a firm contract with it was made. 11. In making the orders of assessment, the Taxing Officer observed that the firm contracts did not provide for any supplies being made from any particular factory and the supplies had actually been made from factories outside the State of Mysore only to suit the convenience of the supplier, the Marketing Company, and not because of any covenant in the contracts. It is true that the written contracts did not themselves contain any covenant that the supply had to be made from any particular factory but it seems to us that the agreement between the parties was not fully set out in them. In any case each contract was subject to the terms of the permit to which it expressly referred. As it is not in dispute that the sale could only be under a permit and on the terms contained in it, a contract has to be read as subject to it. Since the permits with which we are concerned provided that the supply had to be made from one or other factory situate outside Mysore, the contracts must be deemed to have contained a covenant that the goods would be supplied in Mysore from a place situate outside its borders. A sale under such a contract would clearly be an inter-State sale as defined in S.3 (a) of the Central Sales Tax Act. In view of the provisions of the Constitution and the Central Sales Tax Act earlier referred to a State could not impose a tax on such a sale. Therefore it seems to us that the petitions should succeed. 12. It was however said that the petitions were incompetent in view of our decision in Smt. Ujjam Bai v. State of Uttar Pradesh, W.P. No. 79 of 1959: (AIR 1962 SC 1621 ) inasmuch as the Taxing officers under the Mysore Acts had jurisdiction to decide whether a particular sale was an inter-State sale or not and any error committed by them as quasi-judicial tribunals in exercise of such jurisdiction did not offend any fundamental right. But we think that that case is clearly distinguishable. Das J. there stated that if a quasi-judicial authority acts without jurisdiction or wrongly assumes jurisdiction by committing an error as to a collateral fact and the resultant action threaten or violates a fundamental right, the question of enforcement of that right arises and a petition under Art. 32 will lie. He also said that where a statute is intra-vires but the action taken is without jurisdiction, then a petition under Art. 32 would be competent. That is the case here. There is no dispute that the Taxing Officer had no jurisdiction to tax inter-State sales, there being a constitutional prohibition against a State taxing them. He could not give himself jurisdiction to do so by deciding a collateral fact wrongly. That is what he seems to have done here. Therefore we think the decision in Ujjam Bais case, W. P. No. 79 of 1959: (AIR 1962 SC 1621 ) is not applicable to the present case and the petitions are fully competent.

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

Explanation:
1[ds]All the sales with which we are concerned were under such permits. Unfortunately the petitioners did not disclose in their petitions any specimen copy of a permit. As however the existence of the permits was not in dispute and had been mentioned in the petitions the petitioners were allowed at the hearing to produce a specimen copy of a permit which was accepted by the respondents as a correct specimen. It appears from the specimen produced that a cement Factory which was required to supply the cement covered by the permit was named in it. We are concerned with sales in which the permits required supplies to be made from factories outside Mysore. These permits were issued to the purchases and the supplier named in them was the Marketing Company. On receipt of the permit the purchaser placed an order with the Marketing Company and later a firm contract with it was made11. In making the orders of assessment, the Taxing Officer observed that the firm contracts did not provide for any supplies being made from any particular factory and the supplies had actually been made from factories outside the State of Mysore only to suit the convenience of the supplier, the Marketing Company, and not because of any covenant in the contracts. It is true that the written contracts did not themselves contain any covenant that the supply had to be made from any particular factory but it seems to us that the agreement between the parties was not fully set out in them. In any case each contract was subject to the terms of the permit to which it expressly referred. As it is not in dispute that the sale could only be under a permit and on the terms contained in it, a contract has to be read as subject to it. Since the permits with which we are concerned provided that the supply had to be made from one or other factory situate outside Mysore, the contracts must be deemed to have contained a covenant that the goods would be supplied in Mysore from a place situate outside its borders. A sale under such a contract would clearly be an inter-State sale as defined in S.3 (a) of the Central Sales Tax Act. In view of the provisions of the Constitution and the Central Sales Tax Act earlier referred to a State could not impose a tax on such a sale. Therefore it seems to us that the petitions should succeed12. It was however said that the petitions were incompetent in view of our decision in Smt. Ujjam Bai v. State of Uttar Pradesh, W.P. No. 79 of 1959: (AIR 1962 SC 1621 ) inasmuch as the Taxing officers under the Mysore Acts had jurisdiction to decide whether a particular sale was an inter-State sale or not and any error committed by them as quasi-judicial tribunals in exercise of such jurisdiction did not offend any fundamental right. But we think that that case is clearly distinguishable. Das J. there stated that if a quasi-judicial authority acts without jurisdiction or wrongly assumes jurisdiction by committing an error as to a collateral fact and the resultant action threaten or violates a fundamental right, the question of enforcement of that right arises and a petition under Art. 32 will lie. He also said that where a statute is intra-vires but the action taken is without jurisdiction, then a petition under Art. 32 would be competent. That is the case here. There is no dispute that the Taxing Officer had no jurisdiction to tax inter-State sales, there being a constitutional prohibition against a State taxing them. He could not give himself jurisdiction to do so by deciding a collateral fact wrongly. That is what he seems to have done here. Therefore we think the decision in Ujjam Bais case, W. P. No. 79 of 1959: (AIR 1962 SC 1621 ) is not applicable to the present case and the petitions are fully competent8. The whole of the assessment year 1957-58 was after S.3 of the Central Sales Tax Act. 1956 had come into force. During that year, therefore, the State could not tax a sale which was an inter-State sale as defined in S.3 of the Central Sales Tax Act. That section defined an inter-State sale in two ways, one of which is in these terms: A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another. The petitioners contend that the disputed sales were of this variety and the respondents, therefore, could not-Tax them11. In making the orders of assessment, the Taxing Officer observed that the firm contracts did not provide for any supplies being made from any particular factory and the supplies had actually been made from factories outside the State of Mysore only to suit the convenience of the supplier, the Marketing Company, and not because of any covenant in the contracts. It is true that the written contracts did not themselves contain any covenant that the supply had to be made from any particular factory but it seems to us that the agreement between the parties was not fully set out in them. In any case each contract was subject to the terms of the permit to which it expressly referred. As it is not in dispute that the sale could only be under a permit and on the terms contained in it, a contract has to be read as subject to it. Since the permits with which we are concerned provided that the supply had to be made from one or other factory situate outside Mysore, the contracts must be deemed to have contained a covenant that the goods would be supplied in Mysore from a place situate outside its borders. A sale under such a contract would clearly be an inter-State sale as defined in S.3 (a) of the Central Sales Tax Act. In view of the provisions of the Constitution and the Central Sales Tax Act earlier referred to a State could not impose a tax on such a sale. Therefore it seems to us that the petitions should succeed12. It was however said that the petitions were incompetent in view of our decision in Smt. Ujjam Bai v. State of Uttar Pradesh, W.P. No. 79 of 1959: (AIR 1962 SC 1621 ) inasmuch as the Taxing officers under the Mysore Acts had jurisdiction to decide whether a particular sale was an inter-State sale or not and any error committed by them as quasi-judicial tribunals in exercise of such jurisdiction did not offend any fundamental right. But we think that that case is clearly distinguishable. Das J. there stated that if a quasi-judicial authority acts without jurisdiction or wrongly assumes jurisdiction by committing an error as to a collateral fact and the resultant action threaten or violates a fundamental right, the question of enforcement of that right arises and a petition under Art. 32 will lie. He also said that where a statute is intra-vires but the action taken is without jurisdiction, then a petition under Art. 32 would be competent. That is the case here. There is no dispute that the Taxing Officer had no jurisdiction to tax inter-State sales, there being a constitutional prohibition against a State taxing them. He could not give himself jurisdiction to do so by deciding a collateral fact wrongly. That is what he seems to have done here. Therefore we think the decision in Ujjam Bais case, W. P. No. 79 of 1959: (AIR 1962 SC 1621 ) is not applicable to the present case and the petitions are fully