Case: Tobacco Manufacturers (India) Ltd Vs. The Commissioner Of Sales-Tax, Bihar, Patna

which goods were delivered in a State for consumption in such State, i. e., the sales falling within the Explanation to Art. 286(1) 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 SCR): (at p.257 of AIR) of the Report 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 inter-State elements which would avoid the doubts and difficulties arising out of the imposition of sales-tax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution. This they did by enacting Cl. (1)(a) with the Explanation and Cl. (2) of Art. 286. Cl. (1) (a) 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 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." 16. 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 States, which are prohibited from taxing such a sale by reason on 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 determining the State by which the tax might be levied. Whether any and, if so, which is the State which can levy a tax on sale not covered by the Explanation, is not dealt with by this decision at all. 17. 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 of 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, 1953 SCR 1069 : (AIR 1953 SC 252 ) it would follow that on the orders of the Board of Revenue, the previous decision of the Board in the Bengal Timber case, (Case No. 61 of 1952) 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 become 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, 1953 SCR 1069 : (AIR 1953 SC 252 ) the appellants would be entitled to any further relief on the basis of any other decision of this Court interpreting Art. 286(1) and (2). 18. 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.

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

Explanation:
0[ds]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 without 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 caseWe cannot presume that Mr. Bakshi did not peruse the judgment in the United Motors case 1953 SCR 1069   : (AIR 1953 SC 252  ) when he referred to it in his order, nor that he did not acquaint himself with the terms of the Explanation to Art. 286(1)(a) 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 officers 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 questionwhether 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 of Bihar were within the Explanation and so were exempt from the taxliability.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 them13. 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, 1953 SCR 1059 : (AIR 1953 SC 252  ) 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, i. e., the State Government as well as the appellant-agreed that clarification was not needed because "of the specific reference to the judgment of the Supreme Court in the United Motors case, 1953 SCR 1069   : (AIR 1953 SC 252  )". 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 further16. 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 States, which are prohibited from taxing such a sale by reason on 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 determining the State by which the tax might be levied. Whether any and, if so, which is the State which can levy a tax on sale not covered by the Explanation, is not dealt with by this decision at all17. 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 of 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, 1953 SCR 1069   : (AIR 1953 SC 252  ) it would follow that on the orders of the Board of Revenue, the previous decision of the Board in the Bengal Timber case, (Case No. 61 of 1952) 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 become 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, 1953 SCR 1069   : (AIR 1953 SC 252  ) the appellants would be entitled to any further relief on the basis of any other decision of this Court interpreting Art. 286(1) and (2)18. 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.