Case: The State Of Assam Vs. Remesh Chandra Dey And Others

in the course of inter-State trade and the levy of tax thereon was within the prohibition enacted by Art. 286(2). 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 Art. 286(2), but the latter are purely intra-State sales, and tax imposed thereon does not offend Art. 286(2)."These observations are entirely applicable in the context of the fact, 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.6. 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-sec. (1)A in that section. That sub-section reads as follows ;"(1)A. Nothing in sub-sec. (1) shall, except in cases covered by the first proviso to sub-sec. (12) of S. 2 of this Act be deemed to 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-s. (1)A did no more than repeat in the Act the prohibition contained in Art. 286. The first two clauses of this sub-section reiterate the prohibition contained in Art. 286(1), and the third clause reiterates the prohibition contained in Art. 286(2) of the Constitution. The first proviso to S, 2(12), which is referred to in sub-sec. (1)A, enacts the Explanation to cl. (1) of Art. 286.7. 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 Art. 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 S. 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 registered 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 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, S. 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 turn over did so include such sales the dealer would, under sub-sec. (1)A of S. 3, be able to claim that those transactions were not taxable, because they fell within the ban of Art. 286(2) as well as S. 3(1)A(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 Art, 286(2) and S. 3(1)A of the Act. In our opinion, the ban of Art. 286(2), which is again re-enacted by S. 3(1)A, makes it incumbent that the sales falling within those provisions should be excluded from the net turnover.8. Reference was made to sub-sec. (2) of S. 3, and it was said that sub-sec (2) stated that every dealer to whom sub-sec. (1) did not apply shall be liable to be taxed under this Act, and that there was no mention of sub-sec. (1)A there. No doubt sub-sec. (2) does not mention sub-sec (1)A; but sub-sec. (1)A is not rendered ineffective by the omission. Sub-section (1)A speaks of its own force, and has to be given effect to, along with the remaining sub-sections of S. 3. Sub-section (1)A has the added support of Art. 286, and the Constitution must prevail. Thus, both Art. 286 and sub-sec, (1)A of S. 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.

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

Explanation:
1[ds]In so far as the decision of the learned Chief Justice is concerned the point has been before this Court in another case.In Endupuri Narasimham and Son v. State of Orissa, WP No. 12 of 1959, D/14-3-1961: (AIR 1961 SC 1344  ) 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-State trade or commerce directly and were an integral part thereof were saved under Art. 286 (2). On that occasion, reference was made to all the authorities of this Court which had discussed the question from the angle of Art. 286(1) of the Constitution and it was pointed out that the same reasoning applied also to Art. 286(2).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 Art. 286(2). 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 Art. 286(2), but the latter are purely intra-State sales, and tax imposed thereon does not offend Art. 286(2)."These observations are entirely applicable in the context of the fact, 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.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 Art. 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 S. 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 registered 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 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, S. 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 turn over did so include such sales the dealer would, under sub-sec. (1)A of S. 3, be able to claim that those transactions were not taxable, because they fell within the ban of Art. 286(2) as well as S. 3(1)A(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 Art, 286(2) and S. 3(1)A of the Act. In our opinion, the ban of Art. 286(2), which is again re-enacted by S. 3(1)A, makes it incumbent that the sales falling within those provisions should be excluded from the net turnover.8. Reference was made to sub-sec. (2) of S. 3, and it was said that sub-sec (2) stated that every dealer to whom sub-sec. (1) did not apply shall be liable to be taxed under this Act, and that there was no mention of sub-sec. (1)A there. No doubt sub-sec. (2) does not mention sub-sec (1)A; but sub-sec. (1)A is not rendered ineffective by the omission. Sub-section (1)A speaks of its own force, and has to be given effect to, along with the remaining sub-sections of S. 3. Sub-section (1)A has the added support of Art. 286, and the Constitution must prevail. Thus, both Art. 286 and sub-sec, (1)A of S. 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.