Case: Tika Ram &amp; Sons Ltd. Etc Vs. The Commissioner Of Sales Tax U.P., Lucknow

2. The appellants are manufacturers and dealers of oil in the Province of Uttar Pradesh and they have their own depots outside the Province. For the financial year 1948-49 and the subsequent period from April 1, 1949 to January 25, 1950, the appellants had sent their goods to their depots outside the Province of Uttar Pradesh, for example to Calcutta in the State of West Bengal before any contract of sale in respect of the goods was made. After the goods had reached the depots outside the Province of Uttar Pradesh, they were sold to various parties. The Sales Tax Officers of Uttar Pradesh assessed the outside sales of all the appellants to sales tax under the Uttar Pradesh Sales Tax Act 15 of 1948, hereinafter called the Act. It appears that this category of sales roughly amounted to more than one crore of rupees in the case of the appellants and the sales tax was levied at the rate of 3 pies per rupee subject to a rebate under S. 5 of the Act and certain other adjustments. Aggrieved by the assessments, the appellants took the matter in appeal under Section 9 of the Act. The appeals were heard by various Appellate Officers called Judge, Appeals. Some of the Appellate Officers held that the assessment was properly made, while some others took the view that the assessments made for outside sales were improper and the assessment order should be quashed. The parties aggrieved by the appellate orders filed revisions before the revising authority called Judge, Revisions, under Section 10 of the Act. By his judgment dated July 10, 1957 the Judge, Revisions, held that the out-of-State sales would be taxable (1) if the goods were in existence in the Province of Uttar Pradesh at the time when the contracts for sale were made, and (2) if the goods were manufactured after the contracts for sale were made in respect of them and were subsequently appropriated towards those contracts. He further held that sales of goods which were not only manufactured but also exported before any contracts for sale were made would not be taxable. Under S. 11 of the Act, the Commissioner of Sales Tax applied to the Revising Authority for making a reference of the case to the High Court. By its order dated January 23, 1958 the Revising Authority drew up a statement of the case and referred to the Allahabad High Court the following two questions of law forWhether clause (ii) of the Explanation II to Section 2 (h) U. P. Sales Tax Act provides for taxing sales in which goods were manufactured or produced in U. P. but for which the contract for sale was made after the goods had left the State?2. If the reply to the above is in affirmative, whether this provision is ultraits judgment dated November 30, 1962, the High Court answered the first question in the affirmative and the second question in the negative.

Reasoning: 4. It was argued by Mr. Chagla in the first place that Cl. (ii) of Explanation 11 to Section 2 (h) of the Act means that the goods should have been manufactured and produced in Uttar Pradesh for sale to the person who had contracted to buy them. In other words, there must be a contract for the sale before manufacture or produce. It was pointed out that in the present case the contract was entered into after the goods were manufactured and exported out of Uttar Pradesh. It was contended that as a matter of construction Explanation 11 does not cover these sales and the deeming provision will not make the appellants liable to pay sales-tax in regard to such sales. We are unable to accept this argument as correct. There is nothing in the language or context of Explanation II to suggest that the goods should be produced or manufactured in Uttar Pradesh after the contracts for sale had been entered into. There is hence no warrant for the argument that for attracting the tax liability the goods must have been manufactured or produced after and not before the agreement for sale.In other words it is only necessary for the application of Explanation II that the goods must have been sold by the person who produced or manufactured them but there is no requirement that he must have manufactured or produced them after the agreement for sale.It is the admitted position in these appeals that the goods were manufactured or produced in Uttar Pradesh by the appellants carrying on business in Uttar Pradesh in those goods and therefore the appellants are liable to pay the tax on their sales irrespective of where and when the cotracts for sale were entered into and also irrespective of the fact that the contracts were entered into after the goods had been exported out of Uttar Pradesh. We accordingly hold that the first question was rightly answered by the Highwas argued by Mr. Chagla that the doctrine of nexus was not applicable to sales-tax legislation, because such legislation was concerned with the tax on the transaction of sale, that is to say, a completed sale and to break up a sale into its component parts and to take one or more such parts and to apply the theory to it would mean that the State would be entitled to impose tax on one or more of the ingredients or constituent elements of the transaction of sale which by itself will not amount to ais manifest that a transaction of sale is a composite transaction and consists of legal ingredients like agreement of sale, passing of title and delivery of goods but it is not necessary for the purpose of legislative jurisdiction that all legal ingredients of sale or even the transfer of title should have taken place inside the Province. It is sufficient if there is a proper territorial nexus or connection between the taxing authority and the transaction sought to be taxed. The fact that the goods are manufactured in the Province constitutes a real and pertinent nexus or connection which confers jurisdiction upon the Provincial Legislature to impose theour opinion, the ratio of this decision applies to the present case and it must be accordingly held that Explanation II to Section 2 (h) of the Act is not ultra vires as being outside the legislative competence of the State of Uttar Pradesh.It was lastly submitted by Mr. Chagla that a reference to the High Court under Section 11 of the Act at the instance of the Commissioner of Sales-tax was incompetent as the Commissioner was neither a dealer nor a person aggrieved within the meaning of the section as it originally stood, and the amendment effected in sub-section (3) of Section 11 by U. P. Sales Tax Act 8 of 1954 which came into force on April 1, 1954 was not retrospective in character and could not apply to proceedings which had been initiated earlier before Sales-tax Authorities as well as before the Revising Authority. It was pointed out that the appellate order was made on January 4, 1952 and the revision application was filed before the amending Act of 1954 came into force. It further appears that the revision application was disposed of on July 8, 1957 by the Revising Authority. The contention put forward on behalf of the appellants was that the Commissioner had no power to apply for a reference at the time the appellants had made the application for revision. It was conceded by Mr. Chagla that at the time the Commissioner applied for a reference under Section 11 of the Act the amending Act 1954 had already come into force and under the amended section the Commissioner was empowered to ask for a reference. The point taken was that the material date was the date on which the appellants made the application for revision and not the date on which the application was actually decided by the Revising Authority. We are unable to accept this argument as correct. The right to apply for a reference is conferred upon a person aggrieved by an order passed under Section 10 and this right exists regardless of when the application for revision was made. Only the existence of an order under Section 10 is required for the accrual of the right to make an application for a reference. It was suggested by Mr. Chagla that the Commissioner did not have the right to apply for a reference because the right did not exist when the appellants had made the application for revision. But the right did exist on the date on which the Commissioner applied for a reference and there is nothing in the language or context of Section 11 to suggest that the Commissioner could exercise the right only if it existed on the date on which the application for revision had been made. On behalf of the appellants Mr. Chagla referred to the well- recognised rule that a statute should be interpreted, as far as possible, so as to respect vested rights.But this rule has no application to the present case for we do not think that amendment of Section 11 of the Act by enabling the Commissioner also to ask for a reference of a question to the High Court alters any vested or substantive right of the assessee. On the contrary, we consider that the amendment is merely to procedural matter and the present case falls within the general principle that the presumption against a retrospective construction has no application to enactments which affect only the procedure and practice of courts.For "it is perfectly settled that if the legislature forms a new procedure, that, instead of proceeding in this form or that, you should proceed in another and a different way, clearly there bygone transactions are to be sued for and enforced according to the new form of procedure. Alterations in the form of procedure are always retrospective, unless there is some good reason or other why they should not be".Gardner v. Lucas, (1878) 3 ACWe are accordingly of the opinion that Mr. Chagla is unable to make good his argument on this aspect of the case.