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

2. The Tobacco Manufacturers (India) Ltd., the appellants in the above appeals are an incorporated company manufacturing cigarettes and tobacco in their factory at Monghyr in the State of Bihar, and these appeals are concerned with the legality of the levy of sales-tax under the Bihar Sales-tax Act (hereafter referred to as the Act) on the appellants in respect of sales effected during the financial years 1949-50 and 1950-51. The point urged in these appeals is a very narrow one and relates to the proper construction to be placed on certain orders of the Board of Revenue passed in regard to the tax properly leviable for these two years3. The facts relevant to this are briefly these : The assessment of the appellants for the years was completed by the Superintendent of Sales Tax, Monghyr, on May 7, 1952, and the total tax liability was determined in the sum of Rs. 6,44,940-2-6 and Rs. 7,46,876-1-3 for the two assessment years 1950-51 and 1951-52 respectively. Before the assessing officer, the appellants contended that all sales effected by them as a direct result of which the goods were delivered outside the State of Bihar were exempted from tax liability under Art. 286(1) (a) of the Constitution. This objection was overruled, the reason assigned being, that the sales were completed in Bihar, and that the entire turnover of the appellants was therefore subject to tax under the Act. In taking this view the assessing authority followed a previous ruling of the Board of Revenue of the State in the Bengal Timber case (Case No. 61 of 1952). An appeal preferred to the Deputy Commissioner of Sales Tax, Bihar, by the appellants was dismissed on October 8, 1952, on the same grounds4. The appellants paid the tax demanded for both the years and invoked the revisional jurisdiction of the Board of Revenue. In their petitions to the Board the appellants pointed out, that the sales of goods delivered for consumption outside the State of Bihar which involved a tax liability of Rs. 1,23,813-0-2 in the earlier year and Rs. 7,10,185-12-0 in the later year were made up of two types of transactions :(a) those in which the goods thus delivered were for consumption in the State of first delivery or first destination,(b) those in which the goods thus delivered were for consumption not in the State of first delivery but in other States(These two classes would be referred to hereafter for convenience as type (a) and type (b) respectively)The appellants claimed that on the proper construction of Art. 286 (1) and (2) they were entitled to have both these types of sales excluded from their taxable turnover. By the date of the hearing of these petitions by the revisional authority, this Court had rendered the decision in State of Bombay v. United Motors (India) Ltd., 1953 SCR 1069   : (AIR 1953 SC 252  ) expounding the scope of the explanation to Art. 286(1)(a) and its interrelation to the exemption under Art. 286 (2), and naturally this decision was brought to the attention of the member of the Board at the hearing. Without examining whether the decision cited did or did not cover both the two (a) and (b) types of sales effected by the appellants, the Board passed on August 28, 1953, a laconic order in these terms :"The two points urged in this Court were among those points urged in the Lower Court and they are-(i) No tax should have been levied on the Companys canteen Sales(ii) that despatches outside the State for consumption in other States should not have been taxed for the period after the Constitution came into force........ .......... .................... .......... ............As regards the admitted despatches of goods outside the State after the 26th January, 1950, when the Constitution came into force, the learned Lower Court has been guided by the decision of the Board in the Bengal Timber case (Case No. 61 of 1952). But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motors case, 1953 SCR 1069   : (AIR 1953 SC 252  ). According to the decision of the Supreme Court, no tax can be levied on despatches to the places outside the State after the 26th January, 1950 and on this point the petitions are allowed, and the sales-tax officer directed to recalculate the amount of tax payable by the assessee."5. Apparently the appellants understood this order as meaning that all sales, whereunder goods were delivered outside the State, whether or not for consumption in the State of first delivery (i.e., both type a and b) were exempted from the tax levy. The Sales-tax authorities, however, took the order to mean that only those sales in which deliveries were made outside the State for consumption in the State of first destination, i. e., those of type (a) were intended to be exempted, and these rival interpretations were put forward in the correspondence that passed between the appellants and the Sales-tax authorities. The appellant made an application for the refund of the amount of tax attributable to all the sales under which goods were delivered outside the State, but the tax authorities sticking to their interpretation of the order of the Board and of their interpretation of the decision of this Court in the United Motors case, 1953 SCR 1069   : (AIR 1953 SC 252  ) refunded the tax collected on the sales falling within type (a) but refused to refund Rs. 20,923-15-2 for the 1st year and Rs. 1,29,823-5-0 for the later year- these amounts representing the tax on sales of type (b). The appellants however persisted in pressing their claim for the refund of these amounts also6. In this state of affairs, the State of Bihar moved the Board of Revenue to review its order dated August 28, 1953, or at any rate clarify it so as to confine its operation to sales falling within type (a), urging that this would bring it in accord with the interpretation of Art. 286(1) by this Court in the United Motors case, 1953 SCR 1069   : (AIR 1953 SC 252  ). The appellants objected to the jurisdiction of the Board of Revenue to review its previous decision and on April 25, 1955, it passed the following order :"There are what appears to be two miscellaneous petitions filed on behalf of the State of Bihar seeking certain clarifications regarding the interpretation of the Boards order dated 28-8-1953 in Cases Nos. 514 of 1952. After argument was heard it was conceded by both parties that there is no provision in the Act under which the parties concerned may move the court to clarify or explain the order passed, this function essentially being a matter of legal advice. It was also agreed that no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motors case, 1953 SCR 1069   : (AIR 1953 SC 252  ). The petitions are, therefore rejected."7. If the order of the Board dated August 28, 1953, was laconic and ambiguous, the later order dated April 25, 1955, was if anything more obscure. The appellants, however, considered it an order in their favour, because the petition by the State for clarification of the first order on the lines of the interpretation put upon it by the tax authorities had been dismissed, and when the refusal to refund the two sums of tax referred to earlier was continued, they filed two petitions in the High Court of Patna under Art. 226 of the Constitution for the issue of writs of mandamus to compel the refund of the tax on the principal ground that a duty to do so had been imposed by the orders of the Board of Revenue, though the petition made an incidental reference to the appellants being entitled to such refund on a proper construction of Art. 286(1) and (2) of the Constitution, even apart from the order of the Board of Revenue8. The learned Judges of the High Court however in the main considered the question whether on a proper interpretation of the relevant Articles of the Constitution, sales under which goods were delivered outside Bihar but for consumption not in the State of first delivery, were exempt from tax under the Bihar Sales Tax Act and decided the point against the appellants. They next dealt with the central point urged in the petitions, viz., that the Board of Revenue by its order dated August 28, 1953, had allowed the appellants revision in regard to "the second point" which included sales of all categories whether or not for the purpose of consumption in the State of first destination outside Bihar, and directed the Sales-tax Officer to recomputed the tax by allowing this exemption, and that the officer was therefore statutorily bound to give effect to the order of the Board, be the same right or wrong, particularly when the Board refused to vary or modify it so as to exclude particular types of sales from the scope of the exemption when moved to do so by the State Government. In regard to this point after stating that the orders of the Board of Revenue were ambiguous, the learned Judges proceeded to answer the question on the assumption that the Board of Revenue had directed the officer to recompute the tax on the basis that all the outside sales-both the (a) and the (b) types were exempted from liability. The learned Judges then pointed out that the order of the Board would be clearly erroneous in regard to the (b) type sales -and that the petitioner in a writ of mandamus could not insist on a manifestly wrong order being enforced. The petitions were therefore dismissed9. The appellants applied to the High Court for certificates under Arts. 132 and 133, but the learned Judges granted a certificate under Art. 132 alone and it is on the strength of these certificates that the appeals are before us.

Reasoning:
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.