Case: William Jacks and Company Limited Vs. State of Orissa

2. The appellant is a public limited company incorporated in the United Kingdom which has its head office in London and its principal office in India at 16, Netaji Subash Road, Calcutta. During the relevant period, i.e., from October 1, 1953, to June 30, 1955, the appellant which is a dealer in machineries, tools and machine parts had supplied these goods to individual consumers and Government departments including the Hirakud Dam Project authorities in Orissa. The respondent had not levied any sales tax on these transactions till the decision of this court in State of Bombay v. United Motors (India) Ltd. ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) pronounced on March 30, 1953. In that decision it was held by this court that by virtue of the explanation to article 286(1)(a) of the Constitution, as it existed before the Sixth Amendment, the State where the goods were actually delivered as a direct result of sale or purchase for the purpose of consumption, was the State which had the jurisdiction to tax such sales irrespective of the fact that the transfer of property took place in a different State. Some time after this decision was pronounced, the Government of Orissa issue a press note on June 5, 1954, which stated as followsis notified for information of alldealers who are engaged in the business of selling goods in the State of Orissa within the meaning of the explanation to article 286(1)(a) of the Constitution that consequent upon the Supreme Court judgment in the case of State of Bombay v. United Motors (India) Ltd. ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) pronounced on 30th March, 1953, all such dealers are liable to pay tax to the State of Orissa at the rates prescribed under the Orissa Sales Tax Act and the Rules framed thereunder on all sales as a result of which goods are actually delivered in the State of Orissa for the purpose of consumption in this State. It has been decided by the Orissa State Government that tax shall be levied on all such sales effected on or after the 1st day of April,years later, i.e., on September 6, 1955, this court pronounced the judgment in Bengal Immunity Co. Ltd. v. State of Bihar ([1955] 6 S.T.C. 446; [1955] 2 S.C.R. 603) reversing its previous judgment in the United Motors case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069). It was held by this court that the bans provided for in clauses (1), (2) and (3) of articles 286 of the Constitution were distinct and independent of each other and the "explanation sales" were not taxable in the State where the goods were delivered for consumption. Thereafter the Government of Orissa issued a second press note on November 2, 1955, which was published in the Orissa Gazette No. 44 of 1955 which statedis notified for the information of all concerned that the levy of sales tax frombusinessmen outside the territory of the State of Orissa who are engaged in the business of selling goods in the State of Orissa within the meaning of the explanation to article 286(1)(a) of the Constitution of India, has been suspended with immediate effect.On March 2, 1956, Parliament enacted the Sales Tax Laws Validation Act, 1956 (7 of 1956). This Act came into force with effect from March 21, 1956. Thereafter, the Government of Orissa issued a third press note dated December 31, 1956, which was published in the Orissa Gazette dated January 2, 1957. The first paragraph of this press note revoked the second press note dated November 2, 1955. In the second paragraph it was further directed at all proceedings for assessment and collection of sales tax in respect of such sales transacted between April 1, 1953, and September 6, 1955, should be taken up and completed. Relevant extracts from the third press note are reproduced below :"The State Government issued a press note, dated the 2nd November, 1955, to the effect that the levy of sales tax frombusinessmen outside the territory of the State of Orissa within the meaning of the explanation to article 286(1)(a) of the Constitution of India has been suspended with immediate effect. Subsequently the President of India issued the Sales Tax Laws Validation Ordinance, 1956, which was succeeded by the Sales Tax Laws Validation Act, 1956. Under this Act, the State Government is competent to levy, assess and collect sales tax onent dealers for transactions that took place between the 1st day of April, 1951, and 6th day of September, 1955. Therefore, the previous press note mentioned above is hereby revoked.4. The State Government have given series consideration to the question of levy, assessment and collection of sales tax under the Orissa Sales Tax Act, 1947 (14 of 1947), fromdealers in respect of the sales transacted between 1st day of April, 1953 to 6th day of September, 1955. The State Government have decided that all proceedings relating to sales transactions within this period will be taken up and completed and tax due collected subject to the following conditionsIf a dealer can prove that he did not collect sales tax from any sales, no tax should be levied from him in respect of such sales.(2) If a dealer can prove that after collecting the tax he refunded it in part or full to the buyer during the period from the 6th September, 1955, to the 30th January, 1956, the amount so refunded should be deducted from the tax demand payable by the dealer.(3) Tax already deposited with the Government or collected by the Government will not be refunded.If a dealer does not adduce proof to the satisfaction of the assessing authority of suchor refund he will be liable to pay the full amount of tax due.In the intervening period between the second and the third press notes, the Assistant Sales Tax Officer, Central Circle, Cuttack, issued two notices, one under section 12(5) and the other under section 12(2) or 12(4) of the Orissa Sales Tax Act, 1947 (14 of 1947), hereinafter called "the Act", on November 19, 1956, directing theto produce the books of accounts and relevant documents for completing assessment of the turnovers during the relevant period. Theobjected that the sales weretransactions and were not liable to be taxed, but the objection was overruled by the Sales Tax Officer who passed orders of assessmenton December 4, 1956.y challenged the seven orders of assessment for the period from October 1, 1953, to June 30, 1955, in appeals before the Assistant Commissioner who dismissed the appeals. Thetook the matter in second appeal before the Orissa Sales Tax Tribunal which confirmed the orders of the Assistant Commissioner. Under section 24(2) of the Act the Orissa Sales Tax Tribunal referred the following questions of law for the decision of the High CourtWhether, on the facts and circumstances of the case, the press notes dated November 2, 1955, and December 31, 1956, could not be deemed to have been issued under section 7 of the Orissa Sales Tax Act, and, as such, had full statutory force behind them and whether even otherwise the press notes were not binding on the State Government ?(ii) Whether, on the facts and circumstances of the case, the assessments for the relevant quarters being initiated and completed within the interim period of vacuum between the press notes dated November 2, 1955, and December 31, 1956, were not absolutely illegal and unwarranted in view of the mandatory character of the said press notes ?(iii) Whether, on the facts and circumstances of the case, in view of the above press notes, and sectionof the Orissa Sales Tax Act, before its amendment in 1958, the petitioner was not entitled to refund of the tax paid before assessment in excess of the collections actually made from his purchasers which were to be deposited with the Government, being not realisable under the provisions of both the Constitution and the Act itself ?(iv) Whether, in the facts and circumstances of the case, in view of the third press note having been published in the Orissa Gazette on the 2nd January, 1957, permitting levy of sales tax only from that date, any valid assessment for the quarters ending December 31, 1953, was not barred by limitation, under the provisions of the Orissa Sales Tax Act, as it stood at the material period ?(v) Whether, in the facts and circumstances of this case, in view of the involuntary nature of the payment made by the petitioner under threat and coercion prior to the making of the assessment, the assessments for the quarters ending March 31, 1954, to June 30, 1955, should not be restricted to the actual collections only under the terms of the third press noteBy its judgment dated April 22, 1964, the High Court held that the first press not dated June 5, 1954, had statutory effect but the second and the third press notes had no statutory force and did not in any way affect the validity of the assessment orders made against theafter the coming into force of the Sales Tax Laws Validation Act, 1956, by which the effect of the judgment of this court in the Bengal Immunity Co. case ([1955] 6 S.T.C. 446; [1955] 2 S.C.R. 603) was taken away in respect of the "explanation sales" which took place between April 1, 1951, and September 6, 1955, and the levy and collection of sales tax in such cases was also validated.

Reasoning: In our opinion, the argument put forward on behalf of the appellant is not warranted. In the first place, it is obvious that after the decision of this court in the Bengal Immunity case ([1955] 6 S.T.C. 446; [1955] 2 S.C.R. 603) the Orissa Government could not have lawfully levied any sales tax on the "explanation sales" and therefore the issue of the press note dated November 2, 1955, suspending the levy of sales tax on such sales with effect from that date could not be reasonably construed as an order of exemption contemplated by section 7 of the Act since no such exemption was necessary in view of the law declared by this court in the Bengal Immunity case ([1955] 6 S.T.C. 446; [1955] 2 S.C.R. 603). The second press note must therefore be treated to be merely an administrative direction indicating what would be the effect of the decision of this court in the Bengal Immunity case ([1955] 6 S.T.C. 446; [1955] 2 S.C.R. 603) and it was not intended to be an order of exemption made under the provisions of section 7 of the Act. In the second place, it should be noticed that the word "exemption" appears nowhere in the second press note which merely states that the levy of sales tax on the "explanation sales" has been "suspended" with immediate effect. It is therefore not possible to accept the argument on behalf of the appellant that the second press note must be deemed to be an order of the State Government granting exemption under section 7 of the Act with regard to "explanation sales". On behalf of the appellant reference was made by Mr. S. T. Desai to the decision of this court in State of Kerala v. Cochin Coal Co., Ltd. ([1961] 12 S.T.C. 1; [1961] 2 S.C.R. 219) in which it was held that a notification of the State ofdated February 5, 1954, had the effect of exempting the respondent from liability to sales tax. But the principle of this decision has, however, no application to the present case because the language of the second press note is quite different from the language of the notification which was theof debate in State of Kerala v. Cochin Coal Co., Ltd. ([1961] 12 S.T.C. 1; [1961] 2 S.C.R. 219). We accordingly reject the argument of Mr. S. T. Desai on this point.