Case: Endupuri Narasimham And Son Vs. The State Of Orissa And Others

1. The petitioner is a joint Hindu family firm carrying on business at Berhampur in the State of Orissa, and registered as a dealer under the provisions of the Orissa Sales Tax Act. 1947 hereinafter referred to as the Act. Its business consists in the purchases of castor seeds, turmeric, gingili and other commodities locally, and selling them to dealers outside the State. The Sales Tax Officer, Berhampur, included in the taxable turnover of the petitioner the purchase of goods made by it inside the State but sold, as aforesaid, to dealers outside the State and imposed a tax of Rs. 27,161-13-0 on account of such sales during the sixteen quarters commencing from April 1, 1952, and ending with March 31, 1956.

Reasoning: 3. It will be seen that under this section when a sale takes place, the seller has to include it in his taxable turnover; but when the sale is to a registered dealer who declares that his purchases are for resale in Orissa, then it is excluded from the sellers turnover. If the registered dealer-purchaser sells the goods outside the State in breach of the condition, the purchasers by him are liable to be included in his turnover, and assessed to sales tax. That precisely is what has happened in this case. The sales to the petitioner were not included in the taxable turnover of the sellers by reason of the registration certificate which the petitioner had obtained on a declaration that the goods were to be resold in Orissa. But in violation of this declaration he sold the goods to dealers outside the State, and so he became liable to be taxed under S. 5(2)(a)(ii) of thereference to the analogous provision under Art. 286(1)(b) prohibiting the imposition of tax on the sale or purchase of goods in the course of import or export, it has been held by this Court that it is only a sale or purchase which occasions the export or import of the goods out of or into the territory of India or a sale in the State by the exporter or importer by transfer of shipping documents, while the goods are beyond the customs barrier, that is within the exemption, and that a sale which precedes such export or import or follows it is not exempted, vide State of Travancore-Cochin v. Shan Mugha Vilas Cashew Nut Factory, 1954 SCR 53  : (AIR 1953 SC 333 ).On the same principles, a purchase made inside a State, for sale outside the State cannot itself be held to be in the course of inter-State trade, and the imposition of a tax thereon is not repugnant to Art. 286(2) of the Constitution. In the result this petition is dismissed withthe present case, the purchases which are sought to be assessed involved no movement of the goods outside the State of Orissa. In order that a sale or purchase might be inter-State, it is essential that there must be transport of goods from one State to another under the contract of sale or purchase.