Case: Kurapati Venkatasatyanarayana &amp; Others Vs. The State Of Andhra Pradesh

2. The appellant was a firm of dealers in pulses at Vijayawada. It was sending pulses like green gram and black gram to other States viz., Bombay, Bengal, Madras and Kerala by rail in the course of their business. The consignments were addressed to self and the railway receipts were endorsed in favour of Banks for delivery against payments. The purchasers obtained the railway receipts after payment and took delivery of the goods. The total turnover of the business of the appellant for the year 1949-50 was Rs. 17,05,144-2-2. Of the said turnover a sum of Rs. 3,61,442-7-3 represented the turnover of sales effected outside the then Madras State. For the assessment year 1949-50 the Deputy Commercial Tax Officer collected sales tax on the total turnover without exempting the value of the sales effected outside the State. The appellant was permitted to pay sales tax under Rule 12 of the Madras General Sales Tax (Turnover and Assessment) Rules. The appellant submitted monthly returns and paid sales tax without claiming any such exemption till the end of January, 1950. But in the returns for the months of February and March, 1950 the appellant claimed exemption on sales effected outside the State. The appellant submitted a consolidated return Ex. A-18 to the Deputy Commercial Tax Officer on March 30, 1950 claiming exemption in respect of a sum of Rs. 10,37,334-7-9 being the value of the sales effected outside the State for the period commencing from April 1, 1949 and ending January 31, 1950. The Deputy Commercial Tax Officer fixed the taxable turnover of the appellant at Rs. 17,05,144-2-2 and issued a notice Ex. A-23 dated October 24, 1950 to show cause why the appellant should not be assessed accordingly. The appellant was thereafter held liable to pay tax amounting to Rs. 26,642,-14-0 on a net turnover of Rs. 17,05,144-2-2. The appellant preferred an appeal to the Commercial Tax Officer and a revision petition to the Board of Revenue, Madras but was unsuccessful. The appellant, therefore brought a suit for the recovery of Rs. 21,270-13-0 being the amount of tax illegally collected from him together with interest, contending that the sales effected outside the State could not be taxed under Article 286 (1) (a) of the Constitution of India. The State of Madras contested the suit on the ground that the sales were taxable as they fell within the purview of explanation 2 to Section 2 (h) of the Madras General Sales Tax Act, 1939 (hereinafter referred to as the Act). The Subordinate Judge held that for the period from April 1, 1949 to January 25, 1950 the appellant was not entitled to impeach the assessment on the turnover relating to sales outside the State. As regards the period from January 26, 1950 to March 31, 1950 the Subordinate Judge took the view that the part of the turnover relating to outside sales was not liable to sales- tax but as there was a single order of assessment for the entire period the entire assessment was illegal. Against the judgment of the Subordinate Judge both the appellant and the respondent field Appeals A. S. No. 93 of 1957 and A. S. No. 169 of 1957 to the High Court of Andhra Pradesh. But its order dated April 18, 1960 in Appeal No. 169 of 1957 the High Court called for a finding from the trial Court as to whether the appellant was able to prove the facts entitling him to invoke the explanation to Article 286 (1) (a). By its order dated July 21, 1962 the trial Court submitted a finding to the effect that in view of the decision of the Supreme Court in India Copper Corporation Ltd. v. The State of Bihar, 12 STC 56   = (AIR 1961 SC 347  ) the burden of proof was not on the appellant and that the finding will have to be given in its favour. But by its order dated March 5, 1963 the High Court directed the Subordinate Judge to record a finding after considering the evidence adduced by the appellant as to whether the goods in question were delivered for consumption within the delivery States. In its order dated March 22, 1963 the trial Court, after considering the evidence given by the appellants witnesses came to the conclusion that the deliveries were not made for purpose of consumption within the delivery States only. The High Court by a common judgment dated March 11, 1965 in A. S. Nos. 93, and 169 of 1957 held that the appellant could not claim the benefit under Article 286 (1) (a) of the Constitution in the absence of evidence as to how the wholesalers disposed of the goods after obtaining delivery and therefore the entire turnover for the year 1949-50 would be assessable to tax. In the result A. S. No. 169 of 1957 filed by the respondent was allowed and A. S. No. 93 of 1957 filed by the appellant was dismissed.

Court's reasoning:
herefore, by incorporating Section 22 of the Madras Act read with Article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale a cumulative fetter of triple dimension was imposed upon the taxing power of the State. The Legislature of the Madras State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of, the territory of India, or on sale of any goods where such sale took place in the course of inter-State trade or commerce. By the Explanation to Article 286 (1) (a) which is incorporated by Section 22 of the Madras Act a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in anotherby incorporating Section 22 of the Madras Act read with Article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale a cumulative fetter of triple dimension was imposed upon the taxing power of the State. The Legislature of the Madras State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of, the territory of India, or on sale of any goods where such sale took place in the course of inter-State trade or commerce. By the Explanation to Article 286 (1) (a) which is incorporated by Section 22 of the Madras Act a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in anotherour opinion the argument is well founded and must be accepted as correct. In India Copper Corporations case 12 STC 56   = (AIR 1961 SC 347  ) it was pointed out by this Court that if the goods were as a direct result of a sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery, the assessee would be entitled to the exemption from sales-tax by virtue of the Explanation to Art. 286 (1) (a) of the Constitution and it would not be necessary for the assessee to prove further that the goods so delivered were actually consumed in the State of first destination.9. In the present case of the Subordinate Judge has, upon a consideration of the evidence adduced by the parties stated in his report dated June 27, 1962 that the intention of the appellant was that the sale and delivery should be for the purpose of consumption in the delivery States. It is true that in his subsequent report date March 22, 1963 the Subordinate Judge gave a different finding. But it is obvious that the subsequent report of the Subordinate Judge is vitiated because the principle laid down by this Court in India Copper Corporations case, 12 STC 56   = (AIR 1961 SC 347  ) has not been taken into account. Having regard to the evidence adduced by the appellant in this case we are satisfied that the part of the turnover which related to sales from January 26, 1950 to March 31, 1950 was not liable to sales-tax and the levy of sales-tax from the appellant to this extent is illegal.In support of this argument reference was made to the decision of this Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax, 6 STC627 at p. 637 = (AIR 1955 SC 765   at p. 770)