1957 (11) TMI 14 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transaction between the petitioners and Messrs Paluram Dhandhania of Raigarh is exempt from levy of sales tax by the State of Orissa under Article 286 of the Constitution.
2. Whether the petitioners should have been given an opportunity to adduce evidence to show that the purchases were made under the instructions of Messrs Paluram Dhandhania under commission basis.
3. Whether the petitioners are exempt from taxation by the local authorities by virtue of Article 286(2) of the Constitution.

Detailed Analysis:

Issue 1: Exemption from Levy of Sales Tax under Article 286
The petitioners, registered dealers under the Orissa Sales Tax Act, 1947, claimed a deduction for the value of jute despatched to mills outside Orissa under instructions from Messrs Paluram Dhandhania of Raigarh. The Sales Tax Officer rejected this claim, holding that the sales were completed within Orissa before despatch. The Assistant Collector and the Collector of Sales Tax upheld this decision, stating that the sales to Messrs Paluram Dhandhania were not in the course of inter-State trade and thus attracted sales tax in Orissa. The Board of Revenue also rejected the petitioners' claim, noting that the delivery outside Orissa was not the result of the sales from the petitioners to Messrs Paluram Dhandhania, but rather a separate contract between Messrs Paluram Dhandhania and the jute mills. The court concluded that the sales did not fall within the exemptions under Article 286(1)(a) or (b) as they did not occasion the export.

Issue 2: Opportunity to Adduce Evidence
The petitioners argued that they should have been allowed to present evidence showing that the purchases were made under instructions from Messrs Paluram Dhandhania on a commission basis. The court held that under section 24(4) of the local Act, it could not remand a case for re-statement on new points or to take evidence not before the authorities at the time of assessment. The court referred to the decision in Sohan Pathak and Sons v. Commissioner of Income-tax, U.P., which emphasized that the Tribunal should state the case formally and the High Court should decide the question of law based on the assessment orders. Therefore, the court found no merit in the petitioners' contention.

Issue 3: Exemption under Article 286(2)
The petitioners contended that they were exempt from taxation by virtue of Article 286(2) of the Constitution. The court examined several precedents, including the First and Second Travancore-Cochin cases, and the Bengal Immunity case, which discussed the scope of Article 286. The court noted that the majority view in these cases was that sales or purchases which occasion the export or import of goods are exempt under Article 286(1)(b). However, the court found that in this case, the sale to Messrs Paluram Dhandhania was completed within Orissa and did not occasion the export. The court concluded that the provisions of Article 286(2) were not attracted, and the sales were taxable under the local Act.

Conclusion:
The court answered the question in the negative, against the petitioners' contentions, and dismissed the application with costs. The sale to Messrs Paluram Dhandhania was completed in Orissa and did not occasion the export, thus not qualifying for exemption under Article 286. The petitioners were not entitled to adduce new evidence, and the sales tax levied by the State of Orissa was upheld. The reference was answered in the negative.