1979 (9) TMI 185 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Notifications imposing purchase tax on "bamboos agreed to be severed" and "standing trees agreed to be severed".
2. Allegation of double taxation.
3. Whether the transactions amount to sale of goods.
4. Whether the transactions constitute a "profit a prendre".
5. Retrospective effect of notifications.
6. Competence of the State Government to issue the notifications.
7. Excessive delegation of legislative power.

Issue-wise Detailed Analysis:

1. Validity of Notifications Imposing Purchase Tax:
The petitions challenge the notifications S.R.O. No. 372/77 and S.R.O. No. 373/77 dated 23rd May 1977, and S.R.O. Nos. 900 and 901 of 29th December 1977, under sections 3-B and 5 of the Orissa Sales Tax Act. The notifications imposed purchase tax on "bamboos agreed to be severed" and "standing trees agreed to be severed". The notifications of December 1977 were issued in supersession of the previous notifications due to an amendment in section 5 of the Act.

2. Allegation of Double Taxation:
The petitioners argued that the imposition of purchase tax results in double taxation, as the same goods are subjected to both sales tax and purchase tax. The court observed that under section 8 of the Orissa Sales Tax Act, any type of goods is taxable only at one point, and double taxation is not envisaged under the Act. Therefore, such imposition amounts to double taxation and is against the provisions of the Orissa Sales Tax Act.

3. Whether the Transactions Amount to Sale of Goods:
The court considered whether the standing trees and bamboos agreed to be severed are included in the definition of "goods". It was contended that even if they are considered goods, the transactions do not amount to the sale of goods. The court held that the sale of goods under the Orissa Sales Tax Act relates only to movables, and the definition of sale of goods under the Sale of Goods Act is to be accepted. The court found that the property in the goods does not pass to the contractor on mere execution of the agreement. The transfer of goods occurs only when the contractor is allowed to fell the trees after complying with all the conditions of the agreement.

4. Whether the Transactions Constitute a "Profit a Prendre":
The court examined whether the transactions in bamboo contracts amount to a "profit a prendre". It was held that the transactions for bamboo exploitation, which include rights to future bamboos and construction of infrastructure for exploitation, amount to benefits arising out of land and cannot be considered simple rights for goods alone. Therefore, such transactions are not exigible to tax under the Orissa Sales Tax Act.

5. Retrospective Effect of Notifications:
The court discussed whether the liabilities accrued by the first notification of May 1977 were wiped out by the notification of December 1977. It was held that the notifications issued under section 3-B of the Orissa Sales Tax Act cannot have retrospective effect unless expressly authorized by the statute. The court concluded that the liabilities accrued under the notifications of May 1977 cannot be wiped out by the notifications of December 1977.

6. Competence of the State Government to Issue the Notifications:
The petitioners contended that the notifications are beyond the competence of the Government and are ultra vires the Act. The court held that the State Government is not delegated with the power to issue notifications with retrospective effect under section 3-B of the Orissa Sales Tax Act. Therefore, any retrospective operation through "supersession" would be ultra vires.

7. Excessive Delegation of Legislative Power:
The petitioners argued that the notifications amount to excessive delegation. The court did not find it necessary to go into this question, as the notifications were already found to be ultra vires on other grounds.

Conclusion:
The court quashed the impugned notifications of May 1977 and December 1977 relating to "bamboos agreed to be severed" and "trees agreed to be severed". The court held that the notifications result in double taxation, impose tax on agreements of sale rather than actual sales, and amount to an impost of tax on profit a prendre in the case of bamboo exploitation contracts. Consequently, the writ petitions were allowed, and the notifications were declared ultra vires the provisions of the Orissa Sales Tax Act.

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