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TMI Blog1962 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... pinning and Weaving Mills at Trichur and in regard to such sale the taxable turnover, namely, the purchase value of the cotton was determined at Rs. 77,483-1-5. The total taxable turnover in respect of the sale by the firm to the mills in the Kerala State was therefore determined in the sum of Rs. 6,70,752-9-6. The assessee preferred an appeal to the Commercial Tax Officer and challenged the levy of tax on this turnover. The contention urged was that the sales covered by the turnover were effected in this State, that the assessee was not the last purchaser in the Madras State within the meaning of rule 4-A of the Turnover and Assessment Rules and that the last purchaser was only the Sitaram Mills at Trichur. The appellate authority did not accept this plea and dismissed the appeal. There was a further appeal to the Tribunal by the assessee which also ended in a dismissal. This tax revision petition has been preferred against the decision of the Tribunal. T.C. No. 140 of 1958: The petitioner in this case is also a firm dealing in purchase and sale of cotton and cotton seeds at Tiruppur in the State of Madras. For the assessment year 1955-56 the firm was assessed under the Madras G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being covered by the Sales Tax Laws Validation Act, 1956, Central Act VII of 1956 (hereinafter referred to as the Validation Act) it would by its operation render the Sitaram Spinning and Weaving Mills as the last purchaser liable to be taxed under the Act and avoid assessments being made upon the petitioners in these cases. It will now be convenient to refer to the Turnover and Assessment Rules. Rule 4(2) provides that cotton should be taxed in respect of the gross turnover of a dealer determined at the value for which the goods are bought. Rule 4-A reads, "Subject to the provisions of section 5(iv) in the case of cotton (including kapas), the tax under section 3(1) shall be levied from the dealer who is the last purchaser in the State not exempt from taxation under section 3(3) on the amount for which it is bought by him: Provided that the burden of proving that a transaction is not liable to taxation under this clause shall be on the dealer." The short question in these cases is whether the petitioners are the last purchasers in the State. The burden of proving that they are not the last purchasers has been placed by the statute upon them. They attempt to discharge the burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption. The view taken was that the delivery for consumption rendered the sales intraState. But this view did not hold the field for a long time as the Supreme Court in the decision in Bengal Immunity Co. Ltd. v. State of Bihar[1955] 6 S.T.C. 446., held by a majority that the sales failing within the explanation were really inter-State sales in character and could not be taxed under any State law unless Parliament lifted the ban imposed under Article 286(2). The subsequent view of the Supreme Court as expressed by the majority in the Bengal Immunity Co.'s case(2) is that the explanation to Article 286(1)(a) did not have any operation upon the application of the ban imposed under Article 286(2). Then came the Validation Act, Central Act VII of 1956. The relevant provision is section 2, which is as follows: "Notwithstanding any judgment, decree or order of any Court, no law of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce during the period between the 1st day of April, 1951, and the 6th day of September, 1955, shall be deemed to be invalid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of the value of vehicles driven away by the nonresidential dealers' own drivers to the place of business of the nonresidential dealers outside the State of Madras. This Court held that as the sales were completed and delivery was effected within the Madras State, the sales were liable to tax. On appeal, the Supreme Court held that the assessee was in any event liable to tax inasmuch as after the removal of the fetter of Article 286(2) of the Constitution by the Validation Act, the Madras Act of 1939 operating on its own terms made the transactions of sale liable to tax. The contention urged on behalf of the assessee before the Supreme Court that the Madras Act does not operate on sales of an inter-State character other than "explanation sales" was rejected by the Supreme Court. At page 387, S.K Das, J., observed thus: "To repeat what we have said earlier: after the removal of the fetter of Article 286 (2), the Act operating on its own terms makes the transactions in question liable to tax, and new section 22 makes no difference to that position." The effect of the decision of the Supreme Court in Ashok Leyland's case[1961] 12 S.T.C. 379. is to hold that the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sily workable test: Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States. The latter States are prohibited from taxing the sale or purchase; the former alone is left free to do so. Multiple taxation of the same transaction by different States is also thus avoided." This observation is not in any way dissented from by the judgment of the Supreme Court in Bengal Immunity Company case [1955] 6 S.T.C. 446. With regard to "explanation sales", the State in which actual delivery is effected for purpose of consumption can levy tax on the sale provided the Parliament lifts the ban under Article 286 (2) But with regard to what may be called "non-explanation sales", that is, sales which do not fall within the explanation to Article 286(1) of the Constitution, the mere lifting of the ban under Article 286 (2) by the Parliament will not enable a State to levy a tax in respect of a sale which may yet be a sale outside that State territory. We may now refer to another decision of the Supreme Court in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r be lifted or removed by Parliament. But even if the ban is removed no State can tax an interState sale which takes place outside its territorial limits. What is an "outside sale" is defined by the Constitution by the explanation to Article 286 (1) which states what should be deemed to be an "inside sale." The irresistible inference is that an "inside sale" falling within the terms of the explanation can be taxed if the Parliament lifts the ban under Article 286(2). If the terms of the explanation do not cover a particular inter-State sale then the question whether the sale is an "outside sale" qua the taxing State has to be determined by finding out the place where the property in the goods passes. In respect of an inter-State sale not falling within the explanation to Article 286(1)(a) on the lifting of the ban by the Parliament under Article 286(2) the State wherein the property in the goods passes may levy tax if the words of the taxing section of the enactment are wide enough to cover such a transaction. We do not think that the Ashok Leyland case [1961] 12 S.T.C. 379. relied upon by the learned counsel for the petitioners can at all help him to press his contentions. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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