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TMI Blog1968 (8) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.25 on account of purchase of raw wool by the petitioner in the course of export outside India on the ground that the said turnover was not taxable under the second proviso to section 5-A of the Act. It also claimed refund of Rs. 2,400 which had been paid by the petitioner in lieu of the exemption certificate granted to it under section 4(2) of the Act. The assessing authority, viz., the Commercial Taxes Officer, Special Circle, jaipur, by his order dated 4th March, 1968, accepted the petitioner's claim and held that the purchase of raw wool by the petitioner for the purpose of export outside India was not taxable. He also ordered refund of Rs. 2,400 to the petitioner on account of the fee paid by the latter for obtaining the exemption certificate. The petitioner goes on to state that while his application for refund of the fee for exemption certificate was pending, it received a notice under section 12 of the Act dated Ist March, 1966, signed by Shri Prahlad Rai Sharma, who had been meanwhile transferred as the Commercial Taxes Officer, Special Circle, Jaipur. It was mentioned in the notice that a part of the petitioner's business had escaped assessment to tax on account of no pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 12th April, 1966 (that is for the assessment years 1964-65 and 1965-66) by which the purchases of raw wool and goat-hair made by the petitioner were subjected to tax, be set aside. Firm Messrs Ganeshdas Hamirmal of Beawar, which is the petitioner in Writ Petition No. 302 of 1965, purchased cotton in Rajasthan during the period 26th March, 1962, to 17th October, 1963 (i.e., the assessment years 1962-63 and 1963-64). It is alleged that on 12th March, 1965, the Commercial Taxes Officer, Survely and Investigation, Ajmer, assessed the petitioner to purchase tax on purchase of cotton during the year 1962-63 under section 5-A of the Act, and similar tax was assessed on purchase of cotton during the year 1963-64 on Ist May, 1965. Assessment orders for the years 1962-63 and 1963-64 dated 12th March, 1965, and 1st May, 1965, respectively have been challenged by this writ application. It appears that the assessing authority further issued notice under section 16(1)(b) of the Act on 5th May, 1965, to the petitioner to show cause why penalty be not imposed on the petitioner for not depositing purchase tax for the year 1962-63 and a demand notice has also been issued for payment of the tax f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, commerce and intercourse throughout the territory of India and is thus hit by Article 301 of the Constitution, and if so, whether the tax is liable to be adjudged invalid for want of sanction of the President of India. In this connection, we may first examine the relevant provisions of the Act and the notifications issued thereunder. The Rajasthan Sales Tax Act (No. 29 of 1954) received the assent of the President of India on 22nd December, 1954, and came into force with effect from 1st April, 1955. The Act was subsequently amended by the Rajasthan Sales Tax (Amendment) Act (No. 18 of 1960) which will hereinafter be called the Amending Act. The Amending Act received the assent of the Governor of Rajasthan on 21st April, 1960, but it never received the assent of the President of India. The following new section 5-A was inserted by the Amending Act after section 5 of the Principal Act: "5-A. Levy of Purchase tax.-Every dealer who in the course of his business purchases such goods, other than exempted goods, as the State Government may, by notification in the Official Gazette, specify in circumstances in which no tax under section 5 is payable on the sale price of such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." In support of his contention that "purchase tax" creates an impediment in trade and commerce throughout the country and is therefore hit by Article 301 of the Constitution, Mr. J.P. Jain has relied upon Atiabari Tea Co. Ltd. v. The State of Assam and OthersA.I.R. 1961 S.C. 232., Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan and OthersA.I.R. 1962 S.C. 1406. , Firm A.T.B. Mehtab Majid Co. v. State of Madras and Another[1963] 14 S.T.C. 355; A.I.R. 1963 S.C. 928. The State of Madhya Pradesh and Another v. Bhailal Bhai and Others[1964] 15 S.T.C. 450., Venson Transports represented by its partner V. Srinivasan and Others v. State of Andhra Pradesh represented by its Secretary (Home and Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (9) again came up for interpretation before their Lordships of the Supreme Court in Automobile Transport (Rajasthan) Company's case(8) and it was clarified that regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirement of the proviso to Article 304(b) of the Constitution. Firm A.T.B. Mehtab Majid's case[1963] 14 S.T.C. 355; A.I.R. 1963 S.C. 928. was one of discriminatory legislation made by a State and fell within the scope of Article 304(a). A legislation which comes within the purview of Article 304(a) cannot be rendered valid by reserving the bill for the assent of the President. It will be invalid if the discriminatory nature of law affects the freedom of trade and thus offends against Article 301. It is thus clear that in Mehtab Majid's case', their Lordships were dealing with Article 304(a) and not with Article 304(b) of the Constitution. In The State of Madhya Pradesh v. Bhailal Bhai [1964] 15 S.T.C. 450. also the question was one of discriminatory legislation. The case decided by the Andhra Pradesh High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not operate as a restriction on the freedom of trade as contemplated by Article 301 of the Constitution, and especially Article 304(b). We, therefore, hold that the levy of "purchase tax" is not bad because the assent of the President was not taken under the proviso to Article 304(b). This brings us to the second contention advanced by Mr. J.P. Jain that the State Legislature was not competent to impose tax in view of the provisions of Article 286 of the Constitution. Article 286(1) which is relevant for our purpose reads as below: "286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India." It is contended on behalf of the petitioners that the purchases of raw wool, cotton and goat-hair were made by them in Rajasthan for implementing the contracts, which the petitioners had made with foreign concerns, and thus these purchases were inextricably connected with the export trade and mainly took place in the course of export of goods outside the terri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g orders for supply of skins to London buyers, the respondents used to go about for purchasing the requisite kind and quantity of skins to implement such orders. Their Lordships were further pleased to observe that,"Such purchases were, it is true, for the purpose of export, but such purchases did not themselves occasion the export and consequently did not fall within the exemption of Article 286(1)(b) of the Constitution." In Hind Mercantile Corporation (P.) Ltd. v. Commissioner of Commercial Taxes(3), the learned judges of the Mysore High Court held that it is only the sale under which the export is made that is protected by Article 286(1)(b) of the Constitution and a purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to export, and, therefore, the purchases to fulfil antecedent contracts with foreign buyers do not fall under Article 286(1)(b) of the Constitution. It is contended by Mr. Jain on behalf of the petitioners that the export or movement of the goods out of the territory of India in the case of the petitioners took place as a result of the contract between the seller and the purchaser so that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate legislation, which deals with the imposition of the tax in respect of sale and purchase of declared goods, must conform to the provisions of section 15(a) of the Central Act. The ingredients of those provisions are: (i) In respect of "declared goods" a tax, either on sale or purchase alone, can be levied, and it cannot be on both sale and purchase. (ii) The rate of tax should not exceed the maximum limit fixed by the Central Act, and (iii) The tax can be levied only at one stage. The essence of one stage taxation consists of fixation of a single point or stage, either by the State Act or the rules framed thereunder. Reliance has been placed on M/s. Bhawani Cotton Mills Ltd. v. State of Punjab and Another[1967] 20 S.T.C. 290; A.I.R. 1967 S.C. 1616.In that case their Lordships came to the conclusion that there was no machinery in the Punjab General Sales Tax Act (46 of 1948) by which a dealer can ascertain whether his vendor of the declared goods has paid the tax already. Learned Additional AdvocateGeneral, however, invited our attention to rule 15 of the Rajasthan Sales Tax Rules, 1955, and Notification No. F. 5(103) ET-2/56 dated 6th May, 1957, according to which the purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y particular year. It is contended that for the application of this section it is not necessary that there should be any concealment on the part of the assessee or that any fresh material should be discovered before a reassessment can be made. The learned Additional Advocate-General relied on Deputy Commissioner of Commercial Taxes, Madras Division v. K. Kapoorchand Bhandari[1963] 14 S.T.C. 248., Standard Refinery Co. v. Sales Tax Commissioner, U.P[1963] 14 S.T.C. 529., Commissioner of Wealth-tax (West Bengal), Calcutta v. Imperial Tobacco Co. of India Ltd.[1966] 61 I.T.R. 461; A.I.R. 1967 S.C. 230. and Anandji Haridas and Co. (P.) Ltd. v. S.P. Kushare and Others[1968] 21 S.T.C. 326; A.I.R. 1968 S.C. 565. We may here state that the validity of the notice under section 12 of the Act has not been challenged in the writ petition and it was only in the course of arguments that this point was taken. In the second place if the petitioners thought that the impugned notice did not give jurisdiction to the assessing authority to take proceedings for reassessment, the petitioners should have come for a writ of prohibition as soon as the notice was served, and before the order of reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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