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TMI Blog1990 (7) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases and sells goods inside the State of Orissa as well as outside the State. During the assessment year 1982-83 to which the impugned order (annexure 1) relates, the petitioner No. 1 had purchased goods from registered dealers without payment of tax on furnishing declaration in form XXXIV appended to the Orissa Sales Tax Rules (hereinafter referred to as "the Rules"). The declaration was to the effect, inter alia, that the firm purchased the goods for the purpose of resale in Orissa in a manner that such resale shall be subject to levy of tax under the Act and the goods were covered by its registration certificate. The selling dealer had also submitted returns in the prescribed form and had claimed deduction of the amount from his gross turnover. Subsequently, it came to light that certain goods purchased on submission of the aforementioned declaration had been sold by the petitioner-firm outside the State of Orissa in the course of inter-State sale and, therefore, was exigible to tax under the OST Act. The assessing authority taking note of the violation of the declarations submitted by the petitioner-firm included the price of the goods in the taxable turnover of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eless be liable to pay tax on sales or purchases, if such dealer is liable to pay tax under the Central Sales Tax Act, 1956, or registered as a dealer under the said Act. Section 4-A which provides the incidence of taxation on a casual dealer lays down that subject to the provisions of sections 3-B, 5, 6, 7 and 8 a casual dealer shall, irrespective of the amount of his gross turnover, be liable to pay tax under the Act on the sales and purchases made by him. Section 5 makes provision regarding rate of tax. Under sub-section (1) it is laid down that the tax payable by a dealer under the Act shall be levied on his taxable turnover at such rate, not exceeding sixteen per cent and subject to such conditions as the State Government may from time to time, by notification specify. Sub-section (2) defines the expression "taxable turnover" and how the said turnover is to be determined. Section 9-B makes provision for collection of tax by dealers. Subsection (1)(a) of the said section provides that no person who is not a registered dealer shall collect in respect of any sale by him any amount by way of tax under the provisions of the Act and no registered dealer shall make any such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act enumerates the goods to be of special importance in inter-State trade or commerce. Section 15 lays down restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. It is laid down therein that every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the restrictions and conditions, inter alia, that where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce and tax has been paid under the Act (CST Act) in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law (State law) shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be prescribed in any law in force in that State. From the statutory provisions noticed above, it is clear that under the scheme of the OST Act the tax is a single point levy on sale/purchase of goods. Though the selling dealer is held lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the certificate of registration are purchased by a registered dealer free of tax after furnishing a declaration under the preceding proviso but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of purchasing dealer. Explanation.-In case of series of sales when the State Government, by notification, declares sales of any specified goods to be taxed at the point at which the first of such sales is effected by a dealer liable to pay tax under this Act, the price of the goods so declared shall be included in his taxable turnover, notwithstanding that the goods so specified are sold to a registered dealer in whose certificate of registration the goods so specified are included." The petitioners are particularly aggrieved by the introduction of the words "in a manner that such resale shall be subject to levy of tax under this Act" in clause (ii). From the provisions of section 5(2)(A)(a)(ii) quoted above it is clear that it is in the nature of an exception to the general scheme under the OST Act since in the case of violation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmities or deficiencies as pointed out by the court. All that is to be seen in such cases is that the amended law is within the competence of the Legislature. Powers of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution are plenary. The impugned amended Act is an attempt by the State Legislature to ensure the single point levy by nullifying the effect of the two decisions of this Court. The question is whether such action is within the competence of the State Legislature and is in conformity with article 286 of the Constitution of India. It is the contention of the petitioners that the goods were meant for resale in Orissa and in fact were resold inside Orissa. The State Legislature has power to impose tax on the sale or purchase of goods other than newspapers. This is subject to the provisions of entry No. 92A of List I. The petitioners would have paid the tax while purchasing the goods from a registered dealer. But while purchasing the goods, they have avoided the tax by giving a declaration that the goods purchased were meant for the purpose of resale in Orissa and such resale should be subject to levy of tax under the OST Act. But sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d immediately, as distinct from creating some indirect or inconsequential impediment which may be regarded as remote. Once it is held that a restriction is not regulatory but directly and immediately interferes with the flow of inter-State trade or commerce, it will offend against the freedom guaranteed by article 301, whether such restriction is imposed at the frontier of a State or at any stage prior or subsequent. Considering the facts and circumstances, we are of the view that in the present cases the provisions of article 301 have not been violated." 7.. Coming to the case of Goodyear India Ltd. [1990] 76 STC 71 (SC), section 9 of the Haryana General Sales Tax Act, 1973, validity and constitutionality of which came up for consideration, reads as follows: "9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and- (a) uses them in the State in the manufacture of,- (i) goods specified in Schedule B or (ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the principal Act was amended as follows: "Amendment of section 9 of the Haryana General Sales Tax Act, 1973.-In section 9 of the principal Act,- (a) in sub-section (1)- (i) for clause (b), the following clause shall be substituted and shall be deemed to have been substituted for the period commencing from the 27th day of May, 1971, and ending with the 8th day of April, 1979, namely: '(b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956; or'; (ii) after clause (b), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 1979, namely: '(bb) purchases goods, other than those specified in Schedule B except m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Seventh Schedule to the Constitution. The High Court also held that in its true nature, a mere despatch of goods outside the State to another branch of the original institution is not and never can be equivalent of a sale either as a term of art in the existing sales tax legislation and not remotely so in common parlance, and construing section 9(1)(b) of the Act, the High Court was of the view that the real taxing event is the despatch of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce. The High Court therefore set aside the amended provision so far as it sought to levy purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce and also set aside the retrospective validation of the notification and the consequential validation of all actions taken thereunder. On some writ petitions filed subsequently, a Full Bench of the High Court held that the taxing event is the act of purchase and not the act of despatch or consignment and therefore section 9(1)(b) as amended, was neither invalid nor ultra vires and overruled the earlier decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the tax on despatch of goods outside the territory of the State certainly is in the course of inter-State trade or commerce and amounts to imposition of consignment tax, the latter part of section 9(1)(b) is ultra vires and void. The Supreme Court accordingly upheld the decision of the Punjab and Haryana High Court in the case of Goodyear India Ltd. [1983] 53 STC 163. The Court, however, upheld (sic) the constitutional validity of section 9(1) and sub-section (3) of section 24 of the Act. In the said case the Supreme Court also considered the constitutionality of section 13AA of the Bombay Sales Tax Act which reads as follows: "13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are transferred to outside branches.Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods, so manufactured, to his own place of business or to his agent's place of business situated outside the State within India, then such dealer shall be lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be added to the gross turnover of the selling dealer but it will be added to the taxable turnover of the purchasing dealer who had furnished the declaration. The reason apparently is that the purchasing dealer who had furnished the declaration which the selling dealer accepted in good faith was responsible for the contravention. The section neither contemplates any change in the condition of the goods nor speaks of despatch/movement of the goods outside the State. Considering these circumstances, this Court in Minerals and Metals Trading Corporation of India Ltd.'s case [1987] 65 STC 129, had held that incidence of tax remains on the sale/purchase and levy of tax is merely postponed to the occurrence mentioned in the section and the Legislature has maintained the character of single point tax by not adding the cost price to the turnover of the selling dealer but to that of the purchasing dealer. No decision was brought to our notice in which in a case similar to the present case the decision in Goodyear India Ltd.'s case [1990] 76 STC 71 (SC) has been applied. 10.. Since fairly lengthy arguments were advanced by Shri Agarwal regarding challenge to the provision in section 5(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act at the time of purchase whereas the dealer (like the petitioners) who purchased the goods on submission of return wherein he gave out that the goods will be sold inside the State of Orissa in a manner that such resale shall be subject to levy of tax under the OST Act did not pay the tax at that point of time. So, both categories of dealers ultimately pay tax both under the OST Act and the CST Act. There is, therefore, no merit in the grievance made by Shri Agarwal. 11.. Coming to the contention that section 5(2)(A)(a)(ii) violates the freedom to carry on trade or business guaranteed under article 19(1)(g), in my view, it is also devoid of merit. The freedom to carry on trade or business guaranteed under article 19(1)(g) is not an absolute one. It is subject to reasonable restrictions which might be imposed by any existing law or which may be imposed by law made by the State. There is no dispute that if levy of a tax cannot be justified on the basis of any valid law no question of its reasonableness can arise since an illegal impost must be taken to be an unreasonable restriction. The question is whether section 5(2)(A)(a)(ii) provides for levy of tax which cannot be justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to "goods declared by Parliament to be of special importance in inter-State trade and commerce" or the transaction comes under article 366(29A)(b)(c) and (d). As laid down by the Supreme Court in the Bengal Immunity's case [1955] 6 STC 446; [1953] 2 SCR 1069 and other cases the limitations imposed by the different clauses of article 286 are cumulative and independent of each other. A tax will not be valid under article 286 so long as the ban imposed by any one of the abovementioned clauses fastens upon the transaction. On the other hand, once the foregoing limitations imposed by article 286 are not transgressed and the subject-matter of taxation is intra-State sale, it would be within the competence of a State- (a) to impose/levy tax. As noticed earlier, section 5(2)(A)(a)(ii) proviso does not purport to tax the inter-State sale or export sale; the incidence of tax is the first sale/purchase which is admittedly an intra-State sale and the levy of tax is merely postponed till the purchasing dealer sells goods to an unregistered dealer/consumer in contravention of the declaration furnished by him in form XXXIV. Therefore, the section does not confront article 286 in any m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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