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Tara Oil and Ginning Mills, Through Seth Nagar Mal Modi Vs. Commissioner of Sales-tax, U.P., Lucknow - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Case No. 312 of 1955
Judge
Reported inAIR1959All785; [1959]10STC294(All)
ActsUttar Pradesh Sales Tax Act, 1948 - Sections 2
AppellantTara Oil and Ginning Mills, Through Seth Nagar Mal Modi
RespondentCommissioner of Sales-tax, U.P., Lucknow
Appellant AdvocateJ. Swarup, ;S.N. Kakkar and ;K.N. Seth, Advs.
Respondent AdvocateStanding Counsel
Excerpt:
sales tax - power to tax - section 2(h) of u.p. sales tax act, 1948 - goods manufactured by assessee in u.p. and sold in calcutta can be taxed by u.p. - held, u.p. had power to tax those sales. - .....the language of the second proviso to the definition of 'sale' as contained in section 2(g) of the bihar sales tax act. the second proviso in the bihar act reads as follows:'provided further that notwithstanding anything to the contrary in the indian sale of goods act, 1930 (iii of 1930), the sale of any goods- (i) which are actually in bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that act is made, or (ii) which are produced or manufactured in bihar by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be doomed for the purposes of this act to have taken place in bihar............' it will thus he seen that clause (ii) of expl. ii to section 2(h) of the u. p. sales tax act is identical in.....
Judgment:

Bhargava, J.

1. The Judge (Revisions), Sales Tax, U. P. had referred the following two questions for opinion to this Court:

'1. Whether Clause (ii) of the Expl. II to Section 2(h) of the U, P. Sales Tax Act is ultra vires the Legislature?

2. Whether in the admitted circumstances of the case, the applicants would be liable to pay tax in respect of the sales of oils and soaps in the year 1948-49 from their depot at Calcutta.'

When we heard learned counsel on this reference, our attention was drawn to a number of decisions of the Supreme Court in various cases in which the provisions of the various Sales Tax Acts in India came up for consideration before the Supreme Court. It appears to us that it is not necessary to refer to these cases and that it is sufficient to refer to only a single case in which the Supreme Court has given its latest decision on a point which was identical with the point which arises in the present reference. That decision of the Supreme Court is in Tata Iron and Steel Co. Ltd. v. State of Bihar, AIR 1958 SC 452. In the Bihar Act also 'sale' was defined in language similar to the definition contained in the U. P, Sales Tax Act. The first question, which has been referred to us, relates to the validity of Clause (ii) of Explanation II to Section 2(h) of the U. P. Sales Tax Act.

2. Explanation II to Section 2(h) of the U. P. Sales Tax Act reads as follows:

'Notwithstanding anything in the Indian Sale of Goods Act, 1930, or any other law for the time being in force, the sale of any goods-

(i) which are actually in Uttar Pradesh at the time when in respect thereof, the contract of sale as defined in Section 4 of that Act is made,

(ii) or which are produced or manufactured in Uttar Pradesh by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in Uttar Pradesh.'

3. The language of this explanation is almost identical with the language of the second proviso to the definition of 'sale' as contained in Section 2(g) of the Bihar Sales Tax Act. The second proviso in the Bihar Act reads as follows:

'Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930), the sale of any goods-

(i) which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in Section 4 of that Act is made, or

(ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be doomed for the purposes of this Act to have taken place in Bihar............'

It will thus he seen that Clause (ii) of Expl. II to Section 2(h) of the U. P. Sales Tax Act is identical in language with Clause (ii) of the second proviso to Section 2(g) of the Bihar Sales Tax Act. The Supreme Court in its decision, cited above, considered the validity of this provision contained in the Bihar Sales Tax Act and held that it was within the competence of the State Legislature of Bihar to enact such a provision of law. The Supreme Court laid down the principle that the power of legislation of the State Legislature under Entry 48 of List II of the Seventh Schedule to the Government of India Act, 1935, when imposing sales tax, was not limited to taxing sales which may have taken place within the State itself.

The scope of legislative power was very extensive and sales within and outside the territory of the State could be taxed provided there was a nexus between the transaction of sale and the taxing State. Proceeding further, the Supreme Court held that the presence of the goods at the date of the agreement for sale in the taxing State of the production or manufacture in that State of goods the property wherein eventually passed as a result of the sale wherever that might have taken place, constituted a sufficient nexus between the taxing State and the sale. In laying down this principle, the Supreme Court envisaged two types of cases and, dealing with them subsequently in the judgment, remarked-

'In the first case the goods are actually within the State at the date of the agreement for sale and the property in those goods will generally pass within the State when they are ascertained by appropriation by the seller with the assent of the purchaser and delivered to the purchaser or his agent. Even if the property in those goods passes outside the State the ultimate sale relates, to those very goods.

In the second case the goods wherein the title passes eventually outside the State, are produced or manufactured in Bihar and the sale wherever that takes place is by the same person who produced or manufactured the same in Bihar.'

4. On this reasoning the conclusion of the Supreme Court was-

'Whatever else may or may not constitute a sufficient nexus, we are of opinion that the two cases with which we are concerned in this case are sufficient to do so.'

5. This principle laid down by the Supreme Court with reference to the Bihar Sales Tax Act is fully applicable to the U. P. Sales Tax Act. Clause (ii) of Expl. II to Section 2(h) of the U. P. Sales Tax Act covers the same field as Clause (ii) of second proviso to Section 2(g) of the Bihar Sales Tax Act. The second clause of the proviso In the Bihar Sales Tax Act lays down that if the goods are produced or manufactured in Bihar, the sale of such goods must be deemed for the purposes of the Sales Tax Act, to have taken place in Bihar wherever the delivery or contract of sale may have been made. The provision in the U. P. Sales Tax Act is exactly similar. The U. P. Sales Tax Act also only lays down that if any goods are produced or manufactured in Uttar Pradesh, the sale of such goods must be deemed, for the purposes of the U. P. Sales Tax Act, to have taken place in Uttar Pradesh wherever the delivery Or contract of sale may have been made. Since the Supreme Court held that the provision contained in the Bihar Sales Tax Act was valid, it automatically follows that the similar provision of the U. P. Sales Act is also valid, so that the first question must be answered in the negative.

6. So far as the second question is concerned, it appears to us that this must also be answered against the assessee and in favour of the Department because of the principles laid down by the Supreme Court which have been reproduced above. As we have mentioned earlier, the Supreme Court when dealing with the second type of case held that the tax on sale of goods is valid if the goods, wherein the title passes eventually outside the State, are produced or manufactured in the taxing State and the sale wherever that takes place is by the same person who produced or manufactured those goods in the taxing State. In the case before us, the question, as framed, relates to sales of oils and soaps which were admittedly manufactured by the assessee in U. P. and which goods, according to the language of the question, were sold by the assessee from their depot at Calcutta in the year 1948-49. These goods thus are of the class mentioned by the Supreme Court in their judgment cited above. They were manufactured by the assessee in U. P. and the question of taxing them has arisen on the basis that they were eventually sold by the assessee in the assessment year in question from their depot at Calcutta outside the State of U. P. In such a case the State of U. P. had power to tax the sale of goods as there wis a nexus between the sale and the taxing State of U. P. in accordance with the principles laid down by the Supreme Court. Consequently, the second question must be answered in the affirmative.

7. As a result, we answer the first question in the negative and the second question in the affirmative. The Department will be entitled to its costs from the assessee for this reference. We fix the fee of learned counsel for the Department at Rs. 200/.


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