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Ganpat Pannalal Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Civil Case No. 121 of 1966
Judge
Reported inAIR1967MP286; [1967]19STC384(MP)
ActsConstitution of India - Article 286(1); Central Provinces and Berar Sales Tax Act, 1947
AppellantGanpat Pannalal
RespondentCommissioner of Sales Tax
Appellant AdvocateR.S. Dabir, Adv.
Respondent AdvocateA.P. Sen, Adv. General and ;K.K. Dubey, Govt. Adv.
Cases ReferredState of Kerala v. Cochin Coal Co. Ltd.
Excerpt:
.....and that if after a sale that satisfied that requirement, namely, for the purpose of consumption in the state of first destination, the buyer under such a sale for his own purposes re-exported the goods, that was not a matter with which the seller was concerned and would not affect the character of the sale as one calling within the exploration to article 286(1). the supreme court said that this submission was well founded and added that- if the goods were as a direct result of the sale delivered outside the state of bihar for the purpose of consumption in the state of first delivery the assessee would be entitled to exemption of sales tax imposed and that it would not be necessary for the assessee to 'prove further' that the goods so delivered were actually consumed in the state of..........the explanation, it is the assessee who has to prove that the goods were as a direct result of sale delivered outside the taxing state for the purpose of consumption in the state of first delivery, and that he is not required to prove further that the goods so delivered were actually consumed in the state of first destination. 5. in the present case, in regard to the sales of oilseeds of the value of rs. 1,50,386--2-9, the admitted position is that the oilseeds were actually delivered to purchasers outside the state as a direct result of the sale transactions. the assessee did not establish the fact, that the goods were delivered to purchasers outside the state for the purpose of consumption in their state. in the statement of the case, the tribunal has observed that the assessee was.....
Judgment:

Dixit, C.J.

1. In this reference by the Sales Tax Tribunal, pursuant to the direction given by this Court on 15th January 1966 on an application made by the assessee. M/s Ganpat Pannalal of Harda under Section 44 (2) of the Madhya Pradesh General Sales Tax Act, 1958, the question to be answered is-

'Whether, in the facts and circumstances of the case, the goods worth Rs 150386-2-9 delivered outside the State as a result of sale were covered under the Explanation to Article 286(1)(a) of the Constitution and, consequently, were exempt from sales tax?'

2. The material facts are that in proceedings for assessment of sales tax under the Central Provinces and Berar Sales Tax Act, 1947, for the period from 22nd October 1949 to 9th November 1950, the assessee a dealer in grains, oil-seeds, cotton etc., claimed that its turnover of Rs. 2,73,720-0-3 of oilseeds sold to dealers outside Madhya Pradesh could not be taxed as those sales were 'Explanation' sales under Article 286(1) of the Constitution The Sales Tax Commissioner held that the assessee sold oilseeds of the value of Rs. 1,23,333-13-6 to dealers outside the State to whom goods were actually delivered in their State as a direct result of sale for the purpose of consumption in that State; and that these sales could not be taxed under the C. P and Berar Sales Tax Act, 1947. He, however, found that sale transactions of the value of Rs. 1,50,386-2-9 were taxable as the assessee had failed to prove that those transactions were of goods which were delivered outside Madhya Pradesh for the purpose of consumption as a direct result of sale. This decision of the Sales Tax Commissioner was upheld by the Sales Tax Tribunal in a revision petition preferred by the assessee.

3. Both the Sales Tax Commissioner and the Tribunal have found that sales of oil-seeds of the value of Rs. 1,50,386-2-9 were to two dealers of Surat, two of Navsari and one of Bombay; that the assessee did not produce any letters or documents to show that oilseeds were delivered to those dealers as a direct result of sale for the purpose of consumption in their State, and that consequently the conditions for the applicability of the Explanation to Article 286(1) were not satisfied

4. There can be no doubt that if it is held that as a direct result of sale transactions oilseeds of the value of Rs. 150386-2-9 were delivered for consumption outside the State of M. P. then notwithstanding the fact that property in the goods passed in the State of M P the sales would not be liable to any tax under the C.P. & Berar Sales Tax Act, 1947, by reason of the Explanation to Article 286(1) of the Constitution This position cannot be disputed in view of the decisions of the Supreme Court in Burmah S.O.S. and D. Co. of India Ltd. v Commercial Tax Officer, (1960)-11 STC 764= 1961-1 SCR 902=(AIR 1961 SC 315). India Copper Corporation Ltd. v. State of Bihar, (1961)12 STC 56=(AIR 1961 SC 347) and A.V. Thomas and Co. Ltd. v. Deputy Commissioner of A.I.T. and ST, Trivandrum, (1963)14 STC 363=(AIR 1964 SC 569). In all these cases, it has been laid down that for the purpose of determining whether under Article 286(1), as it stood before the Constitution (Sixth Amendment) Act, 1956, a sale is 'inside' or 'outside' the State, it is the passing of property within the State that is intended to be fastened on and, therefore, subject to the operation of the Explanation that State in which the property passed would be the only State which would have the power to levy a tax on the sale; where the Explanation applies, the sale transaction is by legal fiction deemed to have taken place 'inside' the State of delivery and, therefore, 'outside' the State in which the property has passed The decision in (1961)12 STC 56= (AIR 1961 SC 347) (supra) also makes it very clear that in order to claim exemption under the Explanation, it is the assessee who has to prove that the goods were as a direct result of sale delivered outside the taxing State for the purpose of consumption in the State of first delivery, and that he is not required to prove further that the goods so delivered were actually consumed in the State of first destination.

5. In the present case, in regard to the sales of oilseeds of the value of Rs. 1,50,386--2-9, the admitted position is that the oilseeds were actually delivered to purchasers outside the State as a direct result of the sale transactions. The assessee did not establish the fact, that the goods were delivered to purchasers outside the State for the purpose of consumption in their State. In the statement of the case, the Tribunal has observed that the assessee was unable to show from any documents or material on record the purpose for which the goods were delivered to purchasers outside the State Shri Dabir learned counsel for the assessee, however, urged that the very fact that oil-seeds were sent outside the State of Madhya Pradesh was in itself sufficient to indicate that they were delivered to purchasers outside the State for the purpose of consumption in their State It was said that having regard to the fact that the goods which were sold were oilseeds, it must be taken that they were purchased by the dealers of Surat. Navsari and Bombay for the purpose of consumption in their State and not for re-export to any other State: and that even if the purchasers sold the oilseeds to other persons in the delivery-State that would be 'consumption in the State of delivery' within the meaning of the Explanation. Referring to Government of Andhra Pradesh v. Guntur Tobaccos Ltd., AIR 1965 SC 1396 learned counsel said that the burden of showing that the sale transactions in question were taxable was on the Revenue.

6. The contention put forward by the learned counsel for the assessee cannot be accepted in view of the decision of the Supreme Court in 1961-12 STC 56=(AIR 1961 SC 347) (supra). In that case, it was urged on behalf of the India Copper Corporation that under the Explanation to Article 286(1) there need be no proof of actual consumption of the goods delivered in the State of first destination, but that the Explanation was satisfied if the purpose of the delivery under the sale was for consumption in that State; and that if after a sale that satisfied that requirement, namely, for the purpose of consumption in the State of first destination, the buyer under such a sale for his own purposes re-exported the goods, that was not a matter with which the seller was concerned and would not affect the character of the sale as one calling within the Exploration to Article 286(1). The Supreme Court said that this submission was well founded and added that-

. . if the goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery the assessee would be entitled to exemption of sales tax imposed and that it would not be necessary for the assessee to 'prove further' that the goods so delivered were actually consumed in the State of first destination'

(Underlining (here, in ' ') is ours) The words 'prove further' used by the Supreme Court are very significant, and point to the fact that in order to claim exemption of sales tax the assessee has to prove that the goods were as a direct result of sale delivered outside the taxing State for the purpose of consumption in the State of first delivery, and that he will not have to prove further that the goods were actually consumed in the State of first destination.

7. No doubt, the burden of showing that a sale transaction is taxable is on the Revenue. But here the point raised is not whether the sale transactions in question effected by the assessee are taxable. But it is whether under the Explanation the assessee is entitled to exemption of sales tax on those transactions. The liability to tax on those transactions arose when under the general law property in the goods passed in the State of Madhya Pradesh by reason of sale. What the assessee claimed was that by recourse to the legal fiction created by the Explanation the sale should be deemed to have taken place 'inside' the State of delivery and; therefore outside the State of Madhya Pradesh where the property passed. The burden of proving the conditions for applicability of the Explanation was clearly on the assessee. The assessee only proved that the goods were actually delivered outside the State of M.P. as a direct result of sale transactions, but not the further requirement that the goods so delivered were for the purpose of consumption in the State of delivery. From the mere fact that the goods were actually delivered outside the State of Madhya Pradesh as a direct result of sale transactions, it cannot be inferred that the goods were delivered for the purpose of consumption in the State of delivery. So to hold would be to nullify altogether the requirement of the Explanation that the delivery of the goods must be for the purpose of consumption in the Stale of delivery.

It is no doubt true that, as explained by the Supreme Court in the State of Kerala v. Cochin Coal Co. Ltd., (1961) 12 STC 1: AIR 1901 SC 408 and 1961-12 STC 56=(AIR 1961 SC 347) (supra), goods can be consumed either by destruction or by way of use depending on the nature of the goods and that purchasers outside the State to whom the goods are delivered can consume the goods themselves in the sense of using (sic) up or can take the goods outside their State and consume them there or even sell the goods to the ultimate consumer within the State of delivery, and that the manner in which the purchaser outside the State consumes the goods is not a matter with which the seller is concerned. But what is necessary is that as between the seller and the purchaser outside the State the delivery of the goods outside the State must be for the purpose of consumption in the State of delivery. If this is not the purpose of delivery as between the seller and the purchaser, then recourse to the Explanation cannot he had.

In the present case, the assessee failed to prove that oilseeds of the value of Rs. 1,50,386-2-9 were sold to purchasers outside the State for consumption in the State of delivery. It should not have been difficult for the assessee to prove this when it was able to establish this requirement in the case of other sales of oilseeds which were exempted by the sales tax authorities under the Explanation.

8. For the foregoing reasons, our answer to the question placed before us for decision is that the sales of goods of the value of Rs. 1,50,386-2-9 to persons outside the State did not fall under the Explanation to Article 286(1) of the Constitution. The asses see shall pay costs of this reference. Counsel's fee is fixed at Rs. 150.


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