P. V.B. Rao, J.
1. All these cases are taken up together as they involve common questions of law and fact. In S, J. C. Nos. 12 and 13 of 1952 and O.J. C. No. 35 of 1954 Messrs. Robert Alveres and Sons of Biramitrapur, Sundargarh are the petitioners. In S. J. C. Nos. 14 and 15 of 1952 and O. J. C. No. 36 of 1954 Messrs. Dulichand Eric of Biramitrapur are the petitioners.
2. S. J. C. Nos. 12 and 13 were Bled by the petitioners under Section 24(2)(b), Orissa Sales Tax Act, 1947 (Act 14 of 1947) praying for a direction to the Member in-charge of Commercial Taxes, Board of Revenue, to state a case for the opinion of this 'Court, by its order dated 15-9-1953. This Court directed the Member in charge of Commercial Taxt's, Board of Revenue under Section 24(3) of the Act, to refer the case for the opinion of this Court on the following points:
'Whether on the facts and circumstances of this case, the transactions in question can be held to be sales of goods within the meaning of Act 14 of 1947.'
Till 7-7-1954 no case was stated as directed by this Court, but the Commercial Tax Officer was proceeding with the certificate Cases Nos. 208 of 1950-51 and 146 of 1950-51 against the petitioners, in pursuance of which the certificate officer Uditnagar attached all the immovable properties of the petitioners including their factory and residential house and lands worth approximately Rs. 1,10,000/- for the purpose of realisation of the impugned taxes by putting the properties to sale. Notice was also issued on the petitioners to show cause why they should not be arrested and committed to civil prison.
Though the petitioners stated that they committed no act of bad faith, they were directed to bring an order of stay from this Court. They also filed an application for stay, but apprehending that there may he technical difficulty in granting the stay' in the S. J. C. cases noted above, they filed this application under Articles 226 and 227 of the Constitution of India praying for issue of a writ in the nature of mandamus or any other order prohibiting the opposite parties from proceedings with the realisation of the sales taxes in the above-noted certificate cases or from doing anything in furtherance of such realisation of the alleged dues.
3. S. J. C. Nos. 14 and 15 of 1952 were filed by Messrs. Dulichand Eric on exactly similar grounds as in the case of Messrs. Robert Alveres and Sons and O. J. C. No. 36 of 1954 was also filed on the same grounds as in O. J. C. No. 35 of 1954. In these crises also the Member, in charge of Commercial Taxes, Board of Revenue was asked to state a case on exactly the same question as in the other S. J. cases.
4. The petitioners are dealers in lac in the district of Sundargarh and any on business with Calcutta firms for the sale of lac outside Orissa. The Calcutta firms are Messrs. Purushottam Das Jalan, D. MukTierji and Co., and Jagannath Sarap. These Calcutta firms, according to the petitioners are their brokcrs who arrange for the sale of the commodity on a commission basis.
The petitioners were charged to sales tax under the Orissa Sales Tax Act on the basis that the sale took place within the State of Orissa. The Board of Revenue was moved under Section 24(1) of the Act to make a reference to this Court on the question of law that arises on the facts of the case.namely whether there has been a sale in Orissa as defined in the Act. The Board having refused to state the case, these petitions were filed by the petitioners.
5. The contention of the opposite parties was that the transactions amounted to sales and the petitioners were liable to sales taxes.
6. After hearing the parties, the Member in charge of Commercial Taxes, Board of Revenue was asked to submit a statement of the case and refer the question of law arising for decision of this Court as stated above. In the course of the judgment asking the Member in charge of Commercial Taxes to state a case the learned Chief Justice observed:
'Admittedly there was no evidence of any contract of sale entered into between the parties whether inside or outside Orissa. It is therefore idle to speculate what the nature of the transaction is. A sale in essence means a transfer of property in goods for valuable consideration. The transactions in question admittedly are not for cash. The Board of Revenue was right in taking the view that a sale can take place for deferred payment, but the point that appears to have been missed by the taxing authorities is that a transfer of goods is not identical with transfer of property in goods.
Undoubtedly, the' property was transferred by the Orissa dealers to the Calcutta firms by delivery of the railway receipt. But at the time of delivery no money was paid or received by the respective firms. This shows that the property in the goods remained with the sellers until the Calcutta firms found a buyer for them. It cannot be said that the Calcutta firms became the owners of goods immediately after they were put in possession of the goods. They may have been in such possession either as bailees, or as agents, or as brokers.'
7. The Member, Board of Revenue, submitted the statement of the case on 7-7-54.
8. According to the statement of the case, the firms of the petitioners carried on business in lac and lac products etc., at Biramitrapur. On 30-4-1949 the firms applied for certificates of registration which were granted. No returns of turn over were filed by the firms for the quarters ending 30-6-1949 and 30-9-1949 as required by Section 11, Orissa Sales Tax Act and Rule 20 of the Rules thereunder. On issue of notices under Sections 11(3) and 12 (4) of the Act, the parties only contended that lac was a commodity exempt from sales tax. This contention was rejected and the firms were assessed to tax on the turnover as shown in the accounts produced.
The firms then preferred appeals before the Assistant Collector of Commercial taxes and in the appeals they also took up the contention that the firms carried on their sales through brokers at Calcutta who paid to the petitioners the entire sale proceeds less the actual expenses and their brokerage; that the goods were actually consigned by the firms from Orissa and the railway receipts were given as delivery; and that therefore there was no transfer of property between the petitioners. & the brokers. In support of their contentions, a number of copies of accounts sent by the brokers were filed.
These copies do not furnish the names of the ultimate purchasers. The Assistant Collector of Commercial Taxes did not accept these contentions, because the brokers quoted their sales tax numbers' and were obviously treating such consignments as their purchases and also gave their declarations that they purchased lac for Resale. The accounts also revealed that the so-called brokers, were making advance payments frequently which only con-firmed that they were purchasing goods from the petitioners.
There was a revision also before tile Collector of Sales Tax where it was admitted that the sales tax was not being paid at Calcutta. It was also admitted that in case of default, the petitioners could not proceed against the eventual buyers but they could only proceed against the alleged commission agents. The Board of Revenue was also approached in revision where it was pressed that the sales ware at Calcutta and not in Orissa.
The Board noticed that the brokers in Calcutta were, according to their papers, charging only a percentage of the sale price as their commission. It was held by the Board that a sale could take place with the condition that the sale price was to be fixed on a certain basis on the occurrence of further transaction. No contract between the parties was produced. The transactions appeared to be sales in Orissa.
9. The petitioners' business headquarters is Biramitrapur in the district of Sundargarh which was in former Gangpur State before the merger. Gangpur State formerly was one of the Feudatory States of Orissa which merged with the province of Orissa by the Merger Agreement on 1-1-1948. The Orissa Sales Tax Act was passed by the Legislature in 1947 and came into force in the old province of Orissa sometime in that year.
After the merger of the Gangpur State with Orissa, the Government of Orissa as the delegated authority of the Central Government and exercising . powers under Section 4 Extra-provincial Jurisdiction Act applied the Orissa Sales Tax Act of 1947 to the former Orissa States including Gangpur State by Notification No. 20306 states, dated 14-12-1948.
10. Mr. L. K. Dasgupta, the learned counsel for the petitioners contends that the assessments of the petitioners to sales tax are illegal on two grounds. Firstly he contends that the sales actually took place at Calcutta and consequently the petitioners cannot be liable under the Orissa Sales Tax Act. Secondly, he contends 'that the notification made by the Government under Section 4(1), Sales Tax Act was ultra vires and invalid, and consequently the petitioners could not be assessed to sales tax for the two periods: and that the said assessments were illegal and the tax imposed could not be realised from them.
11. As far as the reference under consideration is concerned, it is only the first contention that is material. The second contention of Mr. Dasgupta will be considered in dealing with the O. J. Cs. for the issue of a writ of mandamus.
12. With regard to the first contention it is clearly stated in the statement of the case that the Board noticed that the brokers in Calcutta were, according to their papers, charging only a percentage of the sale price as their commission. When the brokers are paid commission for effecting the sales, it cannot be said that the goods were sold to the brokers. The learned Advocate General contends that as the goods were actually consigned by the petitioners' firms from Orissa and the railway receipts were given as delivery, the sales are to be held to have taken place in Orissa. Section 2(g), Sales Tax Act defines a sale as follows:
'Sale means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment orother valuable consideration, including a transfer ofproperty in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge.'
The essence of a sale therefore under the definition!appears to be a transfer of property in the goods.)According to Section 4, Indian Sale of Goods Act a contract of sale of goods is a contract whereby the seller transfers or agrees transfer the property in goods to the buyer for a price and where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of property inthe goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. According to this section also transfer of property in goods to the buyer is the essential characteristic of a sale.
13. In the case of -- 'Popatlal Shah v. State of Madras', AIR 1953 SC 274 (A), is was laid down by their Lordships of the Supreme Court that,
'A contract of sale becomes a sale under the Sale of Goods Act only when the property in the goods is transferred to the buyer under the terms of the contract itself'.
Under Section 2 (g) Sales-Tax Act, the stress is laid in this definition on the element of transfer of property in a sale and no other, as was held by their Lordships of the Supreme Court in construing the definition under the Madras Sales Tax Act.
14. The learned Advocate General also relies upon the second proviso to Section 2 (g) (which was omitted after the coming into force of the Constitution by the Adaptation of Laws (Third Amendment) Order, 1951) which says :
'Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actaully in Orissa at the time when, in respect thereof, the contract of sale as defined in Section 4 of that Act is made, shall, wherever the said contract of sale is made, be deemed for the purposes of this Act to have taken place in Orissa.'
He contends that by virtue of this proviso, the goods were in Orissa at the time of the contract of sale as defined in Section 4, Sale of Goods Act, 1930, and therefore the sale shall be deemed to have taken place in Orissa. But in this case there is absolutely no evidence as to the existence of any contract of sale or that the petitioners entered into contract of sale with anybody at Calcutta.
15. In the order in the Revision Case beforethe Collector of Commercial Taxes, it is stated,
'The dealer to whom the alleged commissionagent sells the goods also states as is evident fromcertain particulars filed, that he has purchased fromthe Calcutta dealer and not from the petitioners.'
In the order dated 14-11-1951, by the Member,Board of Revenue, in Revn. Case No. 35 of 1951-52,it is stated,
'The vouchers submitted by the Calcutta firms show that the firm treats the case as one of taking a fixed percentage commission and charging all handlings to the petitioners firms in Orissa.'
Unfortunately, these two statements do not find a place in the statement of the case submitted by the Member in charge of Commercial Taxes. On the strength of these two statements as also the other facts stated in the statement of the case, the petitioners' learned counsel submits that there was no sale of goods by the petitioners and that the sales were only by their brokers on their behalf to persons in Calcutta, and as such the sales are outside the state of Orissa.
The learned Advocate General on the other hand contends that as the brokers quoted their sales tax numbers and were treating such consignments as their purchases and also gave declarationsthat they purchased lac for resale, and that as theaccounts also revealed that the so-called brokerswere making advance payments frequently whichconfirmed that they were puchasing goods from thepetitioners, the transactions must be held to be salesby the petitioners firms in Orissa.
In my opinion the brokers quoting their salestax numbers cannot in any way be taken into account as against the petitioners. The payment of advances by the brokers after the receipt of the goods does not necessarily show that the advanceswere paid towards purchase price, because as theagents were in possession of the goods belonging tothe petitioners, they might have advanced somemoneys to the petitioners before actually selling thegoods at Calcutta with a view to deduct the advances at the time of final payment to their principals.
In the case of -- 'Commissioner of Income-Tax, Madras v. Mysore Chromite Ltd.', (S) AIR1955 SC 98 (B), their Lordships of the SupremeCourt repelled the argument of the learned Solicitor-General on behalf of the Commissioner of Income-tax that the payment of the 80 per cent or 90 per cent, as the case may be, made in Madrasby the Eastern Bank Ltd., Madras, to the assesseeCompany on the delivery of the documents, alongwith other circumstances indicated that the property in the goods passed at Madras and the saleswere accordingly completed in British India. TheirLordships observed :
'The facts strongly relied on by him (learned Solicitor General) are (i) that the price and delivery of goods were on F.O.B. terms, (ii) that in the European contracts the insurance, if any, was to be the concern of the buyers and (iii) that payment of the 80 per cent or 90 per cent, as the case may be, was made in Madras by the Eastern Bank Ltd., Madras, to the assessee company on the delivery of the documents. All these facts taken together indicate, according to his submission, that the property in the goods passed at Madras and the sales accordingly were completed in British India. We are unable to accept this line of reasoning.'
16. For these reasons stated above, I am of opinion that the two transactions do not amount to sales of goods and consequently the petitioners are not liable to pay any sales tax. I would, therefore, answer the question referred to this Court 'whether on the facts and circumstances of the case, the transactions in question can be held to be sales of goods within the meaning of Act 14 of 1947' in the negative.
17. The applications of the petitioners in S. J. C. Nas. 12 and 13 are therefore allowed with costs. Hearing fee Rs. 250.
18. The applications of the petitioners in S.J.C.Nos. 14 & 15, are also allowed with costs for thesame reasons. Hearing fee Rs. 250.
19. The next contention raised by the learned counsel for the petitioners is that the notification made by the Government extending the operation of the Sales Tax Act to the merged States is ultra vires and invalid; that consequently the assessment of the petitioners to sales tax is illegal and that therefore the petitioners in OJ.C. Nos. 35 and 36 of 1954 are entitled to an order restraining the opposite parries to realise the lax from them. As has been already stated, the merger of the Gangpur State took place on 1-1-1948 and the Orissa Sales Tax Act of 1947 was extended to the merged states by Notification No. 20306, states, dated 14-12-1948.
The commencement clause (Section 1(3), Sales Tax Act) is as follows :
'This section shall come into force at onceand the rest of this Act shall come into force onsuch date as the Provincial Government may, bynotification in the Gazette, appoint.'
Consequently by the Notification dated 14-12-1948 all the sections of the Sales Tax Act would not at once come into force in Orissa States and for thatEurpose a separate notification was necessary. So a fresh Notification in Finance Department No. 2267-F. dated 1-3-1949 was issued to the following effect:
'In exercise of the powers conferred by Sub-section (3) of Section 1, Orissa Sales Tax Act of 1947 (Orissa Act 14), as applied to Orissa States, the Government of Orissa are pleased to appoint 1-3-1949 as the date on which Sections 2 to 29 of the said Act shall come into force,'
Consequendy, the operative sections of the Sales Tax Act came into force only on 1-3-1949 and the effective commencement of the Act in the State to which the petitioners belong is 1-3-1949.
20. Section 4, Sales Tax Act which is a charging section, is as follows :
'4 (1) Subject to the provisions of Sections 5, 6, 7 and 8 and with effect from such date as the Provincial Government may, by notification in the Gazette, appoint being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded Rs. 10,000/- shall be liable to pay tax under the Act on sales effected after the date so notified.
* * * * *(2) Every dealer to whom Sub-section (1) does not apply shall be liable to pay tax under this Act on sales which have taken place in Orissa with effect from the quarter immediately following a period not exceeding twelve months during which his gross turnover on sales which have taken place in Orissa first exceeded Rs, 10,000/-
21. According to Section 2 (j) of the Act, 'year' is defined as 'financial year', that is, 1st April to 31st March of the next year. The scheme of the Act was to tax certain classes of dealers in respect of transactions of sale which took place after the commencement of the Act, and to. determine the class of dealers liable to pay sales tax, their gross turnover during the year preceding the year of assessment was taken into consideration. Though the Act came into force in the old Province of Orissa in Angust 1947, the liability for payment of sales tax did not arise immediately after that date.
Consequently, a separate notification under Sub-section (I) of Section 4 was necessary and the express provisions ' of that sub-section required at least 30 days interval between the date of the commencement of the Act and the date from which transactions of sale would be liable to assessment. So the . Government issued a notification (Finance Department No. (6378. C.T. 41/47-F., dated 30-8-1947) to the following effect:
'In exercise of the powers conferred by Sub-section (1) of Section 4, Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947) and in supersession of the Notification of the Government of Orissa in the Finance Department No. 5599.F., dated 28-T-1947, the Governor of Orissa with effect from which every dealer whose geoss turnover during the year ending 31-3-1947 exceeded Rs. 5000/- shall be liable to pay tax under. the said Act on sales effected after the said date.'
Thus, as far as the old Province of Orissa was concerned by virtue of the aforesaid Notification transactions of sale after 30-9-1947 were liable to sales tax and in determining wintt classes of dealers were liable to such assessment, their turnover for the previous financial year, that is, 1-4-1946 to 31-3-1947, was taken into consideration, though during the period from 1-4-1946 to , 31-3-1947 the Act was not in force in the Province of Orissa.
Thus transactions of sale from 30r9-1947 to 31-3-1948 were assessable by virtue of Sub-section (1) ofSection 4. -
22. Section 4, Sub-section (2) would come into play when the gross turnover of a dealer during the year 1-4-1946 to 31-3-1947 is below Rs. 5,000/-. He is not liable to any sales tax on transactions from 30-9-1947 to 31-3-1948 as during the preceding financial year his 'turnover did not exceed Rs. 5000/-. But if during the financial year from. 1-4-1947 to 31-3-1948 his gross turnover exceeded Rs. 5,000/-, he would be liable to pay sales tax for transactions of sale effected in the next year, that is, from 1-4-1946 to 31-3-1949, by virtue of Sub-section (2) of Section 4. These two sub-sections are consequently mutually exclusive and a person liable under Sub-section (1) cannot be assessed under Sub-section (2).
23. The commencement of the Act for the Gangpur State is 1-3-1949. Consequently, a dealer of that State is not liable to pay tax in respect of transactions of sale effected immediately after that date. The liability' arises only from the date as may be prescribed by Notification issued under Sub-section (1) of that section, and the Act requires a minimum interval of 30 days. Consequently, the Government of Orissa issued a Notification No. 2269-F., dated 1-3-1949 to the effect:
'In exercise of the powers conferred by Sub-section (1) of Section 4, Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947) as applied to Orissa States, the Government of Orissa are pleased to appoint 31-3-1949 as the date with effect from which every dealer whose gross turnover during the year ending 31-3-1949 exceeded Rs. 5000/- shall be liable to pay tax under the said Act, on sales effected after the said date.'
The Notification thus fixed 31-3-1949 as 'the date from which the sales tax shall be assessed in Gang-pur State which happens to be the end of the financial year 1947-48. Consequently, the dealers' liability for assessment arises only in respect of transactions of sale effected during the financial year 1949-50, The commencement of the Act as far as the petitioners' state is concerned, is 1-3-1949 and. the financial year immediately preceding that date would be the period from 1-4-1947 to 31-3-1948.
24. Mr. Dasgupta contends that the Notification No. 2269-F., dated 1-3-1949 was invalid inas much as it referred to the year ending with 31-3-1949 as the year immediately preceding the commencement of this Act. The said year would be the financial year ending with 31-3-1948 and not with 31-3-1949. The Notification is therefore clearly defective and does not conform strictly to the requirement of Sub-section (1) of Section 4. It is dated 1-3-1949 which is the date of commencement of the Act. Yet it referred to the year ending with 31-3-1949 as the year immediately preceding the commencement of the Act.
Consequently, the Notification is ultra vires and the power conferred by the Government under Sub-section (1) of Section 4 is invalid. The petitioners' liability arises only after the issue of a valid notification under Sub-section (1) of Section 4 and as the notification is ultra vires, they cannot be held liable to sales tax in respect of transactions of sale which took place from 1-4-1949,
25. The learned Advocate General on behalfof the Department contends that Sub-section (2) of. Section 4would be applicable 'on the facts of the presentcase. But this sub-section opens with the words'every dealer to whom Sub-section (1) does not apply'.If Sub-section (1) applies to a particular dealer, resortcannot be had to Sub-section (2) for the purpose ofassessing that dealer.
Also Sub-section (2) says that such a dealer shall be liable, to pay tax under this Act on sales which. had, taken place m Orissa with effect from the' quarter immediately following the period not exceeding twelve months during which his gross turnover on sales which had taken place in Orissa first exceeded Rs. 10.000/-. It is clear from the wording of this section that in view of the notification having been made on 1-3-1949 it applies to saleswhich took place only from 1-3-1950.
26. This point was already the subject matter of a decision of this Court by a Division Bench consisting of my Lord the Chief Justice and --'Narasimham J., reported in the case of B. C. Patel and Co. v. Sales Tax Officer', (S) AIR 1955 Orissa 172 (C), where it -was held that the Notification No.' 2269-F., dated 1-3-1949 was ultra vires and invalid. I respectfully agree with the reasons given in the said decision to hold the said notification invalid. I have already held in dealing with the first contention of the petitioners that the transactions do not amount to sales under the Sale of Goods Act
Consequently, the assessments of the petitioners are not Liable to be assessed for those quarters, and the opposite parties cannot realise the tax from the petitioners. The Department was also proceeding with the levy of the tax against the petitioners keeping pending the direction of this Court to state a case for the decision of this Court.
27. O.J.C, 35 of 1954 is therefore allowed and the opposite parties therein are directed not to proceed with the certificate cases against the petitioners for realisation of the tax. The petitioners shall have their costs. Hearing fee is assessed at Rs. 100/- The petitioners are also entitled to a refund of the tax paid as also a refund of thecourt-fee paid.
28. For the same reasons, O.J.C. 36 of 1954 Is also allowed and the opposite parties therein are directed not to proceed with trie certificate cases against the petitioners for realisation of the tax. The petitioners shall have their costs. Hearing fee Rs. 100/-. The petitioners are also entitled to a refund of the tax paid as also a refund of the court-fee paid.
29. I agree.