G.C. Das, J.
1. This is a reference under Section 24 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947) (Hereinafter referred to as the 'Local Act') for a determination of the following question of law :
'Whether on the facts and circumstances of this case, the transaction between the petitioners and Messrs Paluram Dhandhania of Raigarh is exempt for levy of sales tax by the State of Orissa under Article 286 of the Constitution.'
2. The petitioners are registered dealers within the meaning of the local Act, and submitted their return before the Sales-tax Officer, Balangir Patna, for the quarter ending 30-6-1951. In the return filed by them, they claimed a deduction of Rs. 1,04,212-7-0 representing the value of certain quantity of jute despatched to some jute mills in Madhya Pradesh and West Bengal, outside the State of Orissa under instructions from Messrs Paluram Dhandhania of Raigarh in Madhya Pardesh.
The Sales-tax Officer rejected the petitioners' claim on the ground that the impugned sales were completed at Bargrah in the district of Sambalpur inside the State of Orissa before they were dispatched to the mills outside. Against this order of the Sales-tax Officer, the dealers preferred an appeal to the Assistant Collector of Sales-tax, Sambalpur, who by his order dated 15-12-1952, dismissed the appeal holding that the transaction of sales between M/s. Paluram Dhandhania and Co. and the purchasing jute mills outside the State of Orissa may come under inter-State trade, but not the transaction between the petitioners and M/s. Paluram Dhandhania.
Accordingly, he negatived the contention of the petitioners and held that the sales of jute to M/s. Paluram Dhandhania were not in course of inter-state trade and as such they attract sales-tax in this State. Against this order of the Assistant Collector, the petitioners filed a revision petition before the Collector which was also rejected by him. The Collector of Sales-tax, however, held that the petitioners purchased most of the jute from other dealers in the State of Orissa. The goods were actually resold in this State to M/s. Paluram Dhandhania and the delivery was given here, although it might be that the goods were subsequently despatched outside the State by or under the instructions of the purchasing dealer.
Relying upon the second Travancore-Cochin case, State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut factory, 1953-4 S.T.C. 205 : (AIR 1953 S. C. 333) (A) he held that the purchases in the State by the exporter for purposes of export are not within the exemptions con-templated under Article 286(1)(a). Thus, in his opinion, the sales to an exporter cannot be exempted. Thereafter the petitioners filed another revision petition before the Board of Revenue, Orissa, which was heard by Mr. B. Sivaraman, I. C. S., who also rejected the same by his order dated 5-12-1953.
Mr. Sivraman in his turn similarly held that the sale to M/s. Paluram Dhandhania was final as soon as they delivered the goods or booked the goods on behalf of that firm to somebody else. That transaction was completed in Orissa. Article 286 of the Constitution applies only where as the result of the sale the goods are delivered outside Orissa. In this case, the delivery outside Orissa is not the result of the sales from the petitioners by M/s. Paluram Dhandhania.
Evidently, the export was the result of another contract between M/s. Paluram Dhandhania and the jute mills outside the State of Orissa. Accordingly in his opinion, Article 286(1) was not applicable at all. In his judgment he referred to the United Motors Case decided by the Supreme Court, since reported in State of Bombay v. United Motors (India) Ltd. AIR 1953 S. C. 252 (B). The petitioners in due course filed an application under Section 24 (1) of the local Act for a reference, to this Court the above question of law, which was rejected on the ground that on the facts as found the sale was completed before it assumed the complexion of inter-State trade and the question having been finally decided by the Supreme Court, there was no necessity for any further reference.
The petitioners, eventually moved this Court under Section 24 (2) to direct the Board of Revenue to state a case. This Court by its order dated 9-1-1956, directed the Member, Board of Revenue, to send a statement of the case for its decision, and accordingly, the Member, Board of Revenue, Sambalpur, has now stated the case to this Court for a decision of the above question of law.
3. The contentions of Mr. Ranjit Mohanty, learned counsel on behalf of the petitioners are two-fold. His first contention was that the petitioners should have been given an opportunity to adduce evidence to show that the purchases were made under the instructions of M/s. Paluram Dhandhania, under commission basis and thus, it assumed the complexion of inter-State trade from the very inception of the transaction. He not having been given any such opportunity, this Court should call upon the Member, Board of Revenue to restate the case after recording the necessary evidence. His next contention was that the petitioners are exempt from taxation by the local authorities by virtue of Article 286(2) of the Constitution.
4. The local Act, under Section 24(2) provides for the restatement of a case by the revenue commissioner on certain specified grounds. Sub-section (4) to Section 24 lays down that if the High Court is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, it may refer the case back to theRevenue Commissioner to make such additions thereto or alterations therein as the Court may direct in that behalf. Thus, Sub-section (4), does not empower this Court to remand a case for re-statement on any new point, or to re-state the case after taking evidence which; was not before the authorities at the time the assessment was completed.
This provision is in pari materia with the provision in Section 66 (4) of the Indian Income-tax Act, 1922 (Act XI of 1922). Mr. Mohanty in support of this contention, relied upon a decision reported in Sohan Pathak & Sons v. Commr. of Income Tax, E.P. (1953) 24 I. T. R. 395 : (AIR 1953 SC 456) (C). The facts were that the assessee in that case was a Hindu undivided family consisting of four branches representing the four sons of one Sohan Pathak. The family, besides owning considerable property in Benares carried on business in money lending and Bena-rasi brocade under the name and style of M/s. Sohan Pathak and sons.
In the assessment to excess profits tax for the year 1944-45, the assessee claimed that there was a partial partition among the members of the family on 16-7-1953, whereby the Benarasi brocade business was divided among the members of the family in equal shares and that on the next day the members of the family formed two partnership under the names, Sohan Pathak and Giridhari Pathak and G. M. Pathak and Compay, and carried on business in Benarasi borcade though the family continued to remain joint in status.
The Tribunal while forwarding a statement of the case in one place spoke of the old family brocade business as continuing without a break after the partial partition, whereas in another place it referred to the assets of that business having been equally divided among the four branches forming the family. Their Lordships of the Supreme Court were of opinion that the Tribunal had not stated the case properly, there being patent ambiguities, and hence referred the case back to the Tribunal to submit a clearer statement of the facts as found by the Revenue authorities.
This case by no stretch of imagination, can be an authority for the proposition that the Court exercising the power of reference under a Taxing Statute can direct the Tribunal to take further evidence on a new point of fact raised by the dealer or the assessee as the case may be. I have never come across a case where either the Privy Council or the High Courts in India have directed a Tribunal to re-state a case after recording evidence on a new point of fact raised by the assessee. On the other hand the Privy Council have always deprecated departures from the regular procedure under which it is for the Tribunal to state formally the question that arises and it is for the High Court to decide the question of law so raised from the assessment orders. Hence, there is no merit in the first contention of Mr. Mohanty.
5. Turning to his second contention, Mr. Mohanty relied upon the first Travancore-Cochin case reported in State of Travancore-Cochin v. Bombay Co. Ltd. Alleppey, AIR 1952 S. C. 366 (D), and the second Travancore-Co-chin case reported in 1953-4 S. T. C. 205 : (AIR 1953 S. C. 333) (A).
6. In the first Travancore-Cochin case, AIR 1952 S. C. 366 (D), the facts were that the Bombay Company Ltd. were dealing in coir products, lemon grass oil and tea and were assessed on the turnover of the sales of these commodities which were exported to foreign buyers on c.i.f. or f. o. b. terms as per their contract.
The Company claimed exemption from assessment in respect of the sales effected by them on the ground, inter alia, that such sales took place 'in course of the export of the goods out of the territory of India' within the meaning of Article 286(1)(b) of the Constitution. The Revenue authorities negatived the contention of the Company, since in their view the sales were completed before the goods were shipped and hence could not be held to have taken place in course of export. On these facts, their Lordships of the Supreme Court held :
'We are clearly of opinion that the sales here in question, which occasioned the export in each case, fall within the scope of the exemption under Article 286(1)(b). Such sales must of necessity be put through by transporting the goods by rail or ship or both out of the territory of India, that is to say, by employing the machinery of export. A sale by export thus involves a series of integrated activities commencing from the agreement of sale with foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Assuming, without deciding, that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the State before the goods commence their journey as found by the Sales Tax authorities, the sales must nevertheless be regarded as having taken place in the course of the export and are, therefore, exempt under Article 286(1)(b).
That clause, indeed, assumes that the sale has taken place within the limits of the State and exempts it if it takes place in the course of the export of the goods concerned.'
Their Lordships further held :
'We accordingly hold that whatever else may or may not fall within Article 286(1)(b), sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India come within the exemption.....'
7. In the second Travancore-Cochin case, (1953) 4 S. T. C. 205: (AIR 1953 S. C. 333) (A), the relevant facts were that the respondent-com-pany were dealers in cashew-nuts in the United State of Travancore-Cochin, and their business consited of importing raw cashew-nuts from abroad and the neighbouring districts in the State of Madras in addition to purchases made in the local market. After converting them by means of certain processes into edible kernels, they exported the same to other countries, mainly, to America. The oil pressed from the shells removed from the cashew-nuts was also exported.
A question, after the enforcement of the Constitution on 26-1-1950, arose if the respondent-factory can be allowed exemption under Article 286 from 29-5-1950, to the end of the accounting, year. The sales-tax authorities negatived the claim of the respondent-factory whereas the High Court under Article 226 of the Constitution upheld the claim and quashed the assessments so far as they related to the period mentioned above.
On appeal to the Supreme Court, the majority took the view that the language of Clause (1) (b) of Article 286 clearly requires as a condition of the exemption that the export must be of the goods whose sale or purchase took place in the course of export. Where the respondents who were dealers of certain goods in the State of Travancore-Cochin, purchased goods from the neighbouring districts of the State of Madras and their own paid servants took deliveries of the goods outside the State of Travancore-Cochin, the provisions of Article 286(1)(b) would be attracted. If the purchases were made in the neighbouring districts of Madras and deliveries were effected through ordinary commercial channels by employing commission agents who made the purchases and arranged for the deliveries at the respondent's depots inside the State of Travancore-Cochin, the transaction would partake of an inter-State character and fall under Article 286(2) of the Constitution.
The respondent-factory, as was found, imported goods from Africa. They purchased the goods through intermediaries called 'Bombay party' doing business as commission agents-charging commission when the goods were on the High seas and shipped from the African port to Cochin or Quilon. Before the goods were actually landed at Bombay, the Bombay party arranged for purchases on behalf of the respondent-factory got delivery of the shipping documents on payment at Bombay through a bank which advanced money against the shipping documents and collected the same from the respondent-factory at destination.
Their Lordships on these facts clearly held that the purchases were purchases which occasioned the import and therefore fell within the exemption of Article 286(1)(b).
But in certain other cases the Bombay party indented the goods on their own account and sold the goods as principals to the respondents and other customers; but the goods were shipped direct to Cochin or Quilon on c. i. f. terms. The shipping documents were made out in the name of the Bombay party as consignees and were de-livered to them against payment through bankers at Bombay.
The Bombay party cleared the goods through their own representatives at the port of destination and issued separate delivery orders to the respondent-factory and other customers for the respective quantities ordered. It was, in those circumstances, held that the respondent's purchases could only be described as purchases from the Bombay party of the goods within the State and therefore, they did not come within the exemption of Article 286(1)(b).
The minority view, however, was that the Explanation to Clause 1 (a) of Article 286 only explains what is an outside sale or purchase, for, by sayipg that a particular sale or purchase, is to be deemed to take place in a particular state it only indicates that it is to be deemed to take place outside all other States so as to attract the ban of Clause 1 (a) and thereby take away the taxing power of those other States with respect to such sale or purchase. The explanation does not operate as an exception or a proviso but only explains Sub-clause (a). Its purpose is not to confer any taxing power on any State, and it cannot be resorted to for any such extraneous or collateral purpose. It does not convert an inter-State sale or purchase into an intra-State sale for any purpose other than the limited purpose of Sub-clause (a).
The non-obstante clause in the Explanation clearly implies that the framers of the Constitution adopted the view that a sale or purchase has a situs and that it ordinarily takes place at the place where the property in the goods passes.
If, therefore, a sale or purchase takes place outside the State either under the general law or by virtue of the fiction created by Explanation, then that State cannot, under Clause 1 (a), tax such sale or purchase. If, a sale or purchase takes place within a State, either under the general law or by reason of the Explanation, then if such a sale or purcahse takes place 'in the course of inter-State trade and commerce, no State, not even the State where the sale or purchase takes place as aforesaid, can tax it by reason of Clause (2), unless and until Parliament by law provides otherwise.
A sale or purchase 'in the course of' import or export within the meaning of Clause (1) (b) include (i) a sale or purchase which itself occasions the import or export, (ii) a sale or purchase which takes place while the goods are on the high seas on their import or export journey, & (iii) the last purchase by the exporter with a view to export and the first sale by the importer to a dealer after the arrival of the imported goods.
If a sale or purchase takes place within a State, either under the general law by reason of the Explanation then, if it takes place in the course of import or export as explained above, no State, not even the State within which such sale or purchase takes place can tax it by reason of Clause 1 (b).
8. These two Travencore-Cochin cases came up for consideration in a subsequent decisionreported in State of Madras v. Gurviah Naidu and Co. Ltd, 1955-6 STC 717 : (S) AIR 1956 SC 158) (E). That was a case against an order of acquittal recorded by the High Court of Madras in a proceeding under Section 15 (b) of the Madras General Sales Tax Act, the respondent Gurviah Naidu & Co. having failed to pay the entire amount of sales-tax assessed.
The question that arose for determination was : whether the purchases of skins made by the respondent having taken place in course of their export out of the territory of India, any sales-tax can be levied thereon. The respondents who were merchants dealing in hides and skins were prosecuted under Section 15(b) of the Madras General Sales Tax Act, for non-payment of the sales-tax for the purchase made by them. They contended that as these purchases were exempt under Article 286(1)(b), the assessment of tax on them was illegal.
The evidence adduced by the respondents showed that they secured orders for the supply of skins to London buyers through intermediaries and they then purchased the requisite kind and quantity of skins and then forwarded to the intermediaries for the purpose of export. The Magistrate, however, convicted the respondents on the ground that under Section 16-A, the validity of the assessment could not be questioned in any Criminal Court.
On appeal, the High Court acquitted the accused on the ground that Section 16-A which prevented the respondents from pleading in defence exemption under Article 286(1)(b), was ultra vires the Legislature. The High Court, however, granted to the State of Madras a certificate under Article 134(1)(c) of the Constitution. On appeal to the Supreme Court, Das, acting Chief Justice (as he then was), held that even conceding, without deciding it, that Section 16-A did not prevent the respondent from questioning the validity of the assessment, it was impossible to hold, on the evidence adduced by the respondents, that the purchases were exempt from sales-tax by virtue of Article 286(1)(b). Accordingly, the order of acquittal as passed by the High Court of Madras was reversed and the Supreme Court restored and confirmed the orders of conviction, sentence and the directions as passed by the trial Court.
While coming to this conclusion, the majority view in the Second Tarvancore-Cochin case (A) appears to have been accepted. As I have stated above, the majority had taken the view that if the purchases were made in the neighbouring districts of Madras and deliveries were effected through ordinary commercial channels by employing commission agents who made the purchases and arranged for the deliveries at the respondents' depots inside the State of Travan-core-Cochin, the transactions would partake of an inter-State character and fall under Article 286(2).
9. In the instant case, Mr. Mohanty tried to argue that he was merely a commission agent of the outside mills for which he had charged commission which would be apparent from the assessment records. There is, however, no evi-dence to support this contention except a bare reference in the order of assessment while disclosing the circumstances under which the dealer received a commission amounting to Rs. 1146-12-6. It may well be that after the transaction of sale was completed he undertook to send the goods to the outside dealers for which he charged a commission.
But the Assistant Collector in his order dated 15-12-1952, unmistakably found that the books of accounts of the dealer showed that they sold jute to M/s. Paluram Dhandhania and not to the jute mills outside the State of Orissa: M/s. Paluram Dhandhania appear to have sold the jutes to said jute mills. The dealer had thus nothing to do with the outside jute mills. The price of jute has been debited to the account of M/s. Paluram Dhandhania & Co. in the books of accounts of the dealer.
The dealer promised to produce the books of accounts of Messrs. Paluram Dhandhania who happened to be a relative of his. But ultimately the said accounts were not produced. The Assistant Collector further recorded that at the time of hearing it was admitted that M/s. Paluram sold the above jute to the outside jute mills charging a profit thereon. Thus, it is clear on facts that the situs for the sale was at Baragarh and the books of accounts of the dealer themselves show clearly that it was a sale out and out to M/s. Paluram Dhandhania & Co. Hence, according to the majority view of the Supreme Court, in the second Travancore-Cohin case, the provisions of Article 286(2) are not attracted.
10. Subsequently, in the Bengal Immunity Co., Ltd. v. State of Bihar (1955) 6 S. T. C. 446: ( (S) AIR 1955 S. C. 661) (F), the majority took the view that the Explanation to Clause (1) of Article 286 was for the avowed purpose of explaining what an outside sale referred to in Sub-clause (a) is and it does not confer or enlarge the legislative power of the States. The explanation would be legitimately extended to Clause (2) either as an exception or as a proviso thereto or be read as curtailing or limiting the ambit of Clause (2),
The dominant, if not the sole, purpose of Article 286 is to place restrictions on the legislative powers of the States, subject to certain conditions in some cases and with that end in view Article 286 imposes several bans on the taxing power of the State in relation to sales or purchases viewed from different angles and according to their different aspects. In some cases the ban is absolute (Clause (1) (a) read with the Explanation and Clause (1) (b) ) and in some cases it is conditional (Clause (2) ). Again, in some cases, the bans may overlap but nevertheless they are distinct and independent of each other.
The operative provisions of the several parts of Article 286, namely, Clause (1) (a), Clause (1) (b), Clauses (2) and (3) are intended to deal with different topics and one cannot be projected or read into another.
Therefore, except in so far as Parliament may by law provide otherwise, no State law can impose or authorise the imposition of any tax on sales or purchases when such sales or pur-chases take place in the course of inter-State trade or commerce and irrespective of whether such sales or purchases do or do not fall within the Explanation to Article 286(1)(a).
After referring to the previous decisions of the Court, the majority thus came to the conclusion that until Parliament by law made in exercise of the powers vested in it by Clause (2) of Article 286 provided otherwise, no State could impose or authorise the imposition of any tax on sales or purchases of goods when such sales or purchases took place in the course of inter-State trade or commerce and accordingly, their Lordships did not accept the majority view in (1963) 4 S. T. C. 133: (AIR 1953 S. C. 252) (B).
11. Two decisions of this Court were referred to at the Bar, K.E.S. Ahmed Mohinuddin v. Sales Tax Officer, Ganjam, 1956-7 S. T. C. 639 (Ori.) (G), and Shew Bhagaban Shewaratna v. Sales Tax Officer, Ganjam, 1956-7 S. T. C. 645 : (AIR 1956 Ori. 145) (H). In the former case, Narasimham, J. (as he then was) considered the question of the application of Clause (2) of Article 286 of the Constitution and independently came to the same conclusion, but rightly held that it would be academic to decide the point in view of the findings of fact of the Sales Tax Authorities.
In the latter case (Shew Bhagaban Shewaratna v. Sales Tax Officer, Ganjam) (H), Moha-patra, J., also held that Article 286 (1) or (2) had no application to the case and that there was no legal or constitutional bar to the State Legislature to enact the provisions and that the departmental authorities were therefore entitled to raise the tax under the proviso, the dealer having purchased the articles from another registered dealer with an undertaking that the articles were to be resold in Orissa and accordingly, both of them were therefore exempt from paying sales-tax under Section 5 (2) (a) (ii) of the local Act. The petitioner in that case subsequently sold the goods outside Orissa. The Board of Revenue rightly included the sale-price of such goods in the petitioners' turnover under the proviso to Section 5 (2).
12. I may mention here that the present Clause (2) to Article 286 was substituted by the Sixth Amendment, but the old law undoubtedly will have its application to the assessment year in question. Besides, the local Act had by the Adaptation of Laws (Third Amendment) Order, 1951, added a new section as Section 30 which lays down :
'notwithstanding anything contained in this Act (a) a tax on the sale or purchase of goods shall not be imposed under this Act:--
(i) Where such sale or purchase takes place outside the State of Orissa; or
(ii) Where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India;
(b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide.
(2) The explanation to Clause (1) of Article 286 of the Constitution shall apply for the interpretation of Sub-clause (i) of Clause (a) of Sub-section (1).'
13. Thus, according to my discussions above, the sale to the mills outside the State of Orissa had nothing to do with the sale by the dealer to Messrs. Paluram Dhandhania. Further, the sale having been completed at Baragarh, it cannot be held that it had itself occasioned the export and thus assumed a complexion of inter-State trade at its inception. Besides, the sale to outsiders was the result of a separate contract with the outsider millers, and accordingly, it cannot be said that the sale by the dealer to M/s. Paluram Dhandhania & Co. was in course of the inter-State trade. Thus, the contention of Mr. Mohanty is bound to fail, and the order passed by the Board of Revenue stands unassailed.
In the result, we answer the question in the negative against the contentions of the petitioners, and dismiss this application with costs.
Hearing fee is assessed at Rs. 100/-.
14. I agree.