Singareni Collieries Co. Ltd. Vs.
State of Andhra Pradesh & Ors [1965] INSC 212 (12 October 1965)
12/10/1965 SHAH, J.C.
SHAH, J.C.
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
HIDAYATULLAH, M.
SIKRI, S.M.
CITATION: 1966 AIR 563 1966 SCR (2) 190
CITATOR INFO:
R 1966 SC1216 (9,10) R 1967 SC1348 (3) RF
1968 SC 339 (6) R 1979 SC1160 (15) RF 1992 SC1952 (8)
ACT:
Hyderabad General Sales Tax Act, 1950, s.
2(k)-Supply of coal to consumers outside State pursuant to allotment orders
under Colliery Control Order, 1945-Whether allotment order covenant or incident
of contract of sale-Whether sales tax under State Act leviable-Or whether
exempt under Explanation to Art. 286(1) (a) or as inter-State sales.
HEADNOTE:
The appellant company carried on the business
of mining coal from its collieries and supplying it to consumers both within
and outside the State. In proceedings for assessment to Sales tax, the company
claimed that it was not liable to pay sales tax under the Hyderabad General
Sales Tax Act, 1950, on the price of coal supplied to allottees outside the
taxing State pursuant to the directions of the Coal Commissioner issued under
the Colliery Control Order, 1945.
This claim was rejected by the Sales Tax
Officer on the ground that the coal in question was sold F.O.R. colliery siding
and was actually delivered to the consumers within the State when it was loaded
on their account in Railway Wagons at the colliery siding. The appeals against
that decision to the appellate authorities as well as to the High Court were
dismissed.
On appeal to this Court,
HELD : The sales in question were not liable
to be taxed under the Hyderabad General Sales Tax Act, 1950. [203 D] Sales of
coal between April, 1, 1954 and September 6, 1955, for delivery to consumers
outside the State could not be taxed under the Hyderabad Act because they were
covered by the explanation to Art. 286(1) (a) before it was amended.
[201 F] Under the Colliery Control Order,
supply, use and disposal of coal were regulated from the stage of production till
consumption. Coal supplied was meant for consumption by the allottee; therefore
when the allottee was outside the State, it was supplied for the purpose of
consumption in the State in which the allottee resided or carried on business.
The expression "actually delivered" used in Explanation to Art.
286(1) (a) does not include mere symbolical
or notional delivery e.g. by entrusting goods to a common carrier, or by
delivery of documents of title like railway receipts. [194 H, 196 B, 200 F]
Shree Bajrang Jute Mills v. The State of Andhra Pradesh, 15 S.T.C. 430,
followed.
Similar Sales during the period September 7,
1955 to September 10, 1956 were also exempt because the Explanation continued
to remain in force till the latter date and furthermore during that period the
State had no power to levy tax on inter-State sales. [201 G-H] Bengal immunity
Co. Ltd. Y. State of Bihar, (1955] 2 S.C.R.
603, referred to.
191 For the period September 11, 1956 to
January 4, 1957 although Art. 286(2) stood repealed, there was no power in the
State to tax inter-state sales; and from January 5, 1957 to March 31, 1957 the
power to tax inter-state sales rested exclusively with the Central Government
under the Central Sales Tax Act, 1956. Coal was transported from the colliery
of the company to consumers outside the taxing State as a result of a covenant
or incident of the contract of sale and therefore the sale must be regarded as
an inter-State sale within the meaning of s. 3 (a) of the Central Act and not
liable to be taxed under the Hyderabad Act. [202 D, 203 B] Tata Iron &
Steel Co. Ltd. v. S. R.Sarkar, [1961] 1 S.C.R.
379, State Trading Corporation of India Ltd.
v. State of Mysore, 14 S.T.C. 188 and Cement Marketing Co. of India v.
State of Mysore, 14 S.T.C. 1751, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
Nos. 950-952 of 1963.
Appeals from the judgment dated the November
15, 1960 of the Andhra Pradesh High Court in T.R.C. No. 17 of 1960 and dated
the July 25, 1961 in Special Appeals Nos. 1 & 2 of 1961.
N. A. Palkhivala, S. N. Andley, Rameshwar
Nath, P. L. Vohra and Mohinder Narain, for the appellant.
D. Munikanniah and T. V. R. Tatachari, for
the respondents.
M. Adhikari, Advocate-General, Madhya Pradesh
and I. N. Shroff, for intervener no. 1.
M. C. Setalvad, N. A. Palkhivala, A. P. Sen,
R. K. P.
Shankardass, J. B. Dadachanji, O. C. Mathur
and Ravinder Narain, for intervener no. 2.
N. A. Palkhivala, A. P. Sen, R. K. P.
Shankardas, J. B.
Dadachanji, O. C. Mathur and Ravinder Narain,
for intervener no. 3.
J. B. Dadachanji, for intervener no. 4.
S. V. Gupte, Solicitor-General and R. N.
Sachthey, for inter-intervener no. 5.
The Judgment of the Court was delivered by
Shah, J. The question which falls to be determined in these appeals is
"whether the appellant Company is liable to pay sales-tax assessed under
the Hyderabad General Sales Tax Act, 1950 on the price of coal supplied to
allottees outside the taxing State pursuant to directions of the Coal
Commissioner issued under the Colliery Control Order, 1945".
The Company which has its registered office
at Hyderabad in the former Part 'B' State of Hyderabad, and 192 now in the
State of Andhra Pradesh, carried on the business of mining coal from its
collieries and supplying it to consumers within and outside the State of
Hyderabad.
These appeals relate to three financial years
1954-55, 195556 and 1956-57, during which coal was a controlled commodity, and
its disposal and use could be made only under orders issued by the appropriate
authority under the Colliery Control Order, 1945. The Company claimed that Rs.
1,75,67,286/1/2 in the year 1954-55, Rs.
1,17,39,636/11/8 in the year 1955-56, and Rs. 1,55,18,937/6/5 in the year 195657
were not liable to be included in the taxable turnover for levying sales tax
under the Hyderabad General Sales Tax Act, 1950, because the State Legislature
which enacted that Act was, by Art. 286 of the Constitution, prohibited from
imposing tax on transactions of supply of coal outside the limits of the State
under orders of the Coal Commissioner.
The Commercial Tax Officer, Hyderabad,
admitted the claim of the Company for the years 1954-55 and 1955-56 for
exemption from liability. The claim of the Company for the year 195657 was
however rejected. The Company appealed to the Deputy Commissioner of Commercial
Taxes and to the Sales-tax Appellate Tribunal, Hyderabad, against the order of
assessment for the year 195657, but without success. The Company then applied
to the High Court of Andhra Pradesh in its revision jurisdiction, and submitted
in support of its claim that a part of its turnover was exempt from liability
to sales-tax under the Hyderabad General Sales Tax Act because the turnover was
in respect of sales, (a) which had taken place outside the State within the
meaning of Art.
286(1)(a) read with the Explanation thereto,
and (b) which were effected in the course of inter-State trade or commerce, and
the Parliament had not by law removed the ban against imposition of tax on such
sales by the State Legislature. The High Court rejected these contentions. In
the meanwhile the Commissioner of Commercial Taxes issued notices to the
Company to show cause why the orders of assessment for the years 1954-55 and
1955-56 should not be reopened and why the sales which were exempted by the.
order of the Commercial Tax Officer should not be charged to tax, and by his
orders respectively dated February 8, 1961 and November 16, 1960 for the two
years 1954-55 and 1955-56 brought to tax the turnover which was previously
treated as exempt. The orders were carried to the High Court in appeal and the
same grounds which were set up in the revision application relating to the
assessment year 1956-57 were set up, beside the ground that the action for
reopening the assessments by the Commissioner of Commercial Taxes was barred by
limitation and was therefore incompetent. The High Court 193 rejected these
contentions. With certificate granted by the High Court, these appeals are
preferred by the Company.
At the material time, by s. 2(k) of the
Hyderabad General Sales Tax Act, 1950, the expression "sale" was
defined as under :
"'Sale' with all its grammatical
variations and cognate expressions means every transfer of property in goods by
one person to another in the course of trade of business for cash or for
deferred payment or other valuable consideration and includes also a transfer
of property in goods involved in the execution of a works contract, but does
not include a mortgage, hypothecation, charge or pledge.
Explanation 2. -Notwithstanding anything to
the contrary in any other law for the time being in force, a transfer of goods,
in respect of which no tax can be imposed by reason of the provisions contained
in Article 286 of the Constitution, shall not be deemed to be 'sale' within the
meaning of this clause." The Explanation was evidently introduced into the
definition with a view to avoid its operation on transactions which are outside
the taxing power of the States by virtue of Art. 286 of the Constitution.
In these appeals, the Company submitted in
the first instance that within the meaning of the Hyderabad General Sales Tax
Act, there was no sale of coal which was supplied to the consumers pursuant to
directions issued by the Coal Commissioner and therefore the taxing provisions
of the Act were not attracted, and placed reliance in support thereof on the
judgment of this Court in New India Sugar Mills Ltd.
v. Commissioner of Sales Tax, Bihar(1). But
this contention was never raised at any stage before the taxing authorities or
even before the High Court, and on the view we take on the other contentions
raised in these appeals, we need not consider this contention. We proceed to
deal with these appeals on the footing that the transactions under which coal
was supplied by the Company to the consumers as directed by the Coal
Commissioner were sales under the general law of sale of goods.
Two questions arise for determination :
(1) Whether the transactions of sale were
"Explanation sales" and on that account hit by Art. 286 (1) (a) of
the Constitution, before it was amended by the Constitution (Sixth Amendment)
Act, 1956; and (1) 14 S.T.C. 316.
194 (2) whether those transactions were sales
which took place in the course of inter-State trade or commerce.
It is urged that for a part of the period to
which these appeals relate, the sales are hit by both the legislative bans
contained in Art.
286 (1) (a) and Art. 286 (2), and for the
rest by one or the other of such bans.
It is necessary in the first instance to
summarise the provisions of the Colliery Control Order, 1945, and to set out
the manner in which coal was supplied by the Company to its constituents. The
Central Government was authorised by notification to fix the price of coal or
different prices for different grades of coal which may be sold by colliery
owners (cl. 4). The colliery owners and their agents were prohibited from
selling, or offering for sale coal at a price different from the prices fixed
in that behalf under cl. 4, and from granting or agreeing to grant any
commission, rebate or such other concession in any form having the effect of
reducing either directly or indirectly the said price (cl. 5). A colliery owner
could with the consent of the Deputy Coal Commissioner sell coal at the price
fixed under cl. 4 direct to a consumer, if an allotment was made by the Deputy
Coal Commissioner to the consumer -for such direct sale (cl. 6). The Central
Government could issue directions to any colliery owner regulating the disposal
of his stocks of coal or of the expected output of coal in the colliery during
any period (cl. 8); and notwithstanding any contract to the contrary, every colliery
Owner to whom a direction was given under cl. 8 had to dispose of coal in
accordance therewith and could not dispose of coal in contravention thereof
(cl. 9). The Coal Commissioner could order that coal dispatched by any colliery
owner to any person which was in transit (terminal whereof were defined by the
Explanation) shall subject to terms and conditions if any imposed by the Coal
Commissioner be diverted and delivered to another person specified in the order
[cl. 10-A(1)]. As soon as an order was made under sub cl. (1), all the rights
of the consignee, the owner of the colliery, or other person in that
consignment of coal were, subject to the terms of the order, to devolve upon
and vest in the person to whom the coal was to be delivered under the order
[cl. 10-A(2)]. An allottee of coal could not use it otherwise than in
accordance with the conditions of the order of allotment, nor divert or
transfer any such coal to any other person except under a written authority
from the Central Government (c]. 12-B) : and no person could acquire or
purchase or agree to acquire or purchase coal from a colliery, and no colliery
owner could dispatch or agree to dispatch or transport any coal from the
colliery except under the authority and in accordance with the authority of the
Central Government (cl. 12-E).
195 Broadly speaking the scheme of the
Colliery Control Order was that no person could acquire or purchase or agree to
acquire or purchase any coal from a colliery and no colliery owner could sell
or agree to sell or dispatch coal from the colliery, except under the authority
and in accordance with the conditions prescribed by the Coal Commissioner, and
that the person to whom coal was supplied also could not utilise it for a
purpose other than the purpose for which it was supplied, nor could he dispose
of coal supplied to him.
Supply, use and disposal of coal were
therefore regulated from the stage of production till consumption.
The manner in which the Colliery Control
Order was administered is illustrated by certain documents on the record.
The Coal Commissioner addressed a letter to a
colliery authorising it to dispatch on the request of the specified consumers
coal not exceeding the quantities mentioned during certain months and according
to the schedule appended. In the Schedule appended to the letter were set out
the names of the concerns to whom coal was to be supplied. Intimation of the
dispatch instructions was given to the consumers individually. Acting upon this
intimation, the consumer addressed a letter to the colliery requesting that the
quantities of coal allotted may be dispatched to him by train and gave
instructions regarding booking, the name of the person to whom coal may be
consigned, and also about the collection of price of coal supplied. The
colliery then loaded coal in railway wagons making out a "sale note"
mentioning the cost per ton F.O.R. Colliery with "freight to pay" and
dispatched the same by rail to the consumer at the destination requested. In
the "sale note" were set out the name of the buyer, grade and
quantity of coal allotted, the terms of sale, cost per ton F.O.R. Colliery,
other charges, and particulars of dispatch, such as the name of the Railway
Station to which the coal should be booked and the name of the consignee. The
sale note was subject to conditions of sale, that the colliery shall not be
responsible for non-delivery of coal or for any loss occasioned in consequence
of fire, snow, heat, flood, strikes, lockouts, shortage of wagons, restrictions
on booking, accidental losses, etc.
that any taxes, export duty, cess or other
charges not in force imposed by the Government after the date of the sale note
shall be borne by the purchaser; that the colliery reserved the right to demand
payment in advance and to have a right of lien on all. Coal dispatched until it
was paid for : that the sale note was subject to the quantity allotted by the
Deputy Coal Commissioner for buyers outside the State and in the event of the
Deputy Coal Commissioner cancelling the whole or any part of the said
allotment, such cancellation shall be deemed to apply equally to -the sale
note.
196 Under the terms of the "sale
note" the property in the coal consigned passed, so far as the colliery
was concerned, to the allottee original or substituted-when the goods were
loaded into the railway wagons for conveyance, and thereafter all losses and
any new taxes imposed were to be borne by the purchaser, the colliery having
only a right of lien on coal not paid for. Coal supplied was meant for consumption
by the allottee : therefore when the allottee was outside the State, it was
supplied for the purpose of consumption in the State in which the, allottee
resided or carried on business.
In view of the legislative developments which
we will presently notice, the period of the three assessment years may be
divided into four sub-periods. They are : April 1, 1954 to September 6, 1955;
September 7, 1955 to September 10, 1956; September 11, 1956 to January 4, 1957
and January 5, 1957 to March 31, 1957. In making this sub-division we have not
taken into account the application of the States Reorganisation Act as a result
of which on November 1, 1956, the Part 'B' State of Hyderabad ceased to exist
and the State of Andhra Pradesh came into existence by merger of certain areas
including parts of the State of Hyderabad.
The effect of the Reorganisation Act had a
bearing only on the territorial operation of the constitutional prohibitions
under Art. 286.
Under the Government of India Act, 1935, it
was open to every Provincial Legislature to enact legislation authorising_ the
levy of tax on sale of goods in respect of transactions whether within or
outside the Province, provided the Province had a territorial nexus with one or
more elements constituting the sale. This resulted in levy of sales tax by many
Provinces in respect of the same transaction--each Province fixing upon one or
more elements constituting the sale with which it had a territorial nexus.
The Constitution with a view to prevent
imposition of manifold taxes on the same transaction of sale imposed by Art.
286 restrictions on the levy of sale and purchase taxes on certain classes of
transactions. Article 286, as it was originally enacted, read as follows
"(1) No law of a State shall impose, or authorise the imposition of, a tax
on the sale or purchase of goods where such sale or purchase takes place(a)
outside the State; or (b) in the course of the import of the goods into, or
export of the goods out of, the territory of India.
Explanation. For the purposes of sub-clause
(a), a sale or purchase shall be deemed to have taken place in the State in
which the goods have actually been delivered 197 as a direct result of such
sale or purchase for the purpose of consumption in that State, notwithstanding
the fact that under the general law relating to sale of goods the property in
the goods has by reason of such sale or purchase passed in another State.
(2) Except in so far as Parliament may by law
otherwise provide, no law of a State shall impose, or authorise the imposition
of, a tax on the sale or purchase of any goods where such sale or purchase
takes place in the course of inter-State trade or commerce :
Provided that the President may by order
direct that any tax on the sale or purchase of goods which was being lawfully
levied by the Government of any State immediately before the commencement of
this Constitution shall, notwithstanding that the imposition of such tax is
contrary to the provisions of this clause, continue to be levied until the
thirty-first day of March, 1951.
(3) No law made by the Legislature of a State
imposing, or authorising the imposition of, a tax on the sale or purchase of
any such goods as have been declared by Parliament by law to be essential for
the life of the community shall have effect unless it has been reserved for the
consideration of the President and has received his assent." Article 286,
thus imposed qua sales four bans upon legislative power of the States. Clause
(1) prohibited every State from imposing or authorising, the imposition of, a
tax on outside sales and on sales in the course of import into or export
outside the territory of India. By cl. (2) the State was prohibited from
imposing tax on the sale of goods where such sale took place in the course of
interState trade or commerce. But the ban could be removed by the legislation
made by the Parliament. By cl. (3) the Legislature of a State was incompetent
to impose or authorise imposition of a tax on the sale or purchase of any goods
declared by the Parliament by law to be essential for the life of the
community, unless the legislation was reserved for the consideration of the
President and had received his assent.
This Court in The Bengal Immunity Company
Ltd. v. State of Bihar(1) held that the operative provisions of the several
parts of Art. 286, namely cl. (1)(a), cl. (1)(b), cl. (2) and cl. (3), are
intended to deal with different topics and one cannot be projected or read (1)
[1955] 2 S.C.R. 603.
197 198 into another, and therefore the
Explanation in cl. (1)(a) cannot legitimately be extended to cl. (2) either as
an exception or as a proviso thereto or read as curtailing or limiting the
ambit of cl. (2). This Court further held that until the Parliament by law made
in exercise of the powers vested in it by cl. (2) of Art. 286 provides
otherwise, no State may impose or authorise the imposition of any tax on sales
or purchases of goods when such sales or purchases take place in the course of
inter-State trade or commerce, and therefore the State Legislature could not
charge inter State sales or purchases until the Parliament had otherwise
provided. The judgment in The Bengal Immunity Company's case(1) was delivered
on September 6, 1955. The President then issued the Sales Tax Laws Validation
Ordinance, 1956, on January 30, 1956, the provisions of which were later
embodied in the Sales Tax Laws Validation Act, 1956. By this Act
notwithstanding any judgment, decree or Order of any Court, no law of a State
imposing, or authorising the imposition of, a tax on the sale or purchase of
any goods where such sale or purchase took place in the course of inter-State
trade or commerce during the period between the 1st day of April, 1951 and the
6th day of September, 1955, shall be deemed to be invalid or ever to have been
invalid merely by reason of the fact that such sale or purchase took place in
the course of inter-State trade or commerce; and all such taxes levied or
collected or purported to have been levied or collected during the aforesaid
period shall be deemed always to have been validly levied or collected in
accordance with law. The Parliament thereby removed the ban contained in Art.
286(2) of the Constitution retrospectively but limited only to the period
between April 1, 1951 and September 6, 1955. All transactions of sale, even
though they were inter-State could for that period be lawfully charged to tax.
But Art. 286(2) remained operative after September 6, 1955 till the
Constitution was amended by the Constitution (Sixth Amendment) Act, i.e.,
September 11, 1956. By the amendment, the Explanation to cl. (1) of Art.
286 was deleted and for cls. (2) & (3)
the following clauses were substituted :
" (2) Parliament may by law formulate
principles for determining when a sale or purchase of goods takes place in any
of the ways mentioned in clause (1).
(3) Any law of a State shall, in so far as it
imposes,, or authorises the imposition of, a tax on the sale or purchase of
goods "declared by Parliament by law to be of special importance in
inter-State trade or commerce, be subject to such restrictions and conditions
in regard to the (1) [1955] 2 S.C.R. 603;
199 system of levy, rates and other incidents
of the tax as Parliament may by law specify." By cl. (2) of Art. 286 as
amended, the Parliament was authorised to formulate principle for determining
when a sale or purchase of goods takes place in any of the ways mentioned in
cl. (1), namely, outside the State or in the course of the import into, or
export out of the territory of India. By the Constitution (Sixth Amendment)
Act, the Parliament was entrusted with power under Art. 269(3) to formulate
principles for determining when a sale or purchase of goods takes place in the
course of inter-State trade or commerce; and to effectuate the conferment of
that power in the Seventh Schedule, Entry 92A was added in the First List and
Entry 54 in the Second List was amended. The Parliament enacted, in exercise of
that power, the Central Sales Tax Act 74 of 1956 (which became operative as
from January 5, 1957) to formulate principles for determining when a sale or
purchase of goods takes place in the course of inter-State trade or commerce or
outside a State or in the course of import into or export from India, and to
provide for the levy, collection and distribution of taxes on sales of goods in
the course of inter-State trade or commerce and to declare certain goods to be
of special importance in inter State trade or commerce etc.
For the period April 1, 1954 to September 6,
1955 therefore transactions which were inter-State were deemed, because of the
Sales Tax Laws Validation Act, taxable by the States-the bar contained in Art.
286(2) having been retrospectively removed. For the period September 7, 1955 to
September 10, 1956 Art. 286(2) having remained in operation and the Sales Tax
Laws Validation Act, 1956, not having been extended to cover that period, inter
State sales could not be taxed by the State Legislature. During the period
September 11, 1956 to January 4, 1957 Art. 286(2) stood repealed by the
Constitution (Sixth Amendment) Act, 1956. but the Parliament had assumed to
itself the power under Entry 92A of the First List in the Seventh Schedule to
tax sale or purchase of goods where such sale or purchase takes place in the
course of inter-State trade or commerce. In exercise of the power to formulate
principles for determining when a sale or purchase of goods takes place in the
course of inter-State trade or commerce, the Parliament enacted the Central
Sales Tax Act, 1956 which was brought into force on January 5, 1957, and after
that date inter State sales could be taxed under the provisions of the Central
Sales Tax Act.
200 The Company claims that the transactions
which are sought to be charged for the period between April 1, 1954 to
September 6, 1955 are not taxable, because they were covered by Explanation to
cl. (1)(a) of Art. 286 of the Constitution, before it was amended for the
period between September 7, 1955 and September 10, 1956, it is claimed that the
transactions are not taxable, because they are covered by the Explanation to
Art. 286(1) and also because they are inter-State sales. For the period
September 11, 1956 to January 4, 1957 the transactions are not taxable, because
they are inter State sales not chargeable under any statute--State or
Parliamentary-and for the period January 5, 1957 to March 31, 1957, the
transactions are not chargeable by the State, because they are inter State and
are chargeable under the Central Sales Tax Act alone.
The true effect of Explanation to Art. 286(1)
and Art.
286(2) gave rise to conflicting opinions, but
it is unnecessary to enter upon a discussion of the earlier cases, for the
principles applicable thereto have now been settled by decisions of this Court
as to what transactions are covered by the Explanation to cl. (1) of Art. 286
before it was amended.
In Shree Bajrang Jute Mills Ltd. Guntur v.
The State of Andhra Pradesh(1), it was held by this Court that a sale falls
within the Explanation to Art. 286(1)(a) if goods have actually been delivered
as a direct result of the sale for the purpose of consumption in the State in
which they are delivered, and the expression "actually delivered" in
the context in which it occurs can only mean physical delivery of the goods, or
such other action as puts the goods in the possession of the purchaser. The
expression "actually delivered" does not include mere symbolical or
notional delivery e.g. by entrusting the goods to a common carrier, or even by
delivery of documents of title like railway receipts. It was said that the rule
contained in S. 39(1) of the Indian Sale of Goods Act, 1930 has no application
in dealing with a constitutional provision which while imposing a restriction
upon the legislative power of the States entrusts exclusive power to levy sales
tax to the State in which the goods have been actually delivered for the
purpose of consumption. The Court also held that if the goods were actually
delivered for consumption in another State it was immaterial whether the
property in the goods passed in the State from which they were dispatched.
Counsel for the State of Andhra Pradesh
contended that in the present case coal dispatched from the territory of the
taxing State to purchasers in other States was actually delivered within the
taxing (1) 15 S.T.C. 430.
201 State and therefore the principle of
Shree Bajrang Jute Mills' case(1) did not apply to those transactions. That
contention has however no force. The Explanation defines the State in which the
goods have actually been delivered for consumption, as the State in which for
the purpose of cl. (1)(a) of Art. 286 the sale shall be deemed to have taken
place. That State alone in which the sale is deemed to take place has the power
to tax the sale, and for this purpose it is immaterial that property in the
goods has under the general law relating to sale of goods passed in another
State in which the allotted resided or carried on business. Delivery of coal to
the Railway Administration may amount to delivery to the allottee for the
purpose of the general law relating to sale of goods, but thereby coal cannot
be said to be "actually delivered" within the meaning of the
Explanation to Art. 286(1)(a). It is also true that under the terms of the
sale-note under which coal was dispatched on terms F.O.R. Singareni the Company
was not responsible for loss or damage to the consignment after it was loaded
in the wagons, that may indicate that the Company had no property in the goods
after it was in transit. But determination of the State in which sale shall be
deemed to have taken place is artificially determined not by terms of the
contract of sale, nor by the legal concept of passing of property in the goods
sold by the delivery for the purpose of consumption.. As observed by Das Ag.
C.J. in the Bengal Immunity Company's case(1) "The shifting of situs of a
sale or purchase from its actual 'situs' under the general law to a fictional
'situs' under the Explanation takes the sale or purchase out of the taxing
power of all States other than the State where the 'situs' is fictionally
fixed." Sales-tax under the Hyderabad General Sales Tax Act on
transactions of coal delivered to the Railway or other carrier for carriage to
places outside the taxing State and for delivery for consumption therein is
therefore not leviable to be taxed by virtue of the Explanation to Art.
286(1).
For the period September 7, 1955 to September
10, 1956, the turnover from sale of coal actually delivered outside the State
of Andhra for consumption in those States would also be exempt from liability,
because the Explanation continued to remain in force till September 10, 1956.
The Company would also be entitled to exemption from liability to tax because
the State had during that period no power to levy tax on inter-State sales. As
(1) 15 S.T.C 430.
(2) [1955] 2 S.C.R. 603.
202 pointed out by Venkatarama Ayyar, J., in
the Bengal Immunity Company casc(1) :
"A sale could be said to begin the
course of inter State trade only if two conditions concur : (1) A sale of
goods, and (2) a transport of those goods from one State to another under the
contract of sale. Unless both these conditions are satisfied, there can be no
sale in the course of inter-State trade." In these transactions relating
to supply of coal, which we have, assumed are sales, coal was transported in
pursuance of the allotment orders to other States. We have also assumed for the
purpose of this argument, that compliance with allotment orders resulted in a
contract of sale. The transactions were unquestionably in the course of inter State
trade.
For the period September 11, 1956 to January
4, 1957, Art.
286(2) stood repealed and there was no power
in the State to tax an inter-State sale. For the period between January 5, 1957
and March 31, 1957 the power to tax inter-State sales was governed by the Central
Sales Tax Act, 1956. By the Constitution (Sixth Amendment) Act amending Art.
286(2) and incorporating Entry 92A in List 1 of the Seventh Schedule read with
Art. 269(3) the power to tax sales in the course of inter State trade or
commerce rested with the Central Government. Sales-tax for the period from
January 5, 1957 to March 31, 1957, has not been levied under the Central Sales
Tax Act, 1956, and if the transactions by the Company were taxable under that
Act, the State of Andhra Pradesh had no power to tax those transactions. As
transactions of sale in the course of inter-State trade or commerce within the
meaning of s. 3, they could not be taxed under the Hyderabad General Sales Tax
Act, 1950. Section 3 of the Central Sales Tax Act, 1956 provides that "a
sale . . . of goods shall be deemed to take place in the course of inter-State,
trade or commerce if the sale . . . occasions the movement of goods from one
State to another or is effected by a transfer of documents of title to the
goods during their movement from one State to another". In Tata Iron and
Steel Company Ltd.
v. S. R. Sarkar (2 ) this Court held that cl.
(a) of s. 3 covers sales in which the movement of goods from one State to
another is the result of a covenant or incident of the contract of sale, and
property in the goods passes in either State. That view was reaffirmed in The
State Trading Corporation of India Ltd. & Another v. The State of (1) [1955]
2 S.C.R. 603.
(2) [1961] 1 S.C.R. 379.
203 Mysore and Another(1) and Cement
Marketing Company of India v. State of Mysore(1).
Coal in the appeals under review was
transported from the colliery of the Company to the consumers outside the
taxing State, as a result of the covenant or incident of the contract of sale
and therefore the sale must be regarded as an inter-State sale and not liable
to be taxed under the Hyderabad General Sales Tax Act, 1950. The High Court
was, in our view, in error in holding that the turnover of the Company in which
coal was loaded in railway wagons for conveyance to places outside the taxing
State was taxable under the Hyderabad General Sales Tax Act. In that view we do
not think it necessary to decide whether the Commissioner of Commercial Taxes
was right in reopening the assessments for the years 1954-55 and 1955-56 in the
manner he has purported to do.
The appeals are allowed and the order passed
by the High Court is set aside. It is declared that the turnover of the Company
amounting to Rs. 1,75,67,286/1/2 for the year 195455; Rs. 1,17,39,636/11/8 for
the year 1955-56 and Rs. 1,55,18,957/6/5 for the year 1956-57 was exempt from
liability to sales tax under the Hyderabad General Sales Tax Act, 1950. The
Company will be entitled to its costs in the appeals in this Court and the High
Court. There will be one hearing fee.
Appeals allowed.
(1) 14 T.C. 188.
Sup.CI/66-14 (2) 14 S.T.C 175.
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