State sales tax declaration scheme upheld as a valid intra-State levy, defeating constitutional challenges under equality and trade rights.

A State sales tax provision that taxed the intra-State first sale or purchase scheme and postponed tax incidence on breach of a declaration was held to remain within the State's legislative competence under entry 54 of List II. It was not treated as taxing an inter-State or export transaction and was found consistent with article 286 and sections 3, 4, 5 and 15 of the Central Sales Tax Act. The Court also rejected the article 14 challenge, holding that the classification had a rational basis, and the article 19(1)(g) challenge, finding that the provision regulated tax incidence without prohibiting trade. The writ petition failed.

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Issues: (i) whether section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947, the corresponding rule and declaration form were beyond the legislative competence of the State or hit by article 286 of the Constitution and sections 3, 4, 5 and 15 of the Central Sales Tax Act, 1956; (ii) whether the provision was discriminatory and violative of article 14 of the Constitution; (iii) whether the provision unreasonably restricted the freedom of trade and commerce under article 19(1)(g) of the Constitution.

Issue (i): whether section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947, the corresponding rule and declaration form were beyond the legislative competence of the State or hit by article 286 of the Constitution and sections 3, 4, 5 and 15 of the Central Sales Tax Act, 1956

Analysis: The amended provision was treated as a charging provision of the State sales tax law, operating on the intra-State first sale/purchase scheme and postponing the tax incidence to the event contemplated by the statute when the purchasing dealer violated the declaration. It did not tax the inter-State sale or export sale as such, did not alter the character of the goods, and did not shift the levy to a consignment or despatch outside the State. The Court distinguished the Supreme Court authority dealing with purchase tax linked to manufacture and despatch outside the State, holding that the present provision remained within entry 54 of List II and did not offend article 286. The Court further held that section 15 of the Central Sales Tax Act, 1956 provided only special restrictions and reimbursement for declared goods and did not invalidate the State provision.

Conclusion: The provision, together with rule 27 and form XXXIV, was held to be within legislative competence and not violative of article 286 or sections 3, 4, 5 and 15 of the Central Sales Tax Act, 1956.

Issue (ii): whether the provision was discriminatory and violative of article 14 of the Constitution

Analysis: The Court found no hostile discrimination on the face of the provision and no factual foundation showing unequal operation against similarly situated dealers. Dealers who purchased goods without furnishing the declaration and dealers who purchased goods on furnishing the declaration were not placed in the same position, because the tax burden arose at different stages under the statutory scheme. The classification was thus held to have a rational basis connected with the levy.

Conclusion: The challenge under article 14 was rejected.

Issue (iii): whether the provision unreasonably restricted the freedom of trade and commerce under article 19(1)(g) of the Constitution

Analysis: The Court held that the impugned provision did not prohibit trade or make it compulsory for any dealer to furnish the declaration. It merely regulated the incidence of tax under the existing levy and did not impose an unlawful restraint on carrying on business. Since the provision was otherwise valid, no unreasonableness could be attached to it under article 19(1)(g).

Conclusion: The challenge under article 19(1)(g) was rejected.

Final Conclusion: The constitutional attack on the amended sales tax provision, the connected rule and form, and the consequential assessment order failed in full, and the writ petition was dismissed.

Ratio Decidendi: A State sales tax provision that preserves the character of an intra-State levy and merely postpones tax incidence upon breach of a declaration does not amount to taxation of an inter-State or export transaction and is not invalid for want of legislative competence, article 286, or the freedom guaranteed by article 19(1)(g).

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