Inter-State deemed sale limits bar sales tax on lease rental for transfer of the right to use goods.

Writ jurisdiction under Article 226 remains available where an assessment is challenged on jurisdictional grounds or on constitutional competence, despite an alternative statutory appeal remedy. A prior mistaken admission by a dealer does not create tax liability, because tax can arise only by authority of law and cannot be imposed by estoppel. Lease rental for transfer of the right to use goods was held not exigible under the Orissa Sales Tax Act where the transaction was an inter-State deemed sale connected with movement of the goods from Haryana to Orissa; a statutory deeming provision cannot override the constitutional limits in Articles 286 and 366(29A)(d).

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Issues: (i) Whether non-exhaustion of the statutory appellate remedy barred exercise of writ jurisdiction under Article 226; (ii) whether tax liability could arise merely because the dealer had earlier admitted liability on the transaction; and (iii) whether lease rental received by the petitioner from IMFA was exigible to tax under the Orissa Sales Tax Act, 1947.

Issue (i): Whether non-exhaustion of the statutory appellate remedy barred exercise of writ jurisdiction under Article 226.

Analysis: The availability of an alternative remedy does not bar writ jurisdiction where the assessment is challenged on questions of jurisdiction and constitutional competence. The dispute involved the power of the assessing authority to levy tax on a transfer of the right to use goods, together with a challenge to the constitutional validity and scope of the statutory explanation on which the assessment rested. Such issues were within the proper province of writ review.

Conclusion: The writ petitions were maintainable notwithstanding the statutory appeal remedy.

Issue (ii): Whether tax liability could arise merely because the dealer had earlier admitted liability on the transaction.

Analysis: Tax can be levied only by authority of law. A mistaken admission cannot create a liability where the statute does not impose one. The absence of taxable liability under the governing law cannot be cured by estoppel or by a prior incorrect stand taken by the assessee.

Conclusion: Prior admission did not fasten tax liability on the petitioner.

Issue (iii): Whether lease rental received by the petitioner from IMFA was exigible to tax under the Orissa Sales Tax Act, 1947.

Analysis: The transfer of the right to use goods under Article 366(29A)(d) is a deemed sale, and such deemed sales are subject to the same constitutional restrictions as ordinary sales under Article 286. A State cannot tax an inter-State transaction or an outside-State transaction by deeming the goods to be within the State at the relevant time. On the facts, the lease transaction was integrally connected with the movement of the boiler from Haryana to Orissa pursuant to the agreements executed at Calcutta, and the transaction was held to be an inter-State lease. The situs of the transfer was not decisive, and the later commencement of rental payments after erection and commissioning did not convert the transaction into an intra-State sale. The statutory explanation was therefore read down so as not to apply to inter-State or outside-State deemed sales.

Conclusion: The lease rental was not exigible to tax under the Orissa Sales Tax Act, 1947.

Final Conclusion: The assessments were quashed, the constitutional challenge succeeded to the extent necessary, and the petitioner obtained relief against the impugned levy.

Ratio Decidendi: A deemed sale involving the transfer of the right to use goods cannot be taxed by a State if the transaction is in the course of inter-State trade or is otherwise outside the State, and a statutory deeming provision cannot override the constitutional limitations imposed by Articles 286 and 366(29A)(d).

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