TaxTMI 
TaxTMI 
1958 (4) TMI 98
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....f Orissa, as it was then constituted. Section 4, as it stood at all times material to this appeal, ran as follows: "4(1) Subject to the provisions of section 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. 5,000 shall be liable to pay tax under the Act on sales effected after the date so notified: Provided that the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the Collector to have been entered into by the dealer concerned on or before the date so notified. (2) Every dealer to whom sub-section (1) does not apply shall be liable to pay tax under this Act with effect from the commencement of the year immediately following that during which his gross turnover first exceeded Rs. 5,000. (3) Every dealer who has become liable to pay tax under this Act shall continue to be so liable until the expiry of three consecutive years, during each of which his gross turnover ....
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....ell after the Constitution came into force. The Sales Tax Officer, Cuttack, having assessed the respondents to sales tax under the said Act for each and all of the said five quarters and the respondents' several appeals against the said several assessment orders under the said Act having been dismissed on April 12, 1952, the respondents filed a petition under Article 226 of the Constitution in the Orissa High Court praying, inter alia, for a writ in the nature of a writ of certiorari for quashing the said assessment orders and for prohibiting the appellants from realising the tax so assessed or from making assessments on them in future. The contention of the respondents before the High Court was that the notification issued by the Government of Orissa on March 1, 1949, under section 4(1) being invalid in that it ran counter to the provisions of that sub-section, no part of the charging section came into force and consequently they were not liable to tax at all for any of the five quarters. As regards the three quarters following the commencement of the Constitution, they urged an additional plea, namely, that the assessment orders for those three quarters were invalid by reason of ....
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.... Government of Orissa to say on what class of dealers the tax liability would fall, for that had been already determined by the sub-section itself. Therefore, by the notification the Government of Orissa properly exercised its powers under sub-section (1) in so far as it appointed March 31, 1949, as the date, but it exceeded its powers by proceeding to say that all dealers whose gross turnover during the year ending March 31, 1949, exceeded Rs. 5,000 should be liable to pay tax under the Act. This part of the notification clearly ran counter to the sub-section itself, for under that sub-section it is only those dealers whose gross turnover exceeded Rs. 5,000 "during the year immediately preceding the commencement of this Act" that became liable to pay the tax. For the purposes of the five assessment orders it made no difference whether the Act is taken to have commenced on December 14, 1948, when it was extended to the feudatory States by notification under section 4 of the Extra Provincial Jurisdiction Act, 1947, or on March 1, 1949, when the notification under section 1(3) was issued, for in either case the year immediately preceding the commencement of this Act was April 1, 1947....
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....y the tax, the Sales Tax Authorities naturally applied their mind to the question whether during the year ending March 31, 1949, the gross turnover of the respondents exceeded the requisite amount, but did not inquire into the question whether the respondents' gross turnover exceeded Rs. 5,000 during the year immediately preceding the commencement of the Act which in this case was the financial year from April 1, 1947, to March 31, 1948. If the matter stood there, it would have been necessary to send the case back to the Sales Tax Officer to enquire into and ascertain whether the quantum of the gross turnover of the respondents during the last mentioned financial year ending on March 31, 1948, exceeded Rs. 5,000 or it did not. But a remand is not called for because it appears from the judgment under appeal that it was conceded that for the period April 1, 1949, till the commencement of the Constitution on January 26, 1950, the respondents would have been liable to pay sales tax provided a valid notification had been issued, under sub-section (1) of section 4. This concession clearly amounts to an admission that the gross turnover of the respondents during the financial year ending ....
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....uthorities, Cuttack, in the State of Orissa, assessed the respondent to sales tax in respect of sales of kendu leaves which took place for five quarters ending on September 30, 1949, December 31, 1949, June 30, 1950, September 30, 1950, and December 31, 1950. It should be noted that two of the aforesaid quarters related to a period prior to the commencement of the Constitution, and the remaining three quarters were post-Constitution. The facts which the Sales Tax Authorities found were (1) that the respondent collected kendu leaves in Orissa and sold them to various merchants of Calcutta, Madras and other places on receipt of orders from them, (2) that the goods were sent either f.o.r. Talcher or f.o.r. Calcutta, and (3) the sale price was realised by sending the bills to the purchasers for payment. The admitted position was that the goods were delivered for consumption at various places outside the State of Orissa. The Sales Tax Authorities proceeded on the footing that all the sales took place in Orissa even though the goods were delivered for consumption at places outside Orissa. By five separate assessment orders dated May 31, 1951, the Sales Tax Officer, Cuttack, held that the....
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....f that section said that "the rest of the Act shall come into force on such date as the Provincial Government may, by notification in the Gazette, appoint". The Provincial Government of Orissa notified August 1, 1947, as the date on which the rest of the Act was to come into force in the Province of Orissa. It is necessary at this stage to refer to the charging section, namely section 4 of the Act, which is set out below as it stood at the relevant time: "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. 5,000 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 with effect from the commencement of the year immediately following that during which his gross turnover first exceeded Rs. 5,000. (3) Every dealer who has become liable to pay tax under this Ac....
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....rcise of the powers conferred by sub-section (3) of section 1 of the Orissa Sales Tax Act, 1947, (Orissa Act XIV of 1947) as applied to Orissa States, the Government of Orissa are pleased to appoint the 1st day of March, 1949, as the date on which sections 2 to 29 of the said Act shall come into force". The position therefore was this. Section 1 of the Act came into force in Pallahara on December 14, 1948, and the remaining sections came into force on March 1, 1949, namely, those sections which dealt with the liability of a dealer to pay sales tax, set up a machinery for collection of the tax and dealt with other ancillary matters. A notification under sub-section (1) of section 4 was also necessary for a liability to arise under that sub-section in the said area, and such a notification was issued on March 1, 1949. That notification must be quoted in full, as one of the points for our decision is the validity of the notification. The notification read: "In exercise of the powers conferred by sub-section (1) of section 4 of the Orissa Sales Tax Act, 1947, (Orissa Act XIV of 1947) as applied to Orissa States, the Government of Orissa are pleased to appoint the 31st March, 1949, as ....
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....o tax on transactions of sale after September 30, 1947, in the old Province of Orissa. The notification for the Orissa States, however, fixed March 31, 1949, as the relevant period. This was clearly a mistake, because under sub-section (1) of section 4 the crucial year is the year immediately preceding the commencement of the Act. The Act commenced in the Orissa States either on December 14, 1948, or on March 1, 1949, and the financial year immediately preceding was the year 1947-48, i.e., April 1, 1947, to March 31, 1948. The notification would have been in consonance with the sub-section, if it had mentioned the year ending March 31, 1948 (instead of March 31, 1949) as the crucial year for determining the class of dealers who would be subject to the liability under sub-section (1) of section 4. This mistake in the notification is the ground on which the High Court held that the assessments for the two quarters of the pre-Constitution period were invalid and without jurisdiction. The learned Solicitor-General who has appeared for the appellants has conceded that a mistake was made in the notification. However, he has argued-firstly, that the mistake was immaterial and secondly, t....
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....ffect from the commencement of the year immediately following that during which his gross turnover first exceeded Rs. 5,000. Obviously, the relevant period for the application of sub-section (2) is the year immediately following that during which the gross turnover of a dealer first exceeded Rs. 5,000. The contrast between the two subsections is this: for sub-section (1) the crucial year is the year immediately preceding the commencement of the Act; but for sub-section (2) the crucial year is the year in which the dealer's gross turnover first exceeded Rs. 5,000. We agree that for the same relevant year both sub-sections (1) and (2) cannot apply, because sub-section (2) says-"Every dealer to whom sub-section (1) does not apply etc." Let us, for example, take the year 1946-47 in the old Province of Orissa. That was the year immediately preceding the commencement of the Act in that area, and sub-section (1) applied to all dealers whose gross turnover exceeded Rs. 5,000, first or otherwise, in that year; sub-section (2) did not apply to such dealers even if their gross turnover exceeded Rs. 5,000 for the first time in that year; because where sub-section (1) applies, sub-section (2) d....
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....bsp;Said the High Court: "Clause (1) of Article 286 prohibited a State from taxing a sale unless such sale took place within the State as explained in the Explanation to the clause of the Article. Similarly, clause (2) of that Article restricted the power of a State to tax a sale which took place 'in the course of inter-State trade or commerce'. Doubtless, by virtue of the proviso to that clause an Order by the President may save taxation on such inter-State sales till the 31st March, 1951. The recent decision of the Supreme Court reported in State of Bombay v. United Motors (India) Ltd.[1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252.has settled the law regarding the true scope of these two clauses of the Article. Where a transaction of sale involves inter-State elements if the goods are delivered for consumption in a particular State that State alone can tax the sale by virtue of clause (1) of that Article and by a legal fiction that sale becomes "intra-State sale'. Clause (2) of Article 286 applies to those transactions of sale involving inter-State elements which do not come within the scope of clause (1) of that Article. On the admitted facts of the present case, clause (1) of Articl....
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....f Article 286 of the Constitution shall apply for the interpretation of sub-clause (i) of clause (a) of subsection (1)." We are of the view that The Bengal Immunity decision(1) does not really help the learned Solicitor-General to establish his contention that the assessments for the post-Constitution period were valid. The admitted position was that the goods sold were delivered for consumption at various places outside the State of Orissa. Therefore, under clause (1)(a) of Article 286 read with the Explanation as also under section 30 of the Act, the sales were outside Orissa. It is true that The Bengal Immunity decision(1) took a view different from that of the earlier decision in so far as it held that inter-State sales were converted into intra-State sales by the Explanation; but it was pointed out that the States' power with respect to a sale or purchase might be hit by one or more of the bans imposed by Article 286. With reference to the different clauses of Article 286, it was observed in the majority judgment of The Bengal Immunity decision(1)"These several bans may overlap in some cases but in their respective scope and operation they are separate and independent. They de....
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....se were hit by clause (1)(a) of Article 286 as also section 30(1)(a)(i) of the Act and were rightly held to be without jurisdiction. The result, therefore, is that in our view this appeal should succeed in part, as we hold that the assessments for the two quarters of the pre-Constitution period were valid under sub-section (2) of section 4 of the Act and the assessments for the post-Constitution period were invalid. In view of the divided success of the parties we further think that they should bear their own costs in the High Court and in this Court. SARKAR, J.-The respondents are a firm of merchants carrying on business in a part of the State of Orissa which was formerly the feudatory State of Pallahara. This State of Pallahara had merged in the Province of Orissa under an agreement with the Government of India, dated January 1, 1948. On December 14, 1948, the Government of Orissa under the powers conferred by section 4 of the Extra Provincial Jurisdiction Act, 1947, and with the permission of the Government of India, issued a Notification applying the Orissa Sales Tax Act, (Orissa XIV of 1947), passed by the Legislature of Orissa, to the areas which previously constituted the f....
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....pay tax under this Act with effect from the commencement of the year immediately following that during which his gross turnover first exceeded Rs. 5,000. (3) Every dealer who has become liable to pay tax under this Act shall continue to be so liable until the expiry of three consecutive years, during each of which his gross turnover has failed to exceed Rs. 5,000 and such further period after the date of such expiry as may be prescribed and on the expiry of this latter period his liability to pay tax shall cease. (4) Every dealer whose liability to pay tax has ceased under the provisions of sub-section (3) shall again be liable to pay tax under this Act with effect from the commencement of the year immediately following that during which his gross turnover again exceeds Rs. 5,000."It is conceded that the respondents are dealers within the meaning of the Act. The term "turnover" is defined in the Act but for the purpose of this judgment it can be taken in its popular sense. It is also unnecessary to consider sections 5, 6, 7 and 8 of the Act, for nothing turns on them in this appeal. Section 1 of the Act came into force in the Pallahara area on December 14, 1948, by virtue of the no....
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....ion (3) and when it has come to an end under that sub-section it can again revive under sub-section (4). Unless however liability has arisen under sub-section (1) and (2), no liability arises under sub-sections (3) and (4). The question that I propose to discuss is whether, in the circumstances of this case, the respondents can be made liable under either sub-section (1) or sub-section (2) of section 4. I shall first consider sub-section (1) of section 4. In order that a liability under this sub-section may arise there has to be an appointment of a date as provided in it, for the liability is in respect of sales effected after that date. It is contended that such an appointment of a date was made by Notification No. 2269/F of March 1, 1949. The respondents say that the notification is invalid and that therefore no date under the sub-section has been fixed at all. I think that the respondents' contention is right. Under the sub-section, on a date being appointed a dealer becomes liable to tax on sales effected after that date provided his gross turnover during the year immediately preceding the commencement of the Act exceeds Rs. 5,000. Now the Act having commenced on March 1, 1949,....
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....ult of no date having been fixed under sub-section (1) no liability to pay tax arises under it at all and the respondents cannot be taxed under it, they are none the less liable to be taxed under sub-section (2). Under sub-section (2) a dealer can only be made liable if he is one "to whom subsection (1) does not apply". It is clear that the words "to whom subsection (1) does not apply" mean, "who is not liable under that subsection", for both sub-sections having been brought into force at the same time by one notification, they apply to all dealers together. The appellants say that the respondents are dealers who are not liable under sub-section (1) because no date having been appointed, no liability under it arises. I am unable to accept this contention. When it is said that a person not liable under one provision shall be liable under another, a situation is contemplated in which the liability of the person under the former provision might have arisen. It does not seem to me to be possible to say that a person is not liable under a section, when no question of liability under it can arise at all, when it is really a dead letter in the statute book. Further the appellant's conten....
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....e is no reason to think, was intended. Now this year must be one immediately following that year when the dealer's turnover first exceeds Rs. 5,000. This preceding year, however, need not be one commencing after the Act, for the sub-section does not say so. If such year is before the commencement of the Act, that would not make the sub-section operate retrospectively either, for the tax would be payable only on sales after the commencement of the Act and that year would only furnish the requisite on which liability arises: see The Queen v. Inhabitants of St. Mary, White Chapel(1848) 12 Q.B. 120, 127; 116 E.R. 811, 814. I may point out that if this view is not right, then in the present case the assessment orders could not have been made under sub-section (2), for they were based on the respondents' turnover for 1948-49, exceeding Rs. 5,000 and this year did not commence after the commencement of the Act. If the appellants are correct in their contention, then the respondents' turnover having first exceeded Rs. 5,000 in 1948-49 they became liable under sub-section (2) to pay tax on all sales made from the commencement of the succeeding year, that is, from April 1, 1949. This liabili....