TaxTMI 
TaxTMI 
TaxTMI 
1959 (11) TMI 48
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....s seems to have been made by the Railway Board with regard to orders for wagons for the 1953-54 and 1954-55 programmes also. On the record there is a letter dated the 13/14th April, 1952, from the Joint Director, Mechanical Engineering, Railway Board, to Martin Burn Limited. This letter encloses several statements. One of such statements shows the distribution to the different railways of the rolling stock ordered against the 1952-53 programme on Messrs Martin Burn Ltd. The statement shows that 2,300 wagons were meant for the Western Railway. A footnote to the statement shows that 500 of these wagons were to be manufactured by Burn & Co. Ltd. and the balance 1,800 wagons were to be manufactured by the appellant. By a letter dated 25th July, 1952, the General Manager of the Western Railway informed Burn & Co. of the marking to be made on the 2,300 wagons meant for the Western Railway. The 1,800 wagons allocated to the appellant were in due course manufactured. During the accounting year ending 31st March, 1953, the appellant delivered 803 wagons to the buyers. The appellant in due course submitted a sales tax return for the year ending 31st March, 1953, in which exemption for the sa....
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....ard to the attack on the tax as being violative of Article 286, it is necessary to remember the facts of this case. The contract under which the sale was made was effected by correspondence. The offer was made by letter posted from New Delhi and the acceptance was made by letter sent by post from Calcutta to New Delhi. The Railway Board administers various railways including the Western Railway. The railways are all inter-State in character. The Western Railway has railways in several States other than the State of West Bengal and has its headquarters in Ajmer. The Railway Board has its headquarters in New Delhi and has local agents within the State of West Bengal. The seller, the Indian Standard Wagon Co. Ltd., carries on business within the State of West Bengal. It has its factory at Burnpore within the State. The wagons were manufactured at Burnpore. The contract provided for delivery F. O. R. works siding of the seller, at Burnpore. In accordance with the contract the wagons were delivered free on rail at Burnpore within the State of West Bengal. The deliveries were taken by the Railway Board through the Western Railway. It is admitted in the petition that the wagons were deliv....
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....cle 286(2). This view was reversed by the Supreme Court itself in the subsequent Bengal Immunity Co.'s case [1955] 6 S. T. C. 446 ; A. I. R. 1955 S. C. 661. which held that an Explanation sale, though outside the ban of Article 286(1)(a), could still be a sale in the course of inter-State trade and commerce and as such within the ban imposed by Article 286(2). This decision occasioned the Sixth Amendment of the Constitution and the enactment of the Sales Tax Laws Validation Ordinance No. 3 of 1956, which was later replaced by the Sales Tax Laws Validation Act No. 7 of 1956. In this appeal we are concerned with the state of law as it stood before the Constitution (Sixth Amendment) Act, 1956, and with the effect of the Sales Tax Laws Validation Act No. 7 of 1956. Before Sinha, J., the imposition of the tax was impugned on the ground that it was violative both of Article 286(1) (a) read with the Explanation and of Article 286(2) of the Constitution. With regard to the complaint regarding the contravention of Article 286(2) of the Constitution Sinha, J., held that the sales were sales in the course of inter-State trade or commerce. The learned Advocate-General attacked this finding. H....
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....n given by Article 286(1)(a) read with the Explanation. Quite clearly, the goods were actually delivered as a direct result of the sale in the State of West Bengal. Having regard to the wording of the Explanation to Article 286(1)(a), the further question arises: Was it delivered for the purpose of consumption in any State and if so, in what State ? Now the Railway Board required the wagons for the purpose of the Western Railway which the Board administers and represents. The Railway Board is not a dealer. As representing the Western Railway the Railway Board is the actual consumer of the wagons. The wagons of course could not be consumed by eating them. They could be consumed by using them. The wagons are permanent rolling stock. They could not be consumed by one single user. They could be used and enjoyed from time to time. The wagons are ordinarily used for purposes of transporting goods from one point of railway to another. The wagons being meant for the Western Railway they would ordinarily be used for transporting goods from one point of the Western Railway lines to another point of that railway. The railway lines of Western Railway are spread over several States and are all....
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....considered to be an inside sale, its purpose is to define what is a sale outside the State. If the situs of the sale can be fixed by recourse to the Explanation in any particular State, the sale is necessarily outside all other States and is outside even the State in which under the general law the property in the goods has passed by reason of sale. But in a case where the sale does not fulfill the requirements of the Explanation and is, therefore, not an Explanation sale, its situs cannot be fixed with reference to the Explanation. Mr. Das argues that in such a case the sale must necessarily be an outside sale. I cannot accept this argument. A sale which is not an Explanation sale may yet be an inside sale, that is to say, a sale inside that State. The Explanation does not say that a sale which is not an Explanation sale must necessarily be an outside sale. Take a simple case: A, a buyer, buys goods from B in Calcutta. Both are in West Bengal. The contract of sale is effected in West Bengal. The goods are located in West Bengal at the time when the sale is completed and the property in the goods passes. The goods are delivered in West Bengal. The purpose of the buyer, however, is ....
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.... sale took place in the State of West Bengal. It is true that the contract of sale was effected by correspondence which passed between New Delhi and Calcutta. The contract, therefore, may be said to have been made partly in Delhi and partly in the State of West Bengal. But the sale did not take place by the contract itself. The goods were not then in existence. The goods were subsequently manufactured. The sale took place when the property in the goods passed and within the State where the goods were situated when the property so passed. It is true that the goods were meant for consumption in several States. But consumption is not an ingredient of sale and it cannot be said that the sale took place in any of the States where the consumption was to take place. But for Article 286(1)(a) the State of West Bengal had undoubted power to tax the sales. The appellant relies upon the restriction imposed by Article 286(1)(a). It is for the appellant to establish that the sale took place outside the State of West Bengal. The appellant has failed to discharge this burden. The construction of Article 286(1)(a) and of the Explanation is elaborately discussed in the several judgments which we....
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....e been delivered in a State for the purposes of consumption in that State. Now, in the present case though the delivery was in the State of West Bengal such delivery was not for the purpose of consumption therein. The present case, therefore, is not a case to which the learned Chief Justice was referring. It may be recalled that in the Bengal Immunity Company's case(1) Venkatarama Ayyar, J., was inclined to follow the view of the majority in the United motors' case[1953] 4 S. T. C. 133. Now observe how Venkatarama Ayyar, J., in the case of Bengal Immunity Co. v. The State of Bihar[1955] 6 S. T. C. 446 ; A. I. R. 1955 S. C. 661., at page 736, deals with the matter. The learned Judge there observed: " Thus, if A in Bengal sells to B in Bihar, and if in his turn B sells the same goods to C in U. P. for local consumption, there will be interState commerce under Article 286(2) and in the course thereof, there will be two sales. Taking first the sale from Bengal to Bihar, Bengal can tax it under Article 286(1)(a) because the Explanation thereto is not applicable as the delivery to Bihar is not for local consumption. But Article 286(2) would interpose a bar. " In this illustration the f....
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....o-operative Society v. State of Orissa[1953] 4 S.T.C. 372 ; A.I.R. 1953 Orissa 334., the Orissa High Court had occasion to deal with a case of sale in which the goods were actually delivered outside the State of Orissa for consumption outside the State and it was held that the State of Orissa had no power to tax the sale. The sale was an Explanation sale and in the facts of the case was necessarily, having regard to the Explanation to Article 286(1)(a), a sale outside the State of Orissa. In Firm Raghubar Dayal v. U. P. State [1955] A.I.R. 1955 All. 653., relied upon by Mr. Das, a single Judge of the Allahabad High Court had to deal with a case of sale and purchase outside the State of Uttar Pradesh under which the goods were actually delivered in the State of Uttar Pradesh. The learned Judge held that the sale could not be taxed in U. P. without enquiring into the question whether or not the delivery of cloth in question in U. P. was for the purpose of consumption therein. The case was decided in the background of the United Motors' case [1953] 4 S.T.C. 133. The sale was a sale in the course of inter-State trade or commerce and according to the United Motors' case[1953] 4 S.T.C. 1....