TOBACCO MANUFACTURERS INDIA LIMITED Vs. COMMISSIONER OF SALES TAX BIHAR

JUDGEMENT

(1.) IN Miscellaneous Judicial Case No. 330 of 1955 the petitioner is an incorporated company, manufacturing cigarettes and tobacco and having one of its factories at Monghyr. For the financial year 1950-51 the petitioner was assessed to sales tax by the Superintendent of Sales Tax of Monghyr by his order dated the 7th of May, 1952. By this assessment order the petitioner was assessed to sales tax to the extent of Rs. 7,46,876-1-3. The petitioner claimed that the following sales were not liable to tax : (i) sale of goods outside Bihar and consumed in the State of first destination to the extent of Rs. 3,79,01,221-11-11, and (ii) sale of goods despatched outside Bihar and consumed in States other than the State of first destination to the extent of Rs. 84,78,260. The petitioner claimed exemption under Article 286(2) of the Constitution. The claim was, however, rejected by the Superintendent of Sales Tax on the ground that inter-State sales were taxable up to the 31st of March, 1951, by virtue of the President's Sales Tax Continuance Order, 1950. As a result, therefore, the petitioner was assessed to sales tax to the extent of Rs. 7,46,876-1-3. This amount included the tax of Rs. 7,10,185-12-0 on the sale price of goods despatched outside Bihar and delivered for consumption in other States. The amount of sales tax was duly paid on behalf of the petitioner. An appeal was, however, taken on behalf of the petitioner to the Deputy Commissioner of Sales Tax against the order of assessment, but the appeal was dismissed. The petitioner filed an application in revision before the Board of Revenue, and on the 28th of August, 1953, the Board of Revenue allowed the revision application and held that the petitioner was entitled to exemption in respect of the sale price of goods despatched to places outside the State of Bihar. The relevant portion of the order of the Board of Revenue is to the following effect :-

(2.) ON the 9th of October, 1953, the petitioner applied to the Superintendent of Sales Tax under section 15 of the statute for the refund of the amount of Rs. 7,10,185-12-0. Out of this amount a sum of Rs. 5,80,362-7-0 was refunded to the petitioner by the respondents on the 21st of September, 1954. This amount was refunded by the respondents because they took the view that the petitioner was entitled to a refund of the amount of tax with regard to sales of goods consumed in the State of first destination; but the respondents did not refund the balance of Rs. 1,29,823-5-0 because this amount of tax was with regard to goods consumed not in the State of first destination but in other States. On the 8th of December, 1953, the respondents filed an application for review before the Board of Revenue, but the application was rejected by the Board of Revenue on the 25th of April, 1955, holding that in view of the judgment of the Supreme Court in the United Motors' case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) no further clarification was really required. The petitioner alleged that the amount of tax to the extent of Rs. 1,29,823-5-0 has been illegally realised and that there is a statutory obligation on the part of the respondents to refund this amount of tax to the petitioner. The petitioner has, therefore, prayed that a writ in the nature of mandamus should be issued commanding the respondents to refund to the petitioner the amount of Rs. 1,29,823-5-0 being the amount of tax illegally realised.

(3.) THE argument of the petitioner is that Article 286(2) of the Constitution prohibited taxation of sales or purchases of goods in the course of inter-State trade or commerce. It was submitted that the effect of the decision of the Supreme Court in the United Motors' case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) was that Article 286(1)(a) of the Constitution, read with the Explanation thereto, prohibited taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. It was submitted that in a later decision in the Bengal Immunity case ([1955] 6 S.T.C. 446) the Supreme Court expressed the view that the prohibition on taxation of inter-State sales imposed by Article 286(2) had a greater and more powerful overriding effect. It was affirmed by the majority of the learned Judges of this case that the Explanation to Article 286(1)(a) of the Constitution was meant to explain what an outside sale referred to in sub-clause (1)(a) was and that it did not confer or enlarge the legislative powers of the States. It was further held that the Explanation could not be legitimately extended to clause (2) of Article 286, either as an exception or as a proviso thereto. The decision of the majority of the learned Judges was that no State law can impose or authorise the imposition of any tax on sales or purchases when such sales or purchases take place in the course of inter-State trade or commerce and irrespective of whether such sales or purchases do or do not fall within the Explanation to Article 286(1)(a). It was, however, submitted by the learned Government Advocate on behalf of the respondents that the effect of the Supreme Court's judgment in the Bengal Immunity case ([1955] 6 S.T.C. 446) has been overridden by the President's Sales Tax Continuance Order of 1950, which is in the following terms :-