TOBACCO MANUFACTURERS INDIA LTD Vs. COMMISSIONER OF SALES TAX

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 pf 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: (1) 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 (2) 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 the 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/-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.) In Miscellaneous Judicial Case No. 331 of 1955 the material facts are of similar character. The claim of the petitioner in this case is for a refund of a sum of Rs. 20,923/13/2 which was illegally realised as sales tax. The grounds on which this claim is based are exactly identical to those in Miscellaneous Judicial Case No. 330 of 1955.

(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 1953 SCR 1069: (AIR 1953 SC 252} (A) 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 Co. Ltd. v. State of Bihar 1955-6 S.T.C. 446 : '(AIR 19S5 SC 661) (B) the Supreme Court express ed 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 learn ed 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 there to. 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 of purchases do or do not fall within the explanation to Article 285 (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 1955-6 S.T.C. 446: (AIR 1955 SC 661) (B) has been overriden by the President's Sales Tax Continuance Order of 1950, which is in the following terms: