Judgement

BHAGWATI, J. : The petitioners are a firm carrying on business on a very large scale of making and selling bidis having their head office in Jabalpur in the State of Madhya Pradesh. They are registered as "dealer for the purpose of the Central Provinces and Berar Sales Tax Act, 1947.

2. In the course of their said business, the petitioners import tobacco from the State of Bombay in very large quantities after it is blended in that State by the vendors with various other types of indigenous tobacco by an elaborate process. This finished tobacco, after its import within the State of Madhya Pradesh is rolled into bidis which are exported to various other States, largely to the State of Uttar Pradesh. The dealers in the State of Uttar Pradesh and such other States who buy bidis from the petitioners sell the same to various other dealers and consumers in those States.

3. The Sales Tax authorities in the State of Madhya Pradesh required the petitioners under threat of criminal prosecution to file a statement of return of the total purchases of tobacco made by them out of Madhya Pradesh and delivered to them in Madhya Pradesh with a view to assess and levy purchase tax on the transactions of purchases made by the petitioners as above. The petitioners filed under the protest two returns dated the 11th September 1934 and 3rd December 1954 for the periods 3rd May 1934 to 29th July 1954 and 30th July 1934 to 26th October 1954 respectively but without prejudice to their right to challenge the validity of the assessment and levy of the paid tax on the aforesaid transactions. The sales Tax authorities further called upon the petitioners to deposit the alleged purchase tax which amounts to thousands of rupees in every quarter of the year.

4. The petitioners thereupon filed this petition under Art. 32 of the Constitution for a writ of mandanius or any appropriate direction or order seeking to restrain the State of Madhya Pradesh and the Commissioner of Sales Tax, Madhya Pradesh, from enforcing the said Act and its provisions against the petitioners and for consequential reliefs.

5. The petitioners averred that the imposition of tax on sale or purchase of tobacco rolled into bidis exported out of Madhya Pradesh in the manner described was in contravention of Art. 286(1)(a) of the Constitution, that the tobacco purchased by them for the purpose of making bidis exported outside Madhya Pradesh was never intended for use as raw material for the making of bidis for the purpose of consumption in Madhya Pradesh and S. 4, sub-S. (6) of the Act had no application to the tobacco so used and there was no liability to pay the alleged tax and that to the best of the petitioners information tobacco had not been notified by the State Government in the Gazette for the purpose of S. 12(A) of the Act and that the Sales Tax authorities, under the Act, were, therefore, not entitled to levy any tax on the petitioners.

The petitioners also submitted that the transactions in question had taken place in the course of inter-State commerce, that the State of Madhya Pradesh had no authority to impose or to authorise the imposition of such a tax, and that the action of the State authorities contravened the provisions of Art. 286(2) of the constitution.

6. The Respondents filed a return denying the contentions of the petitioners and submitted that the petitioners by purchasing tobacco which was entered in the registration certificate as raw material for the manufacture of bidis for sale by actual delivery in Madhya Pradesh for consumption in that State made themselves liable to pay the tax by exporting bidis to other States and thus utilising it for a different purpose under S. 4(6) of the Act. They admitted that the petitioners imported tobacco from the State of Bombay in large quantities but stated that the tobacco, after its arrival in the petitioners bidi factories, was cleaned, sieved and blended.

7. A few more facts relevant for the decision of this petition