A sale or purchase which takes place outside the State is exempt from tax by the State in which the goods are at the time of the sale, and in which property passed as a result thereof.

Headnote:
SALES TAX - Bihar Sales Tax Act, 1947 (Bihar Act 19 of 1947), S. 2(g) - Explanation to Art. 286(1)(a) of the Constitution - Scope and effect of - Sales outside the State of Bihar - Whether exempt from tax - Meaning of "outside the State" - Whether a sale completed by the passing of property within the State is not "outside" the State merely because as a direct result of the sale the goods are delivered outside the State - Whether the Explanation to Art. 286(1)(a) is exhaustive of what the Constitution makers conceived to be a sale which alone may be the subject of tax by a State - Whether a sale takes place "outside" the State, where as a result of the contract of sale, the property in the goods passes to the purchaser within the State - Whether a sale not satisfying the terms of the Explanation is "outside" the State for the purpose of Art. 286(1)(a) - Whether the State of Bihar has no power to levy a tax by reason of such sales being "outside" the State within Art. 286(1)(a) - Whether the Explanation to Art. 286(1)(a) is satisfied if the purpose of the delivery under the sale was for consumption in the State of first destination - Whether the assessee is entitled to exemption of the sales-tax imposed without proving that the goods so delivered were actually consumed in the State of first destination.
Fact of the Case:

The assessee-company, which carried on business in copper and various other materials and mineral products, filed an application under Arts. 226 and 227 of the Constitution before the High Court of Patna praying for the issue of a writ to quash the order of assessment dated November 13, 1950 and the orders rejecting the prayers for review, reassessment and refund and for a direction to the departmental authorities to refund the sum realised by them in so far as the tax related to sales as a result of which goods were delivered outside the State of Bihar for consumption outside the State of Bihar.
Finding of the Court:

The learned Judges of the High Court held that the order of the Superintendent of Sales-tax, Singhbhum, dated November 13, 1950, should be set aside and that the matter should go back to the Superintendent to make a reassessment according to law for the post-Constitution period. A further direction was added requiring the respondent to refund to the assessee so much of the tax as had been paid in excess of the amount of reassessment to be made by the Superintendent in accordance with the law as laid down by the Court.
Issues: 1. Whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination, are exempt from the levy of sales-tax by the Bihar State by virtue of Art. 286(1)(a) of the Constitution as it stood before the recent amendment? 2. Whether a sale completed by the passing of property within the State is not "outside" the State merely because as a direct result of the sale the goods are delivered outside the State? 3. Whether the Explanation to Art. 286(1)(a) is exhaustive of what the Constitution makers conceived to be a sale which alone may be the subject of tax by a State? 4. Whether a sale takes place "outside" the State, where as a result of the contract of sale, the property in the goods passes to the purchaser within the State? 5. Whether a sale not satisfying the terms of the Explanation is "outside" the State for the purpose of Art. 286(1)(a)? 6. Whether the State of Bihar has no power to levy a tax by reason of such sales being "outside" the State within Art. 286(1)(a)? 7. Whether the Explanation to Art. 286(1)(a) is satisfied if the purpose of the delivery under the sale was for consumption in the State of first destination? 8. Whether the assessee is entitled to exemption of the sales-tax imposed without proving that the goods so delivered were actually consumed in the State of first destination?
Ratio Decidendi: 1. A sale or purchase which takes place outside the State is exempt from tax by the State in which the goods are at the time of the sale, and in which property passed as a result thereof. 2. The Explanation to Art. 286(1)(a) is not exhaustive of what the Constitution makers conceived to be a sale which alone may be the subject of tax by a State. 3. A sale takes place "outside" the State, where as a result of the contract of sale, the property in the goods passes to the purchaser within the State, if the sale does not satisfy the terms of the Explanation. 4. The State of Bihar has no power to levy a tax by reason of such sales being "outside" the State within Art. 286(1)(a). 5. The Explanation to Art. 286(1)(a) is satisfied if the purpose of the delivery under the sale was for consumption in the State of first destination. 6. The assessee is entitled to exemption of the sales-tax imposed without proving that the goods so delivered were actually consumed in the State of first destination.
Final Decision: The appeal fails, but in the circumstances of the case there will be no order as to costs.

Judgment

AYYANGAR, J. (With him Hidayatullah and Das Gupta JJ.) : The sole question which arises in this appeal, which comes by way of special leave is as to whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination, are exempt from the levy of sales-tax by the Bihar State by virtue of Art. 286(1)(a) of the Constitution as it stood before the recent amendment.

2. The India Copper Corporation Ltd. (referred to hereafter as the assessee-company) carries on business in copper and various other materials and mineral products and the office of its General Manager is in the district of Singhbuhum in Bihar. The period covered by the assessment now in dispute is January 26, 1950 to March 31, 1950. The normal practice of the assessee-company was to deposit sums of money from time to time provisionally towards payment of sales-tax in advance and have the amount finally adjusted after the completion of the assessment of each year. The assessee-company followed this practice in respect of the amount of sales-tax due by it for the year 1949-50. For the financial year April 1, 1949 to March 31, 1950, the Superintendent of Sales-tax, Singhbhum, computed the tax liability of the company in the sum of Rs. 3,60,703-4-0 by an order of assessment dated November 13, 1950 and the company made payment of the amount due by it beyond the sums already paid. It would be noticed that this financial year comprised two periods-(1) before the Constitution, viz., April 1, 1949 to January 25, 1950, and (2) the post-Constitution period from January 26, 1950 to March 31, 1950. There is now no controversy as regards the sales-tax payable in respect of sales affected during the pre-Constitution period. The assessee-company however raised a dispute that in respect of the post-Constitution period, it was not liable to pay any sales-tax in respect of sales to buyers, under which though the property in the goods passed within the State, delivery of the goods was effected outside the State of Bihar for consumption outside that State on the ground that such sales were exempted from tax by Art. 286(1)(a) of the Constitution as it originally stood. It addressed a formal letter to the Commissioner of Commercial Taxes, Bihar, on December 30, 1952, making this demand enclosing a statement showing full particulars of the goods sold, the bill numbers, the date and the amount etc., to enable the refund claimed to be calculated. The assessee-company followed it up by a formal petition for review of the assessment order by filing a revised return under S. 12(2) of the Bihar Sales-tax Act together with an application for refund. The departmental authorities rejected those application by order dated July 20, 1953. Further proceedings before the department by way of revision etc. failed to secure to the assessee-company the relief which it claimed and thereafter it filed an application under Arts. 226 and 227 of the Constitution before the High Court of Patna praying for the issue of a writ to quash the order of assessment dated November 13, 1950 and the orders rejecting the prayers for review, reassessment and refund and for a direction to the departmental authorities to refund the sum realised by them in so far as the tax related to sales as a result of which goods were delivered outside the State of Bihar for consumption outside the State of Bihar.

3. The learned Judges of the High Court held that the order of the Superintendent of Sales-tax, Singhbhum, dated November 13, 1950, should be set aside and that the matter should go back to the Superintendent to make a reassessment according to law for the post-Constitution period. A further direction was added requiring the respondent to refund to the assessee so much of the tax as had been paid in excess of the amount of reassessment to be made by the Superintendent in accordance with the law as laid down by the Court. In form

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1960 Supreme(SC) 271

A sale or purchase which takes place outside the State is exempt from tax by the State in which the goods are at the time of the sale, and in which property passed as a result thereof.

Cases Referred (6)