The first sale from a local dealer to a registered dealer who makes purchases to carry out his obligations to constituents outside the State is not in the course of inter-State trade and commerce and is therefore taxable.

Judgment

HIDAYATULLAH, J.

( 1 ) THE appellant company (Messrs Himatsingka Timber Ltd.) has appealed to this court by special leave against the order of the High court of orissa daded 10/08/1961, dismissing its application under section 24 (2) of the orissa Sales Tax Act, 1947. The appellant is a public company with its registered office in West Bengal and has branches in different states, including one in the State of orissa. The appellant-company had registered itself as a dealer and held a certificate of registration issued by the Sales Tax Officer, Mayurbhanj, Baripada, under the orissa Sales Tax Act, 1947. The main business of the company was to take forests on lease for the extraction of timber and sleepers. The company held a contract for supply of sleepers to the Sleeper Control Officer, Eastern Group, Calcutta. For this purpose it was extracting sleepers from the forests held on lease by it and was exporting them to Calcutta. As the extracted sleepers were not sufficient in number it made purchases locally from local merchants to make up its quota. In the same way the company purchased other timber to fulfil its obligations outside the State. The sleepers and timber so purchased were loaded in wagons in the State of orissa f. o. r. destinatioins outside the State. The company submitted its returns to the sales Tax Authorities for the quarter ended 31/03/1951, and the dispute in this case, briefly stated, centres round the inclusion of the purchased made by the company in its turnover for the said quarter. Before the Salestax Officer a claim was made to exclude these purchases on the ground that they were in the course of inter-State trade and were not taxable by reason of Article 286 of the Constitution. It may be mentioned here that the tax under the orissa Act is a single point tax and the local purchases would have been subject to Sales Tax Act, if the company did not hold a certificate as a registered dealer and purchased free from sales tax on certificate that they were for resale in orissa. The Sales Tax Officer, Mayurbhanj, did not accept the contention of the company under Article 286. He held. that Article 286 of the Constitution was not operative till 31/03/1951, by reason of an order passed by the President of India. The order of the Sales Tax Officer, Mayurbhanj, is dated 14/10/1953, and the view then prevailing The State of Bombay and Another v. The United Motors (India) Ltd. and Others was that sales tax could be levied on inter State trade because of the order of the President. It was only subsequently that this court pointed out that there were two conditions in Article 286 and the Presidents Order removed only one of them and the other still continued to operate (The Bengal Immunity Co. Ltd. v. The State of Bihar and Others ). We need not enter into discussion Of the controversies that took place then because the sale which is sought to be taxed in the present case is the first sale from the local dealer to the company which but for the fact that it was to a registered dealer would have been taxable because that sale ex facie was not in the course of inter-State trade and commerce. It has been held this court in several cases-chief among which is Endupuri Narasimham and Son v. The State of orissa and Others-that a registered dealer who makes purchases to carry out his obligations to constituents outside the State does not make such purchases in the course of inter State trade and commerce because those purchases are at a stage when the course of inter-State trade does not really commence. Such sale, as held in Endupuri Narasimhams case can be taxed and the imposition of tax is not repugnant to Article 286 (2) of the Constitution. The cited case, be it noted, arose under the orissa Sales Tax Act, 1947. It follows that the decision of the Sales Tax Officer to which we just referred is supportable. The company then took an appeal Before the Assistant Collector of Sales Tax, Sambalpur, who dismissed A revisi