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1952 Supreme(Nagpur) 68
HIGH COURT OF NAGPUR
Hidayatullah, Choudhuri
SHRIRAM GULABDAS – Appellant
Versus
BOARD OF REVENUE, MADHYA PRADESH, NAGPUR AND ANOTHER – Respondent
Miscellaneous Civil Case No. 258 of 1951
Decided on : 25-04-1952
Kumari Rama Gupta, R M Hajarnavis, R S Dabir, T L Sheode, Advocates
The Explanation II to S. 2(g) of the Central Provinces and Berar Sales Tax Act, 1947 (C.P. & Berar Act XVI of 1947) is unconstitutional for want of assent of the Governor-General under S. 100 of the Government of India Act, 1935.
Headnote:
SALES TAX - Central Provinces and Berar Sales Tax Act, 1947 (C.P. & Berar Act XVI of 1947) - Ss. 4, 5, 6, 7, 8, 8A, 9, 10, 11, 12, 15, 21, 22, 23, 24, 25, 26, 27, 28 - Entry 48, List II, Seventh Schedule, Government of India Act, 1935 - Explanation II to S. 2(g) - Validity - Whether the Explanation II to S. 2(g) of the Act is ultra vires the Provincial Legislature - Whether the Explanation II to S. 2(g) of the Act is repugnant to the provisions of Article 286 of the Constitution of India - Whether the Explanation II to S. 2(g) of the Act is unconstitutional for want of assent of the Governor-General under S. 100 of the Government of India Act, 1935 - Held, that the Explanation II to S. 2(g) of the Act is not ultra vires the Provincial Legislature - Held, that the Explanation II to S. 2(g) of the Act is repugnant to the provisions of Article 286 of the Constitution of India - Held, that the Explanation II to S. 2(g) of the Act is unconstitutional for want of assent of the Governor-General under S. 100 of the Government of India Act, 1935.
Fact of the Case:
The applicants are a partnership firm of bidi manufacturers. The firm is situated at Tumsar, tahsil and district Bhandara, and is a registered dealer for purposes of Section 10 of the Sales Tax Act. In the present proceedings before the Sales Tax Officer, Bhandara, for the assessment of the tax for the quarter ending with 12th November 1947 (the year of the applicants being from Divali to Divali) the applicants showed Rs. 1,29,279/12/- as the total turn-over of the firm. The firm claimed exemption for the whole of this sum on the ground (i) that they had goods worth Rs. 1,01,746/2/- to their own shop at Muzaffarpur in Bihar, and (ii) that they sold goods worth Rs. 27,533/10/- to registered dealers in Bihar.
Finding of the Court:
1. The Explanation II to S. 2(g) of the Act is not ultra vires the Provincial Legislature. 2. The Explanation II to S. 2(g) of the Act is repugnant to the provisions of Article 286 of the Constitution of India. 3. The Explanation II to S. 2(g) of the Act is unconstitutional for want of assent of the Governor-General under S. 100 of the Government of India Act, 1935.
Issues: 1. Whether the Explanation II to S. 2(g) of the Act is ultra vires the Provincial Legislature? 2. Whether the Explanation II to S. 2(g) of the Act is repugnant to the provisions of Article 286 of the Constitution of India? 3. Whether the Explanation II to S. 2(g) of the Act is unconstitutional for want of assent of the Governor-General under S. 100 of the Government of India Act, 1935?
Ratio Decidendi: 1. The power to tax extra-territorially is, however, subject to one condition precedent which is nowhere better stated than in 'LOUISVILLE & J. FERRY CO. v. KENTUCKY ,1903 188 US 385 at p. 396: "While the mode, form and extent of taxation are, speaking generally, limited only by the wisdom of the legislature, that power is limited by a principle inhering in the very nature of constitutional government, - namely, that the taxation imposed must have relation to a subject within the jurisdiction of the taxing government." 2. In all cases where a certain element of extra-territoriality creeps in, either inadvertently or advisedly, it is always necessary to find, out whether the jurisdiction does or does not exist. That jurisdiction is found to exist if there is a sufficient territorial connection between the person or the transaction sought to be charged and the country seeking to tax him or the transaction.
Final Decision: The opinion will now be sent to the Board of Revenue for dealing with the case according to law.
1. This miscellaneous civil case arises out of Sales Tax proceedings. The applicants are a partnership firm of bidi manufacturers. The firm is situated at Tumsar, tahsil and district Bhandara, and is a registered dealer for purposes of Section 10 of the Sales Tax Act. In the present proceedings before the Sales Tax Officer, Bhandara, for the assessment of the tax for the quarter ending with 12th November 1947 (the year of the applicants being from Divali to Divali) the applicants showed Rs. 1,29,279/12/- as the total turn-over of the firm. The firm claimed exemption for the whole of this sum on the ground (i) that they had goods worth Rs. 1,01,746/2/- to their own shop at Muzaffarpur in Bihar, and (ii) that they sold goods worth Rs. 27,533/10/- to registered dealers in Bihar.
2. This contention of the firm was not accepted and they were charged sales tax on the entire turn-over stated over. The applicants thereupon appealed to the Commissioner of Sales Tax, Madhya Pradesh, with no result. They also applied for revision of the order to the Board of Revenue, but without success.
3. The applicants then applied under Section 23 of the Central Provinces and Berar Sales Tax Act, 1947, requesting the Board to refer certain questions of law for decision by this Court. That application was rejected. The applicants moved this Court and the Honourable the Chief Justice directed the Board of Revenue to state the case and to refer the following questions for decision by this Court. The questions are as follows:
" (i) Whether the sending of goods to Muzaffarpur shop belonging to the assessee constitutes a sale within the meaning of the Sales Tax Act?
(ii) Whether the sending of goods to persons outside the limits of this State constitutes a sale within the meaning of the Act?
(iii) Whether the sending of goods to customers outside this State, to whom railway receipts were sent through a bank, constitutes a sale within the meaning of the Act?
(iv) Whether the sending of goods to salesmen out of the province amounts to a sale within the meaning of the Act? and
(v) Whether Explanation 11 to Clause (g) of Section 2, which makes an agreement of sale taxable even though the sale may have taken place outside the province, is ultra vires of the Provincial Legislature?
4. Before dealing with the questions involved in this reference, it is necessary to see how the Act is constructed. The Preamble to the Act states that it is an Act to levy a tax on the sale of goods in the Central Provinces and Berar. The Act begins by defining certain terms for the purposes of the Act. Of these we are concerned with the definitions of "dealer", "goods", "sale", "taxable quantum" and "turn over" in the present reference. It is not necessary to quote all the definition clauses relating to the above terms. "Dealer" has been defined to include both a principal and an agent in reference to the business of selling or supplying goods, whether on remuneration, commission or otherwise. "Goods" have been defined to include all kinds of moveable property other than actionable claims, stocks, shares or securities.
5. The definition of "Sale" will have to be considered in its various parts and it can be conveniently quoted here:
" "Sale" with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods made in course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge";
* * * *
"Explanation (II): Notwithstanding anything to the contrary in the Indian Sale of Goods Act 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar."
Explanation II was amende
