Supreme Court Dismisses Dealer's Appeal Against Levy of Purchase Tax on Tobacco Used in Exported Bidis. Section 27A of Central Provinces and Berar Sales Tax Act, 1947, Read with Explanation III to Section 2(g), Positively Authorised Taxation of Inter-State Sales and Was Validated by Sales Tax Laws Validation Act, 1956; Section 4(6) Applied Despite Technical Omission in Registration Certificate.

Challenge by a registered dealer to levy of purchase tax on tobacco imported from non-resident dealers and used as raw material in manufacture of bidis exported outside Madhya Pradesh, under the Central Provinces and Berar Sales Tax Act, 1947, as amended, and the Sales Tax Laws Validation Act, 1956.

Appellant sought a writ of certiorari to quash notices dated December 5, 1958, issued by the Deputy Commissioner of Sales Tax, and a writ of mandamus restraining the respondents from enforcing the provisions of the Act and the Sales Tax Laws Validation Act, 1956, and from imposing any tax on purchases of tobacco and other raw materials from non-resident dealers.

After the Sales Tax Laws Validation Act, 1956 came into force, the Deputy Commissioner of Sales Tax issued notices proposing to levy tax on purchases of tobacco during the period from November 7, 1953 to September 5, 1955 from non-resident dealers under Section 4(6) of the Act, despite the earlier Supreme Court writ restraining enforcement for inter-State transactions.

In Writ Petition No. 67 of 1955 (M/s Mohanlal Hargovind Das v. The State of Madhya Pradesh), decided on September 20, 1955, the Supreme Court restrained the respondents from enforcing the Act and imposing tax in respect of inter-State transactions. The Assistant Commissioner of Sales Tax then exempted the appellant by orders dated September 9, 1956 and September 10, 1956. The High Court of Madhya Pradesh, in Miscellaneous Petition No. 395 of 1958, dismissed the appellant's challenge on February 19, 1962, leading to the present appeal by certificate.

Whether Section 27A of the Central Provinces and Berar Sales Tax Act, 1947, read with Explanation III to Section 2(g), imposed a tax on inter-State sales, thereby constituting a pre-existing law validated by the Sales Tax Laws Validation Act, 1956. Whether Section 4(6) of the Act applied to tobacco imported by the appellant when tobacco was not specifically mentioned in the registration certificate as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for consumption in that State.

Appellant argued that before advantage could be taken of the Sales Tax Laws Validation Act, 1956, there had to be in existence a State Act imposing tax on inter-State sales, and Section 27A of the Act imposed no such tax; therefore the Validation Act could not validate any levy. Appellant argued that Section 4(6) had no application because tobacco was not specified in the certificate of registration granted to the appellant as intended for use by it as raw material in the manufacture of any goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State. Appellant contended that the technical omission of the Sales Tax Officer to make a specific entry in the certificate should confer a benefit on the appellant and exempt it from purchase tax.

Section 27A of the Central Provinces and Berar Sales Tax Act, 1947, read with the third explanation to Section 2(g), had a positive and not merely a negative content; it gave power to the State of Madhya Pradesh to impose a tax on transactions falling within its purview, including inter-State sales. Therefore, it was a pre-existing law validated by the Sales Tax Laws Validation Act, 1956. For Section 4(6), the declaration made by the dealer and the mention of goods in the registration certificate under Section 8, construed in the context of the Act and along with the declaration, satisfied the requirement that the goods were intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for consumption in that State. A technical omission by the Sales Tax Officer to make a specific entry in the certificate did not confer any benefit on the dealer when there was other incontrovertible evidence establishing the specified purpose.

Read with the third explanation to s. 2(g) of the Act s. 27-A had a positive and not merely a negative content. It gave power to the State of Madhya Pradesh to impose a tax on a transaction falling within its purview. The technical omission of the Sales Tax Officer to make a specific entry in the certificate would not confer any benefit on the appellant when there was other incontrovertible evidence to show that the appellant did purchase the goods specified in the certificate as raw materials in the manufacture of any goods for the purpose of sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State.

The appellant firm was registered as a dealer under the Central Provinces and Berar Sales Tax Act, 1947 during April 1, 1951 to September 6, 1955. It imported tobacco from Bombay and used it to manufacture bidis, which were largely exported. Sales Tax authorities required returns showing purchase price of goods used for other purposes. The appellant filed Writ Petition No. 67 of 1955 under Article 32 of the Constitution; the Supreme Court on September 20, 1955 granted a writ restraining enforcement of the Act for inter-State transactions. The Assistant Commissioner of Sales Tax passed orders dated September 9 and 10, 1956 exempting the appellant from tax. The Sales Tax Laws Validation Act, 1956 came into force on March 21, 1956. On December 5, 1958, the Deputy Commissioner of Sales Tax issued two notices proposing to levy tax under Section 4(6). The appellant filed Miscellaneous Petition No. 395 of 1958 in the High Court of Madhya Pradesh; the High Court dismissed it on February 19, 1962. The appellant appealed to the Supreme Court by certificate, which was heard and dismissed on November 15, 1966.

• Central Provinces and Berar Sales Tax Act, 1947 (C.P. & Berar Act 21 of 1947): Section 2(c), Section 2(g), Explanation II to Section 2(g), Explanation III to Section 2(g), Section 4(6), Section 8, Section 27A
• Madhya Pradesh Sales Tax (Amendment) Act, 1953 (M.P. Act 20 of 1953):
• Sales Tax Laws Validation Act, 1956 (Act 7 of 1956):
• Constitution of India: Article 286(1)(a), Article 286(2)