Case Note & Summary
The Supreme Court of India considered an appeal by the Sales Tax Officer, Cuttack and the Collector of Commercial Taxes, Cuttack against a judgment of the Orissa High Court dated 12 April 1955 in a writ petition under Article 226 of the Constitution. The respondent, M/s. B.C. Patel & Co., carried on business in collection and sale of kendu leaves in the erstwhile Feudatory State of Pallahara, which merged into Orissa on 1 January 1948. The Orissa Sales Tax Act, 1947 was extended to the merged territories on 1 March 1949, and on the same day the Government issued a notification under Section 4(1) appointing 31 March 1949 as the date from which dealers whose gross turnover during the year ending 31 March 1949 exceeded Rs. 5,000 would be liable to pay tax on sales effected after that date. The respondent was assessed under the Act for five quarters ending 30 September 1949, 31 December 1949, 30 June 1950, 30 September 1950 and 31 December 1950. The first two quarters were before the commencement of the Constitution and the last three after. The respondent's appeals were dismissed by the Assistant Collector on 12 April 1952. The respondent then filed a writ petition in the Orissa High Court contending that the notification under Section 4(1) was invalid because it ran counter to the sub-section, so no part of the charging section came into force, and that the post-Constitution assessments violated Article 286 of the Constitution. The High Court accepted both contentions and quashed all five assessments. On appeal, the Supreme Court unanimously upheld the High Court's decision regarding the three post-Constitution quarters. The Court held that the goods were admittedly delivered for consumption outside the State of Orissa, and by virtue of the Explanation to Article 286(1)(a) and Section 30(1)(a)(i) of the Orissa Sales Tax Act, 1947, such sales were deemed to be outside the State. Therefore, the assessments for those quarters were without jurisdiction and must be set aside. For the two pre-Constitution quarters, the Court was divided. Das CJ and Venkatarama Aiyar J held that the first part of the notification, appointing the date, was valid and in consonance with Section 4(1), while the second part, which altered the class of dealers, was ultra vires but severable. Therefore Section 4(1) came into force and the respondent was liable under that sub-section. S.K. Das and Vivian Bose JJ held that the notification as a whole was invalid, because the second part was not a mere surplusage, and no valid notification under Section 4(1) existed; however, the respondent was liable under Section 4(2), which applied independently without any notification. Sarkar J held that no liability could arise under Section 4(1) because no valid date was appointed, and Section 4(2) was not intended to operate until a date was appointed under Section 4(1). The majority of four judges held the respondent liable for the pre-Constitution quarters, though on different grounds, and accordingly the appeal was allowed in part: the High Court's order quashing the pre-Constitution assessments was set aside, while its order quashing the post-Constitution assessments was affirmed. The Court relied on State of Bombay v. United Motors (India) Ltd. and Bengal Immunity Company Limited v. State of Bihar.
Headnote
A) Constitutional Law - Taxation of Inter-State Sales - Article 286(1)(a) read with Explanation and Section 30(1)(a)(i) of Orissa Sales Tax Act, 1947 - Sales delivered for consumption outside State deemed outside State - Constitution of India, 1950, Article 286; Orissa Sales Tax Act, 1947, Section 30(1)(a)(i) - Assessments for three post-Constitution quarters (ending 30-06-1950, 30-09-1950 and 31-12-1950) were challenged on ground that goods were delivered for consumption outside Orissa. The Supreme Court held that such sales fell within the Explanation to Article 286(1)(a), which declared them as outside the State, and Section 30(1)(a)(i) of the Act also deemed them outside; therefore the assessments were without jurisdiction and must be set aside. (Paras 1-22) B) Sales Tax - Notification Under Charging Section - Validity and Severability - Orissa Sales Tax Act, 1947, Section 4(1) - The notification dated 01-03-1949 appointed 31-03-1949 as the effective date but altered the class of dealers from "gross turnover during the year immediately preceding the commencement of this Act" to "gross turnover during the year ending 31-03-1949". Das CJ and Venkatarama Aiyar J held that the first part appointing the date was valid and the second part altering the class was ultra vires but severable, so Section 4(1) came into force and the assessee was liable for pre-Constitution quarters under Section 4(1). S.K. Das and Vivian Bose JJ held the notification as a whole invalid, so Section 4(1) did not operate, but the assessee was liable under Section 4(2) as an independent charging provision. Sarkar J held the notification invalid and Section 4(2) not operative until a date was appointed under Section 4(1). (Paras 1-22) C) Sales Tax - Charging Sections 4(1) and 4(2) - Independent Operation - Orissa Sales Tax Act, 1947, Section 4(2) - Assessee not covered by a valid notification under Section 4(1) could still be liable under Section 4(2) from the commencement of the year immediately following the year when gross turnover first exceeded Rs. 5,000. Majority held that for the two pre-Constitution quarters the assessee was liable under either Section 4(1) (if notification partly valid) or Section 4(2) (as it applied without notification), leading to reversal of High Court on pre-Constitution assessments. (Paras 1-22) D) Writ Jurisdiction - Article 226 of Constitution - Quashing of Assessment Orders - Constitution of India, 1950, Article 226 - High Court had quashed five assessment orders. The Supreme Court partially upheld the High Court, affirming quashing of post-Constitution orders but setting aside quashing of pre-Constitution orders. (Paras 1-22)
Issue of Consideration
Whether the notification dated 01-03-1949 under Section 4(1) of Orissa Sales Tax Act, 1947 was valid and whether assessments for the two pre-Constitution quarters were legal; whether assessments for the three post-Constitution quarters violated Article 286 of the Constitution and Section 30(1)(a)(i) of the Orissa Sales Tax Act, 1947.
Final Decision
Appeal allowed in part. The High Court's order quashing the assessments for the two pre-Constitution quarters (ending 30-09-1949 and 31-12-1949) was set aside, and the respondent was held liable for those quarters under either Section 4(1) or Section 4(2) as per the majority view. The High Court's order quashing the assessments for the three post-Constitution quarters (ending 30-06-1950, 30-09-1950 and 31-12-1950) was affirmed, as those assessments contravened Article 286 of the Constitution and Section 30(1)(a)(i) of the Orissa Sales Tax Act and were without jurisdiction.
Law Points
- Legal points not extracted
- A notification under Section 4(1) of Orissa Sales Tax Act
- 1947 must conform strictly to that sub-section
- if part of such notification is ultra vires
- it may be severable if the remaining part can stand independently
- Section 4(2) of the Act operates independently without any notification and applies to dealers not covered by a valid notification under Section 4(1)
- Sales delivered for consumption outside the State are deemed outside the State under Article 286(1)(a) Explanation and Section 30(1)(a)(i) of Orissa Sales Tax Act
- 1947
- Assessments for post-Constitution quarters on such sales are without jurisdiction
