D.P. Mohapatra, J.
1. This application filed under Article 226 of the Constitution of India calls in question the validity and constitutionality of Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947, as amended by Section 2(c) of the Orissa Sales Tax (Amendment) Act, 1978, of Rule 27(2) of the Orissa Sales Tax Rules, 1947 and form XXXIV appended to the said rule. The petitioners have also prayed to quash the order passed by the Sales Tax Officer, Cuttack III Circle, as per annexure 1.
2. The facts relevant for proper appreciation of the case of the parties may be stated thus :
The petitioner No.1, Industrial Minerals and Metals, is a registered dealer under the Orissa Sales Tax Act, 1947 (hereinafter referred to as 'the OST Act') and also a registered dealer under the Central Sales Tax Act, 1956 (hereinafter referred to as 'the CST Act'). The firm carries on business in ferro-chrome, ferro-silicon, ferro-manganese, etc. For its business the firm purchases and sells goods inside the State of Orissa as well as outside the State. During the assessment year 1982-83 to which the impugned order (annexure 1) relates, the petitioner No.1 had purchased goods from registered dealers without payment of tax on furnishing declaration in form XXXIV appended to the Orissa Sales Tax Rules (hereinafter referred to as 'the Rules').The declaration was to the effect, inter alia, that the firm purchased the goods for the purpose of resale in Orissa in a manner that such resale shall be subject to levy of tax under the Act and the goods were covered by its registration certificate. The selling dealer had also submitted returns in the prescribed form and had claimed deduction of the amount from his gross turnover. Subsequently, it came to light that certain goods purchased on submission of the aforementioned declaration had been sold by the petitioner-firm outside the State of Orissa in the course of inter-State sale and, therefore, was exigible to tax under the OST Act. The assessing authority taking note of the violation of the declarations submitted by the petitioner-firm included the price of the goods in the taxable turnover of the petitioner-firm relying on the provisions in Section 5(2)(A)(a)(ii), second proviso.
3. In the writ application the petitioners have challenged Section 5(2)(A)(a)(ii) on the grounds, inter alia :
(i) that it is beyond the legislative competence of the State Legislature to enact the provision since the tax relates to inter-State sale/ export sale in respect of which the Parliament has the exclusive competence to legislate. In this connection reliance is placed on Article 286 of the Constitution and entry 54 of List II of the Seventh Schedule of the Constitution ;
(ii) that the provision is repugnant to Sections 3, 4 and 5 of the CST Act and hence it is hit by Articles 254 and 269 of the Constitution ;
(iii) that the levy of tax is discriminatory and, therefore, hit by Article 14 of the Constitution ; and
(iv) that it affects the petitioners' right of freedom of trade and commerce embodied in Article 19(1)(g).
In addition to the aforementioned points Shri B. Agarwal appearing for the petitioners also contended that in selling the goods in the course of inter-State sale the petitioners have not contravened any term in the declaration inasmuch as the sale has taken place inside the State of Orissa and would have been exigible to tax under the OST Act, but for the supervening circumstance of the constitutional bar due to the CST Act.
4. At the outset it will be convenient to notice some of the relevant provisions of the OST Act, CST Act and the OST Rules :
Section 3-B of the OST Act provides that the State Government may, from time to time by notification, declare any goods or class of goods to be liable to tax on turnover of purchases ; provided that no tax shall be payable on the sales of such goods or class of goods declared under this section.
Section 4 which deals with incidence of taxation provides, inter alia, that subject to the provisions of Sections 3-B, 5, 6, 7 and 8 with effect from such date as the State Government may, by notification, in the Gazette, appoint every dealer whose gross turnover during the year immediately preceding the date of commencement of the Orissa Sales Tax (Amendment) Act, 1981 exceeded Rs. 50,000 shall be liable to pay tax under the Act on sales and purchases effected after the date so notified. Sub-section (6) of Section 4 lays down that a dealer, who is not liable to pay tax under the foregoing sub-sections shall nevertheless be liable to pay tax on sales or purchases, if such dealer is liable to pay tax under the Central Sales Tax Act, 1956, or registered as a dealer under the said Act.
Section 4-A which provides the incidence of taxation on a casual dealer lays down that subject to the provisions of Sections 3-B, 5, 6, 7 and 8 a casual dealer shall, irrespective of the amount of his gross turnover, be liable to pay tax under the Act on the sales and purchases made by him.
Section 5 makes provision regarding rate of tax. Under Sub-section (1) it is laid down that the tax payable by a dealer under the Act shall be levied on his taxable turnover at such rate, not exceeding sixteen per cent and subject to such conditions as the State Government may from time to time, by notification specify. Sub-section (2) defines the expression 'taxable turnover' and how the said turnover is to be determined.
Section 9-B makes provision for collection of tax by dealers. Subsection (1)(a) of the said section provides that no person who is not a registered dealer shall collect in respect of any sale by him any amount by way of tax under the provisions of the Act and no registered dealer shall make any such collection except in accordance with the Act, and the Rules made thereunder. In Sub-section (2) of the section it is laid down that notwithstanding anything contained in Section 15 any registered dealer who realises or stipulates to realise any amount by way of tax on the sale of any goods from the purchaser shall issue a cash or credit memo, as the case may be, signed by the dealer or his servant, manager or agent, to the purchaser showing separately the price of the goods sold and the amount realised or stipulated for realisation by way of tax and shall keep a counterfoil duly signed and shall further maintain a true and correct account of all moneys realised or stipulated for realisation by him by way of tax in the prescribed manner.
Rule 27 of the Orissa Sales Tax Rules makes provision regarding evidence in support of deduction claimed. Under Sub-rule (2) it is provided, inter alia, that a dealer who wishes to deduct from his gross turnover the amount of a sale on the ground that he is entitled to make such deductions under item (ii) of Sub-clause (a) of Clause (A) of Sub-section (2) of Section 5 of the Act shall furnish a declaration in form XXXIV to the Sales Tax Officer before the completion of the assessment of the period to which the claim relates and a registered dealer who wishes to purchase goods from another dealer without payment of tax at the rate applicable under the Act for the purpose specified in his certificate of registration, shall obtain on application affixed with a fee of five rupees for every twenty-five blank declaration forms prescribed under this sub-rule for issuing them to the selling dealer.
Coming to the CST Act, Section 3 lays down the circumstances when a sale or purchase of goods is said to take place in the course of inter-State trade or commerce.
Section 5 lays down when a sale or purchase of goods is said to take place in the course of import or export.
Section 6 which makes provision regarding the liability to pay tax on inter-State sales provides in Sub-section (1-A) that a dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State.
Section 14 of the CST Act enumerates the goods to be of special importance in inter-State trade or commerce.
Section 15 lays down restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. It is laid down therein that every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the restrictions and conditions, inter alia, that where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce and tax has been paid under the Act (CST Act) in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law (State law) shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be prescribed in any law in force in that State.
From the statutory provisions noticed above, it is clear that under the scheme of the OST Act the tax is a single point levy on sale/purchase of goods. Though the selling dealer is held liable for payment of the tax he is vested with the authority to collect the tax from the purchasing dealer/ consumer in accordance with the OST Act and the Rules. In the case of sale by a registered dealer to another registered dealer of goods mentioned in the registration certificate of the latter, the realisation of tax is postponed till the purchasing dealer sells the goods to an unregistered dealer or a consumer.
Since the challenge raised by the petitioners is particularly pointed against the retrospective amendment to the provision in 1978 to Section 5(2)(A)(a)(ii) it will be convenient to quote the relevant portion of the statutory provision as it stood prior to the amendment and as it stands after the amendment.
Prior to amendment :
'In this Act, the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom :
(a) his turnover during that period on--
(i) ...........
(ii) sales to a registered dealer of goods specified in the purchasing dealer's certificate of registration as being intended for resale by him in Orissa and on sales to a registered dealer of containers and other materials for the packing of such goods :
Provided that when such goods are used by the registered dealer for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover.'
After amendment :
'In this Act, the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom : --
(a) his turnover during that period on--
(i) .............
(ii) sales to a registered dealer of goods specified in the purchasing dealer's certificate of registration for resale by him in Orissa in a manner that such resale shall be subject to levy of tax under this Act ; and on sale to a registered dealer of containers or other materials for the packing of such goods:
Provided that for the purpose of ascertaining the deductions under this item the dealer selling the goods shall furnish to the prescribed authority in the prescribed manner, a declaration in the prescribed form obtained from the prescribed authority, within the prescribed time or within such further time as that authority may after sufficient cause permit :
Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer free of tax after furnishing a declaration under the preceding proviso but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of purchasing dealer.
Explanation.--In case of series of sales when the State Government, by notification, declares sales of any specified goods to be taxed at the point at which the first of such sales is effected by a dealer liable to pay tax under this Act, the price of the goods so declared shall be included in his taxable turnover, notwithstanding that the goods so specified are sold to a registered dealer in whose certificate of registration the goods so specified are included.'
The petitioners are particularly aggrieved by the introduction of the words 'in a manner that such resale shall be subject to levy of tax under this Act' in Clause (ii). From the provisions of Section 5(2)(A)(a)(ii) quoted above it is clear that it is in the nature of an exception to the general scheme under the OST Act since in the case of violation of the declaration it saddles the purchasing dealer with the liability for the tax instead of the selling dealer. The provision is also remedial in character.
5. The provision in Section 5(2)(A)(a)(ii), as it stood prior to the amendment, was considered by this Court in the cases of State of Orissa v. Joharimal Gajananda reported in [1976] 37 STC 157 and M.M.T.C. of India Ltd. v. State of Orissa reported in [1976] 38 STC 189 [FB] and it was held that a purchasing dealer who purchased the goods without paying sales tax on submission of the declaration in form XXXIV did not violate the declaration in selling the goods in course of inter-State sale since an inter-State sale also took place in the State of Orissa. The amendment was brought in to nullify the effect of the decisions of this Court in the aforementioned cases.
The constitutional validity of the provision in Section 5(2)(A)(a)(ii) as amended came to be considered by this Court in the case of Minerals and Metals Trading Corporation of India Limited v. State of Orissa reported in [1987] 65 STC 129 wherein the contentions raised in the present case were raised on behalf of the petitioners. This Court upheld the constitutional validity of the provision. Relief was, however, granted to the petitioners in some of the cases on other grounds with which we are not concerned in the present case. In that view of the matter, instead of burdening this judgment by repeating the discussions in the earlier judgment, in my view it will be a proper approach to the case to consider whether the view taken in Minerals and Metals Trading Corporation of India Ltd. [1987] 65 STC 129 (Orissa), warrants reconsideration. According to Shri Agarwal, the matter calls for a fresh look in view of the recent decision of the Supreme Court in the case of Goodyear India Ltd. v. State of Haryana reported in [1990] 76 STC 71.
6. At this stage it will be necessary and useful to notice some of the discussions in the case of Minerals and Metals Trading Corporation of India Ltd. [1987] 65 STC 129 (Orissa). The relevant portions of the judgment are extracted hereunder :
'Under the scheme of the Act, the taxable event is postponed until the registered dealer sells the goods to an unregistered dealer or a consumer, or in breach of the undertaking given. Law is well-settled that the competent Legislature can enact law after removing the infirmities or deficiencies as pointed out by the court. All that is to be seen in such cases is that the amended law is within the competence of the Legislature. Powers of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution are plenary. The impugned amended Act is an attempt by the State Legislature to ensure the single point levy by nullifying the effect of the two decisions of this Court. The question is whether such action is within the competence of the State Legislature and is in conformity with Article 286 of the Constitution of India.
It is the contention of the petitioners that the goods were meant for resale in Orissa and in fact were resold inside Orissa. The State Legislature has power to impose tax on the sale or purchase of goods other than newspapers. This is subject to the provisions of entry No. 92A of List I. The petitioners would have paid the tax while purchasing the goods from a registered dealer. But while purchasing the goods, they have avoided the tax by giving a declaration that the goods purchased were meant for the purpose of resale in Orissa and such resale should be subject to levy of tax under the OST Act. But subsequently, in violation of the declaration, they have sold the same in course of inter-State trade or commerce or export and avoided payment of tax. Normally the tax should have been paid at the first point and the petitioners could not have avoided payment of such tax and would have paid the tax but for the declaration given by them. They have sold the goods in violation of the declaration given by them. As already held, in case of declared goods, they are entitled to reimbursement by virtue of Section 15 of the CST Act and Section 14-B of the OST Act and Rule 42-A of the OST Rules. From Section 15 of the CST Act, it is abundantly clear that it places restrictions and conditions upon the local law. Its intention is that declared goods should suffer tax at only one point and at a prescribed rate. Section 15 does not bar levy of sales tax by a State on declared goods, but it provides for refund of such tax to the person making such sale in the course of inter-State trade or commerce. Therefore, Section 15 clearly shows that there is no bar for levy of charge on declared goods, but that is to be refunded. In Section 15 no provision has been made for refund of tax on goods other than declared goods. From this, it can be gathered that the State has also the power to impose tax on the declared goods. But by virtue of Section 15, it is to be reimbursed. If the intentions were not to tax goods other than declared goods, such provisions should have been clearly made. Viewed from this angle, it cannot be said that the assessment and the demand of tax made by the authorities are bad and should be struck down. The State by the amended provision has only wanted to impose tax on intra-State sale and it is within the competence and powers of the State Legislature under entry 54 of List II of the Seventh Schedule of the Constitution of India............
The other argument advanced that the amendment is violative of Article 401 of the Constitution of India does not cut much ice. According to Article 401, subject to the other provisions of this part (Part XIII), trade, commerce and intercourse throughout the territory of India shall be free. 'Freedom' in this article does not mean absolute freedom. There is a violation of the freedom guaranteed by Article 401 only where a legislative or executive act operates to restrict trade, commerce or intercourse, directly and immediately, as distinct from creating some indirect or inconsequential impediment which may be regarded as remote. Once it is held that a restriction is not regulatory but directly and immediately interferes with the flow of inter-State trade or commerce, it will offend against the freedom guaranteed by Article 401, whether such restriction is imposed at the frontier of a State or at any stage prior or subsequent. Considering the facts and circumstances, we are of the view that in the present cases the provisions of Article 401 have not been violated.'
7. Coming to the case of Goodyear India Ltd. [1990] 76 STC 71 (SC), Section 9 of the Haryana General Sales Tax Act, 1973, validity and constitutionality of which came up for consideration, reads as follows :
'9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and--
(a) uses them in the State in the manufacture of,--
(i) goods specified in Schedule B or
(ii) any other goods
and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956, in the course of export out of the territory of India,
(b) exports them,
in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of Section 17, a tax on the purchase of such goods at such rate as may be notified under Section 15.'
In exercise of the powers conferred by Section 9 and Sub-section (1) of Section 15 of the Haryana General Sales Tax Act, 1973, the Governor of Haryana, issued the notification directing that the rate of tax payable by all dealers in respect of the purchases of goods other than goods specified in Schedules C and D or goods liable to tax at the first stage notified as such under Section 18 of the said Act, if used by them for purposes other than those for which such goods were sold to them, shall be the rate of tax leviable on the sale of such goods :
Provided that where any such dealer, instead of using such goods for the purpose for which they were sold to him, despatches such goods or goods manufactured therefrom at any time for consumption or sale outside the State of Haryana to his branch or commission agent or any other person on his behalf in any other State and such branch, commission agent or other person is a registered dealer in that State and produces a certificate from the assessing authority of that State or produces his own affidavit and the affidavit of the consignee of such goods in the form appended to the notification to the effect that the goods in question have been so despatched and received and entered in the account books of the consignee, the rate of tax on such goods shall be three paise in a rupee on the purchase value of the goods so despatched.
The Punjab and Haryana High Court (Goodyear India Ltd. v. State of Haryana [1983] 53 STC 163) held that the term 'disposes of cannot be synonymous with 'despatch', and once that is held then the notification mentioned above travelled far beyond what is provided in Section 9 of the Act, since the said provision provided only for levy of purchase tax on disposal of manufactured goods. Accordingly the High Court quashed the notification and set aside the assessment orders. Thereafter the Haryana Legislature enacted the Haryana General Sales Tax (Amendment and Validation) Act, 1983, by which Section 9 of the principal Act was amended as follows :
'Amendment of Section 9 of the Haryana General Sales Tax Act, 1973.--In Section 9 of the principal Act,--
(a) in Sub-section (1)--
(i) for Clause (b), the following clause shall be substituted and shall be deemed to have been substituted for the period commencing from the 27th day of May, 1971, and ending with the 8th day of April, 1979, namely : --
'(b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the Stale or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956 ; or' ;
(ii) after Clause (b), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 1979, namely : --
'(bb) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of Subsection (1) of Section 5 of the Central Sales Tax Act, 1956 ; or' ;
(iii) the following proviso shall be added, namely :--
'Provided that no tax shall be leviable under this section on scientific goods and guar gum, manufactured in the State and sold by him in the course of export outside the territory of India within the meaning of Sub-section (3) of Section 5 of the Central Sales Tax Act, 1956' ; and
(b) in Sub-section (3), the words 'other than railway premises' shall be omitted.'
The amended provisions were also challenged by filing writ petitions before the High Court. (Bata India Ltd. v. State of Haryana [1983] 54 STC 226). The Court held :
' 'Mere despatch of goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce' is synonymous with or is in any case included within the ambit of the 'consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce' as specified in Article 269(1)(h) and entry No. 92-B of List I of the Seventh Schedule to the Constitution. Hence, the levy of sales or purchase tax on such a despatch or consignment of goods and matters ancillary or subsidiary thereto, will be within the exclusive legislative competence of Parliament to the total exclusion of the State Legislatures. Therefore, Section 9(1)(b) of the Haryana General Sales Tax Act, 1973, as amended by the Haryana General Sales Tax (Amendment and Validation) Act, 1983, in so far as it levies a purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce is beyond the legislative competence of the State of Haryana and is void and inoperative.'
The High Court further held that mere manufacture and consignment of goods outside the State to himself by a manufacturer is not sale or disposal thereof with the result that it will not be within the ambit of entry No. 54 of List II of the Seventh Schedule to the Constitution. The High Court also held that in its true nature, a mere despatch of goods outside the State to another branch of the original institution is not and never can be equivalent of a sale either as a term of art in the existing sales tax legislation and not remotely so in common parlance, and construing Section 9(1)(b) of the Act, the High Court was of the view that the real taxing event is the despatch of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce. The High Court therefore set aside the amended provision so far. as it sought to levy purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce and also set aside the retrospective validation of the notification and the consequential validation of all actions taken thereunder. On some writ petitions filed subsequently, a Full Bench of the High Court held that the taxing event is the act of purchase and not the act of despatch or consignment and therefore Section 9(1)(b) as amended, was neither invalid nor ultra vires and overruled the earlier decision of the Division Bench. (Des Raj Pushap Kumar Gulati v. State of Punjab [1985] 58 STC 393).
8. The Supreme Court considering the entire matter observed thus :
'On a clear analysis of the said section, it appears that Section 9(1)(b) has to be judged as and when liability accrues under that section. The liability to pay tax under this section does not accrue on purchasing the goods simpliciter, but only when these are despatched or consigned out of the State of Haryana. In all these cases, it is necessary to find out the true nature of the tax. Analysing the section, if one looks to the purchase tax under Section 9, one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods arc used up and turned into independent taxable goods, losing their original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created. It is the cumulative effect of that event which occasions or causes the tax to be imposed, to draw a familiar analogy, it is the last straw on the camel's back.'
The court observed :
'It is, therefore, necessary in all cases to find out what is the essence of the duty which is attracted. A taxable event is that which is closely related to imposition. In the instant section, there is such close relationship only with despatch. Therefore, the goods purchased are used in manufacture of new independent commodity and thereafter the said manufactured goods are despatched outside the State of Haryana. In this series of transactions the original transaction is completely eclipsed or ceases to exist when the levy is imposed at the third stage of despatch after manufacture. In the instant case the levy has no direct connection with the transaction of purchase of raw materials, it has only a remote connection of lineage. It may be indirectly and very remotely connected with the transaction of the purchase of raw material wherein the present levy would lose its character of purchase tax on the said transaction.'
Applying the principle of pith and substance, the court held that under the provision in question what is sought to be imposed is a consignment tax, a tax on despatch in the course of inter-State trade or commerce. Since the tax on despatch of goods outside the territory of the State certainly is in the course of inter-State trade or commerce and amounts to imposition of consignment tax, the latter part of Section 9(1)(b) is ultra vires and void. The Supreme Court accordingly upheld the decision of the Punjab and Haryana High Court in the case of Goodyear India Ltd. [1983] 53 STC 163. The Court, however, upheld (sic) the constitutional validity of Section 9(1) and Sub-section (3) of Section 24 of the Act.
In the said case the Supreme Court also considered the constitutionality of Section 13AA of the Bombay Sales Tax Act which reads as follows :
'13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are transferred to outside branches.--Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods, so manufactured, to his own place of business or to his agent's place of business situated outside the State within India, then such dealer shall be liable to pay, in addition to the sales tax paid or payable, or as the case may be, the purchase tax levied or leviable under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture, and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under Section 32, which he is to furnish next thereafter.'
Construing the provisions the Supreme Court held that the incidence of tax is attracted not merely on the purchase but only when the goods so purchased are used in the manufacture of taxable goods and are despatched outside the State. Analysing the section in the light of the principle of pith and substance, the court found that the goods which are despatched are different products from the goods on the purchase of which purchase tax was paid. In that background the court did not accept the argument that the chargeable/taxable event was lying dormant and is activated only on the occurrence of the event of despatch. The court did not accept the challenge to the statutory provisions on the ground of violation of Articles 14 and 301 of the Constitution.
9. The question therefore is whether the decision of the Supreme Court casts a cloud on the correctness of the decision of this Court in the case of Minerals and Metals Trading Corporation of India Ltd. [1987] 65 STC 129. On careful consideration, I am of the view that the decision of the Supreme Court is clearly distinguishable and does not affect the decision of this Court in Minerals and Metals Trading Corporation of India Ltd.'s case [1987] 65 STC 129. Section 5(2)(A)(a)(ii), as fairly stated by the learned Standing Counsel (C.T.) appearing for the opposite parties, is in the nature of a charging section. It has, therefore, to be tested as such. On perusal of the section, it is manifest that unlike the Haryana and Maharashtra Acts, it does not contemplate any change in the condition of the goods purchased and those resold. All that the section lays down is that if the goods were purchased without payment of tax on submission of the declaration that it will be resold in Orissa in a manner so as to be exigible to tax under the OST Act and subsequently the declaration is violated, then the price at which the goods were purchased will not be added to the gross turnover of the selling dealer but it will be added to the taxable turnover of the purchasing dealer who had furnished the declaration. The reason apparently is that the purchasing dealer who had furnished the declaration which the selling dealer accepted in good faith was responsible for the contravention. The section neither contemplates any change in the condition of the goods nor speaks of despatch/movement of the goods outside the State. Considering these circumstances, this Court in Minerals and Metals Trading Corporation of India Ltd.'s case [1987] 65 STC 129, had held that incidence of tax remains on the sale/purchase and levy of tax is merely postponed to the occurrence mentioned in the section and the Legislature has maintained the character of single point tax by not adding the cost price to the turnover of the selling dealer but to that of the purchasing dealer. No decision was brought to our notice in which in a case similar to the present case the decision in Goodyear India Ltd.'s case [1990] 76 STC 71 (SC) has been applied.
10. Since fairly lengthy arguments were advanced by Shri Agarwal regarding challenge to the provision in Section 5(2)(A)(a)(ii), proviso on the ground that it offends Articles 14, 19(1)(g) and 286 of the Constitution of India, I would like to deal with these contentions also.
Article 14 prohibits the State to deny to any person equality before the law or equal protection of the laws within the territory of India. The question, therefore, is if the statutory provision under challenge discriminates against the petitioners. Allegation of discrimination in the very nature of things is not a pure question of law ; it requires certain basic facts to be established before the conclusion can be arrived at that the petitioners are being subjected to hostile discrimination. There is no dispute regarding the proposition that if the statute itself or the rule made under it applies unequally to persons or things similarly situated it would be an instance of direct violation of constitutional guarantee under Article 14 or though a law ex facie appears to treat all that fall within a class alike, if in effect it operates unevenly on persons or property similarly situated, it may be said that the law offends the equality clause. In the present case the provision in Section 5(2)(A)(a)(ii) read as a whole does not give any impression that it applies unequally to persons similarly situated. Regarding the other question whether despite its innocuous look in effect it operates unevenly on persons similarly situated the necessary factual basis has to be established. The petitioners have not laid the basis/foundation on which the superstructure can be built. However, Shri Agarwal, learned counsel for the petitioners, submitted that the provision works out discrimination inasmuch as a registered dealer who has purchased goods from another registered dealer without submission of the declaration and sells the goods in the State in course of inter-State trade pays tax only under CST Act whereas a registered dealer like the petitioners who has purchased goods from another registered dealer on submission of the declaration and sells the goods inside the State in course of inter-State trade is made to pay tax both under OST Act as well as under CST Act. This argument, in my view, suffers from the basic fallacy that the registered dealers in the two aforementioned cases cannot be equated with each other since the dealer who purchased the goods without submission of declaration paid the tax under OST Act at the time of purchase whereas the dealer (like the petitioners) who purchased the goods on submission of return wherein he gave out that the goods will be sold inside the State of Orissa in a manner that such resale shall be subject to levy of tax under the OST Act did not pay the tax at that point of time. So, both categories of dealers ultimately pay tax both under the OST Act and the CST Act. There is, therefore, no merit in the grievance made by Shri Agarwal.
11. Coming to the contention that Section 5(2)(A)(a)(ii) violates the freedom to carry on trade or business guaranteed under Article 19(1)(g), in my view, it is also devoid of merit The freedom to carry on trade or business guaranteed under Article 19(1)(g) is not an absolute one. It is subject to reasonable restrictions which might be imposed by any existing law or which may be imposed by law made by the State. There is no dispute that if levy of a tax cannot be justified on the basis of any valid law no question of its reasonableness can arise since an illegal impost must be taken to be an unreasonable restriction. The question is whether Section 5(2)(A)(a)(ii) provides for levy of tax which cannot be justified in law. As I have already held the provision does not suffer from any illegality or invalidity on other grounds raised in the writ petition. All that the section provides is that the taxable event which remains on the first point sale/purchase is postponed till the purchasing registered dealer who purchased the goods without payment of tax on submission of declaration in form XXXIV sells the said goods to an unregistered dealer in contravention of the declaration. The provision does not intend to tax a sale which takes place inside the State in the course of inter-State trade or export. Further, Section 5(2)(A)(a)(ii) does not put any restriction on a person to carry on any trade or business in goods. The provision also does not make it compulsory for any dealer to submit the declaration in form XXXIV. In this view of the matter, there is no scope to accept the contention that the provision offends Article 19(1)(g) in any manner.
12. Next I shall consider Article 286 of the Constitution which, as the petitioners contend, is also violated. The power to impose 'taxes on sale or purchase of goods other than newspapers' belongs to the State (entry 54, List II). But 'taxes on imports and exports' (entry 83, List I) and 'inter-State trade and commerce' (entry 42, List I) and 'taxes on sale or purchase in the course of inter-State trade or commerce' (entry 92A, List I) are exclusive Union subjects. Article 286 is intended to ensure that sales tax imposed by the States do not interfere with imports and exports and transactions relating to matters of national concern. Hence, the present article lays down certain limitations upon the power of the States to enact sales tax legislation. These are :
I. (a) No tax shall be imposed on a sale or purchase which takes place outside the State.
(b) No tax shall be imposed on a sale or purchase which takes place in the course of import into or export out of India.
II. In connection with inter-State trade and commerce, there are two limitations--
(a) The power to tax sales taking place 'in the course of inter-State trade and commerce' is within the exclusive competence of Parliament [Article 269(1)(g) and entry 92A of List I].
(b) Even though a sale does not take place 'in the course of inter-State trade or commerce' State taxation would be subject to restrictions and conditions imposed by Parliament if the sale relates to 'goods declared by Parliament to be of special importance in inter-State trade and commerce' or the transaction comes under Article 466(29A)(b)(c) and (d).
As laid down by the Supreme Court in the Bengal Immunity's case [1955] 6 STC 446 ; [1953] 2 SCR 1069 and other cases the limitations imposed by the different clauses of Article 286 are cumulative and independent of each other. A tax will not be valid under Article 286 so long as the ban imposed by any one of the abovementioned clauses fastens upon the transaction.
On the other hand, once the foregoing limitations imposed by Article 286 are not transgressed and the subject-matter of taxation is intra-State sale, it would be within the competence of a State--
(a) to impose/levy tax.
As noticed earlier, Section 5(2)(A)(a)(ii) proviso does not purport to tax the inter-State sale or export sale ; the incidence of tax is the first sale/purchase which is admittedly an intra-State sale and the levy of tax is merely postponed till the purchasing dealer sells goods to an unregistered dealer/consumer in contravention of the declaration furnished by him in form XXXIV. Therefore, the section does not confront Article 286 in any manner and, therefore, is not available to be knocked down on that count.
13. The point that remains to be considered relates to Section 15 of the CST Act. Section 15 lays down certain conditions and restrictions regarding tax on sale or purchase of 'declared goods' as enumerated in Section 14 of the CST Act to be of special importance in inter-State trade and commerce. Under the section it is provided that every sales tax law of a State shall, in so far as it imposes or authorises imposition of a tax on the sale or purchase of declared goods, be subject to the restrictions and conditions enumerated in Clauses (a) to (d). Under Clause (a) it is laid down that the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall riot be levied at more than one stage. Clause (b) lays down that where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under the CST Act, in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be prescribed in any law in force in that State. Clauses (c) and (d) are not relevant for the present purpose.
From the provisions as noticed earlier, it is clear that if a registered dealer has purchased declared goods on payment of tax under the OST Act and the said goods are sold inside the State in the course of inter-State sale he will be entitled to be reimbursed the tax paid by him under the OST Act. This is a special provision made in the statute in respect of goods which are considered by the Legislature to be of special importance in inter-State trade or commerce. If the transaction by the petitioners satisfies the conditions laid down in Section 15, they would be entitled to the benefit of the provision in the manner laid down therein. This does not, however, indicate that Section 5(2)(A)(a)(ii), proviso, is hit by any of the provision contained in Section 15 of the CST Act.
14. On the analysis in the foregoing paragraphs, I am of the view that the challenge to the constitutional validity and legality of the provisions in Section 5(2)(A)(a)(ii), proviso, and the provisions in Rule 27 and form XXXIV which are incidental to and flow from the said statutory provision cannot be accepted. It follows that the challenge to the assessment order (annexure 1) on that ground must fail.
15. In the result, the writ application fails and is dismissed. There will, however, be no order for costs.
B.L. Hansaric, C.J.
I agree