J.K. Mohanty, J.
1. In all these writ petitions, identical questions of law has been raised. They were heard together and are disposed of by this common judgment.
2. In all these writ petitions, the petitioners challenge the constitutionality and validity of the amended Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947 (for short the 'O.S.T. Act') as substituted retrospectively by the Orissa Sales Tax (Amendment) Ordinance, 1977, subsequently enacted as the Orissa Sales Tax (Amendment) Act, 1978 and the assessments made applying the said provisions. At this point, it is useful to quote the relevant portion of Section 5(2)(A) as it stood before the amendment and as it stands now after the amendment.
Prior to amendment After amendment
In this Act, the expression In this Act, the expression
'taxableturnover' means 'taxableturnover' means that
that part of a dealer'sgross part of adealer's gross turn-
turnover during any period over during any period which
which remains after deducting remains after deducting there
there from : from :
(a) his turnover during that (a) his turnover during that
period on- period on-
(i) ...
(i) ... (ii) sales to a registered
(ii) sales to a registered dealer of goods specified in
dealer of goods specified in the purchasing dealer's
the purchasing dealer's cert- certificate of registration
ificate of registration as forresale by him in Orissa in
being for resale by him in a mannerthat such resale
Orissa and on sales to a reg- shall be subject to levy
istered dealerof containersand of tax under this Act; and
other materials for the packing on sales to a registered
of such goods: dealer of containers or other
materials for the packing of
Provided that when such goods such goods:
are used by the registered de- Provided that for the purpose
aler for purposes other than of ascertaining the deductions
those specified in his certif- under this item the dealer
icate of registration, the selling the goods shall furnish
price of goods so utilised to the prescribed authority in
shall be included in histaxable the prescribed manner, a
turnover. declaration in the pres-
cribed form obtained from the
prescribed authority, within
the prescribed time or within
such further time as the
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 un]der the preceding
proviso but are utilized
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 the
purchasing dealer.
Explanation.-In case of a series
of sales when the State Government,
by notification, declares sales of
any special goods to be taxed at
the point at which the first of
such sales is effected by a dealer
liable to pay tax under the Act,
the price of the goods so declared
shall be included in his taxable.
So, in the amended law, the words the goods so specified are sold to 'in a manner that such resale shall be subject to levy of tax under this Act' has been added in Section 5(2)(A)(a)(ii) and this has been given retrospective effect. The declaration form (form No. XXXIV) has been amended with effect from 26th April, 1978. Now, the petitioners challenge the above amendment on the following grounds :
I. Section 5(2)(A)(a) a registered dealer in whose (ii) of the O.S.T. Act as amended in 1977 contravenes Article 286 of the Constitution of India.
II. Section 5(2)(A)(a)(ii) contra certificate of registration the venes Sections 4 and 5 of the Central Sales Tax Act (for short the 'C.S.T. Act') and consequently has no operation under Article 254 of the Constitution.
III. The State Legislature is pre goods so specified are included. sumed to have the knowledge of its constitutional limitation and, therefore, Section 5(2)(A)(a)(ii) must be construed in such a manner that such a section does not operate when resale in fact takes place in the State of Orissa whether by export/inter-State sale, but because of the prohibition of Article 286 is not assessable to tax.
IV. Section 5(2)(A)(a)(ii) is in fact a penal provision coupled with Sections 9(3-b), 12(4-a), 12(8) and 25 of the O.S.T. Act and such a penal provision under Article 20 of the Constitution cannot be retrospectively enacted so as to make an act an offence which was not an offence at the time of occurrence.
V. The taxation laws are subject to Article 301 of the Constitution and no impediment by way of taxation or restriction are available to be imposed on the free flow of trade. As the impugned amendment imposes restriction by imposing tax, the same is illegal.
VI. As per the provisions of Section 5(3) of the Central Sales Tax Act, 1956 as amended by Central Act 103 of 1976, the last sale or purchase of any goods preceding the sale or purchase occasioning the export outside the territory of India shall also be deemed to be in course of export. The present amendment of Section 5(2)(A)(a)(ii) of the O.S.T. Act is, therefore, illegal and unconstitutional and ultra vires the said Central legislation.
The petitioners further contend that in the decision reported in [1976] 37 STC 157 (State of Orissa v. Joharimal Gajananda) this Court had the occasion to interpret the provisions of Section 5(2)(A)(a)(ii) of the O.S.T. Act as it stood prior to the amendment. It was held :
Under the scheme of the Act, sales tax is leviable at a single point and a registered dealer at the point of sale is entitled to pass on the incidence of sales tax to the buyer. Where the buyer is a registered dealer, upon furnishing declaration in terms of Section 5(2)(A)(a)(ii) of the Act he is entitled to exemption from payment of sales tax and the payment of tax is shifted and deferred to a point where the sale takes place in favour of a consumer, an unregistered dealer or is a transaction in respect of which no declaration has been furnished even when the purchasing dealer is a registered dealer. Section 5(2)(A)(a)(ii) authorises a dealer to exclude from the 'gross turnover' the 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. The proviso occurring in Section 5(2)(A)(a)(ii) requires the sale price of goods used by the purchasing dealer for the purposes other than those mentioned in his certificate of registration to be included in his taxable turnover. The assessee before us had purchased biri from registered dealers and had furnished declarations. It is not disputed that it was entitled to make such purchases free of tax on furnishing declarations. Its declarations contemplated that it would resell the goods so purchased in Orissa. As we have already found, the goods purchased by the assessee were as a fact resold in Orissa, but these sales, by application of the provisions of the Central Act, became the first sales under the Central Act. It is true that the scheme under the Act collecting Orissa sales tax at the deferred point has not worked out, but in the facts of the case, it cannot be said that the assessee used the goods purchased by it for a purpose other than that specified in its certificate of registration which alone would attract the application of the proviso under which the additional demand has been raised. If the assessee as a fact resold the goods in Orissa, but on account of some supervening law that transaction is made taxable under some other Act and tax under the Orissa Sales Tax Act was not im-posable, it would not amount to any violation of the declarations by the assessee.
In a Full Bench decision of this Court reported in [1976] 38 STC 189 (M.M.T.C. of India Ltd. v. State of Orissa) it was held :
Now we must consider the applicability of the proviso to Section 5(2)(A)(a)(ii) of the Act. We have already recorded a finding agreeing with the Tribunal that there was a resale within the State of Orissa. We have also found that in spite of the fact there were resales within the State, which answer the ingredients of an intra-State sale, the same is not exigible to Orissa sales tax being in the course of export. There is no doubt that if the restriction imposed under the Constitution did not operate, the sales would have been subjected to tax.
* * *Our answers to the questions referred to us, therefore, are :
(1) On the facts and in the circumstances of the case, the Tribunal was correct in holding that there was no contravention of the declarations given under Rule 27(2) of the Orissa Sales Tax Rules and, therefore the proviso to Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act was not attracted.
(2) In the facts and circumstances of the case, the sales by the assessee to the Japanese buyer are covered by the embargo under Article 286(1)(b) of the Constitution of India read with Section 5 of the Central Sales Tax Act and, therefore, are not exigible to sales tax under the Orissa Act.
Basing on the aforesaid decisions, the petitioners contend that in these cases admittedly there were resales within the State of Orissa which answer the ingredients of an intra-State sale and the same are not exigible to Orissa sales tax being in the course of export/inter-State sale.
3. In the counter the State has combated all the points raised by the petitioners. According to the State, the amended Act is not hit by Article 286 of the Constitution of India as no tax is imposed on export/inter-State sale. The Legislature has not prevented the dealer from making the purchase by paying tax and thereafter selling the same in course of inter-State trade/export. The amended Act has not put any embargo on the seller in choosing the purchaser. In the event the purchaser intended to effect the sale to any buyer in course of export or in course of inter-State trade, it is always open to him to effect the purchase without furnishing the statutory declaration. The amendment by no, stretch of imagination amounts to any restriction on the free flow of trade inasmuch as the amended Act does not purport to impose any tax on sales in course of inter-State sale or export and, therefore, it does not violate Article 301. The amendment in question does not purport to impose double taxation under the O.S.T. Act and there is no question of violation of Article 265. The provision for imposing tax on account of contravention of the declaration comes squarely within the entry 54 of List II of the Seventh Schedule and as such its constitutionality is beyond challenge for lack of legislative competency. Law is well- settled that subject to constitutional restrictions, power to legislate included power to legislate prospectively as well as retrospectively.
4. The present petitions can be classified into three categories.-(1) Assessments in which unamended declarations in form No. XXXIV under Rule 27(2) of the O.S.T. Rules have been given and purchases have been made without payment of tax ; (2) Assessment and imposition of tax on sale or purchase of declared goods in violation of Section 15 of the C.S.T. Act and Section 14-B of the O.S.T. Act read with Rule 42-A ; and (3) Assessment and imposition of tax after the amendment of form No. XXXIV, i.e., after 26th April, 1978. Each of the above categories may be dealt with separately.
5. Assessments in which unamended declarations in form No. XXXIV under Rule 27(2) of the O.S.T. Rules have been given and purchases have been made i without payment of tax. '
The following cases come under this category :
___________________________________________________________SI. Case Financial Name of Goods dealtNo. No. year the party with by him___________________________________________________________1. O.J.C. 1974-75 Industrial Ferro manganese,1413/78 Minerals & ferro chrome, ierro-Metals silicon, slags.2. O.J.C. 1975-76 do. do.960/793. O.J.C. 1976-77 do. do.1771/794. O.J.C. 1973-74 Sagarmal Motor oil, lubri-1493/80 Agarwalla cants, kendu leaves,tyres, tubes.5. O.J.C. 1974-75 do. do.1494/806. O.J.C. 1975-76 do. do.1495/807. O.J.C. 1975-76 Sanwarmal Petrol, diesel, lubri-1982/80 Hariprasad cants, tyre and tubes,cement, kendu leaves,motor parts.8. O.J.C. 1973-74 do. do.1983/809. O.J.C. 1974-75 do. do.1984/80___________________________________________________________
Prior to the amendment of form No. XXXIV, the declaration was given in the following manner :
Certified that the goods ordered in my/our purchase order No.... dated.... purchased from you as per cash memo/bill No.... dated.... for an amount of Rs.... are meant for the purpose of resale in Orissa and are covered by my/our registration certificate No.... issued under the Orissa Sales Tax Act, 1947.
Admittedly, this form was not amended immediately after the coming into force of the amending Ordinance of 1977 or the amended Act of 1978. This form was amended on 26th April, 1978. In the new form, the words 'in a manner that such resale shall be subject to levy of tax under this Act' has been inserted after the words 'for the purpose of resale in Orissa'. According to the second proviso to Section 5(2)(A)(a)(ii), where any goods specified in the certificate of registration are purchased by a registered dealer free of tax after furnishing a declaration under the first 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 the purchasing dealer. Rule 27 of the O.S.T. Rules prescribed the procedure for claiming deduction. The relevant portion is as follows :
27. Evidence in support of deduction claimed:-
* * *(2) (i) 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.
(ii) 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 :
Provided that no single declaration shall cover more than one transaction of sale except in cases where the total amount of the sale transaction made under several purchase memos, during a quarter is equal to or less than rupees ten thousand or such other amount as the State Government may, by a general order, notify in the Official Gazette :
Provided further that no second or subsequent supply of declaration forms shall be made to any such dealer unless he furnishes a true copy of account certified by him under his signature of the forms last supplied to him as maintained in form VII-A referred to in Clause (v).
(iii) Before furnishing the declaration to the selling dealer the purchasing dealer or a person authorised by him in this behalf shall fill in all required particulars in the form, affix his usual signature in the space provided in the form for this purpose. Thereafter, the portion marked 'original' shall be made over by him to the selling dealer and the portion marked 'duplicate' shall be submitted to the Sales Tax Officer, who issued the forms, while rendering accounts regarding use of declaration forms before him. The purchasing dealer shall only retain the counterfoil of each declaration form.
* * *
In view of the above provisions, in order to get exemption under Section 5(2)(A)(a)(ii), a declaration in form No. XXXIV shall be furnished by a dealer. There is no other form prescribed for claiming deduction. A registered dealer has to furnish the declaration in the prescribed form to be obtained from the authorities. In the cases coming under this category, at the time of furnishing the declaration as required under the O.S.T. Act and the O.S.T. Rules, the unamended form No. XXXIV was in force in which the words 'meant for the purpose of resale in Orissa' were there. In all these cases, the assessees have furnished declaration in the unamended form, i.e., they have given the declaration that the goods were purchased for resale in Orissa, as the form had not been amended by the time of furnishing the declaration. By no stretch of imagination the assessees could have furnished the declaration in the amended form which came into force only after 26th April, 1978. So, even assuming that the amendment had come into force with retrospective effect at the time when assessment was made, as the form was not amended by the time of furnishing the declaration, it was impossible on the part of the assessees to furnish the declaration in the amended form. In accordance with the maxim of law, Lex non cogit ad impossiblia (which means the law does not compel the impossible), if it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the persons interested had no control, these circumstances can be taken as a valid excuse. The assessees have given the declaration in the form that was prevalent, i.e., with an express undertaking that the goods were purchased for resale in Orissa. So, in our view they cannot be saddled with the liability to pay the tax for giving false declaration. It is not disputed that the assessees in fact sold the goods in Orissa true to the declaration given by them. This does not amount to any violation of the declaration given by them and, therefore, the question of any contravention of Section 5(2)(A)(a)(ii) of the O.S.T. Act does not arise.
6. Assessment and impositions of tax on sale or purchase of declared goods in violation of Section 15 of the C.S.T. Act and Section 14-B of the O.S.T. Act read with Rule 42-A of the O.S.T. Rules.
The following cases fall under this category :-
___________________________________________________________SI. Case Financial Name of Goods dealtNo. No. year the party with by him___________________________________________________________1. O.J.C. 1974-75 Madan Mohan Iron and steel676/78 Traders goods. (declaredgoods)2. O.J.C. 1975-76 do. do.677/783. O.J.C. 1970-71 S.L. Gupta do.1297/80 & Sons4. O.J.C. 1977-78 Orissa Steel do.1521/80 Corporation5. O.J.C. 1978-79 do. do.1522/806. O.J.C. 1977-78 Rataria Rice, atta, maida,1132/82 Brothers suji, iron and steelconveyor belt, (dec-lared goods)7. O.J.C. 1970-71 Orissa Steel Iron and steel188/83 Corporation goods. (declaredgoods)8. O.J.C. 1971-72 do. do.189/83
Except serial No. 5, i.e., O.J.C. 1522/80, the rest are also covered under category (1) as the declaration forms were furnished in the unamended form No. XXXIV. In these cases, the contention of the assessees is that under Section 14-B of the O.S.T. Act read with Rule 42-A of the O.S.T. Rules and Section 15 of the C.S.T. Act, in case of declared goods, the dealer is entitled to get refund of the Orissa sales tax paid by him. Section 14-B of the O.S.T. Act is as follows:
14-B. Refund in case of inter-State trade or commerce.-The Commissioner may refund to such person, in such manner and subject to such conditions as may be prescribed, any amount of tax levied on sales or purchases of goods which are declared under Section 14 of the Central Sales Tax Act (74 of 1956) when such goods are subsequently sold in course of inter-State trade or commerce.
Rule 42-A of the O.S.T. Rules reads as follows :
42-A. Refund of tax in certain cases.-(1) The tax levied and realised under Section 5 in respect of sale or purchase inside the State, of any goods which are declared under Section 14 of the Central Sales Tax Act, 1956 (74 of 1956) shall if such goods are sold in the course of inter-State trade or commerce, be refunded in the manner and subject to the conditions prescribed in this rule to the dealer who has made the inter-State sale and has paid the tax under the aforesaid Act in respect of such sale.
(2) Every such dealer who claims a refund under this rule, shall within twelve months from the date on which the tax was paid on the sale of such goods in the course of inter-State trade or commerce, submit to the Assistant Sales Tax Officer or the Sales Tax Officer, as the case may be, a statement in form XII-A.
(3) The burden of proving the claim preferred shall be on the dealer.
(4) On receipt of the statement in form XII-A, the Assistant Sales Tax Officer or the Sales Tax Officer, as the case may be, shall, if he is satisfied after such scrutiny of the accounts and after such enquiry as he considers necessary that the claim is admissible, pass an order refunding the tax subject to the provisions under Rule 42.
* * *
Section 15 of the C.S.T. Act is to the following effect:
15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.-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 following restrictions and conditions, namely:-
(a) 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 not be levied at more than one stage;
(b) 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 inter-State trade or commerce and tax has been paid under this 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 provided in any law in force in that State ;
(c) where a tax has been levied under that law in respect of the sale or purchase inside the State of any paddy referred to in Sub-clause (i) of Clause (i) of Section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy ;
(d) each of the pulses referred to in Clause (vi-a) of Section 14, whether whole or separated and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law.
The petitioners contend that as the assessment was made much after the payment of the Central sales tax, it was impossible for them to have applied for refund of the Orissa sales tax within twelve months from the date of payment. The impugned amendment creates an impossible situation and condition to be fulfilled and is, therefore, bad in law.
In reply, it is submitted on behalf of the State that in the scheme of things, in case of declared goods there is first levy under the State Act and then there is second levy on the same goods under the Central Act. The tax paid under the State Act is to be refunded to the dealer in the prescribed manner. But these are not,cases of this type. In these cases, the purchasing dealers gave declarations that they would resell the goods in such a manner that it would be subject to levy of tax under the State Act. As such they do not pay the first levy under the State Act, but pay the Central tax as the first levy. The detection of the violation of declaration is noticed after the levy of the Central tax, on completion of the inter-State trade/export. In this state of affairs, the State levy on account of breach of declarations becomes the second levy and, therefore, it does not fit in with the scheme of Section 15 of the C.S.T. Act. Since the declaration is violated by the assessees, the tax imposed on them for such violation or breach is in the nature of a penalty which is equivalent to the Orissa sales tax that would have been paid by them. There is no provision under any law whatsoever for the refund of such levy.
After considering the provisions quoted above and the argument of both sides, we are inclined to accept the contention raised on behalf of the petitioners.The assessees are entitled to get refund of the Orissa sales tax paid by them in case of declared goods (as per Section 14-B of the O.S.T. Act). The only difficulty is that they have not applied for the same within twelve months. The Central sales tax had already been paid and by the time the impugned assessments were made, more than twelve months had elapsed and the dealer-assessees were put in such a situation that they could not apply for refund as there was no assessment or payment of Orissa sales tax. In our view, the petitioners should not be allowed to suffer for this and they shall be entitled to the benefits of the provisions of Section 15 of the C.S.T. Act and Section 14-B of the O.S.T. Act.
7. Assessment and imposition of tax after the amendment of form No. XXXIV, i.e., after 26th April, 1978.
The following cases are covered under this category :
___________________________________________________________SI. Case Financial Name of Goods dealtNo. No. year the party with by him___________________________________________________________1. O.J.C. 1977-78 MMTC of Iron ores.411/78 India Ltd.2. O.J.C. 1979-80 Singhbhum Minerals.1855/80 Mining Dev.Corpn. (P.)Ltd.3. O.J.C. 1978-79 Sanwarmal leaves, I timber,1891/80 Hariprasad lubricants, bambooKendu mats.4. O.J.C. 1979-80 Utkal Coltar & empty barrel.1326/81 Industries &Trading; Co.5. O.J.C. 1978-79 do. do.1327/816. O.J.C. 1977-78 Howrah Motor Motor parts,2429/81 Co. batteries.7. O.J.C. 1978-79 Industrial Ferro manganese, ferro363/82 Minerals & chrome, etc.Metals8. O.J.C. 1978-79 Howrah Motor Motor parts, batteries.1131/82 Co.9. O.J.C. 1980-81 Industrial Ferro chrome.2360/82 Minerals &Metals10.; O.J.C. 1979-80 do. do.1673/8211. O.J.C. 1979-80 Howrah Motor Motor parts, batteries,28/83 Co. tyres, tubes, lubricants.12. O.J.C. 1980-81 do. do.401/8313. O.J.C. 1981-82 Metalloy Mineral ores.402/83 India14. O.J.C. 1981-82 Industrial Ferro chrome, etc.,1647/83 Minerals & mineral ores, scrapMetals iron.
On behalf of the petitioners it is contended that Article 286 of the Constitution is a prohibition and it is too well-settled that the Seventh Schedule is subject to the constitutional limitations. Article 286(1) (a) and (b) prohibits any taxation on sale of goods if such goods are sold outside the State or by way of export of the goods out of or import of goods into the territory of India. The Central Legislature under Article 286 has the power to lay down the principles for taxation which have in fact been laid down in the Central Sales Tax Act, 1956. The State Legislature cannot deviate from the same and, by virtue of the amendment, it should not be allowed to levy tax on export or import or inter-State trade. This Court in [1976] 37 STC 157 (State of Orissa v. Joharimal Gajananda) and [1976] 38 STC 189 (FB) (M.M.T.C. of India Ltd. v. State of Orissa) has already held that the sale in the course of inter-State trade/export of the goods purchased by furnishing declarations under Section 5(2)(A)(a)(ii) of the O.S.T. Act is not a contravention so as to make it a part of the taxable turnover. The impugned amendment, in pith and substance, is an attempt to undo the effect of the aforesaid two judgments of this Court and it is in direct conflict with Article 286 of the Constitution. On the other hand, it is argued on behalf of the State that the Orissa Sales Tax Act has adopted a single point tax. Under the scheme, the taxable event is postponed until a registered dealer sells the goods to an unregistered dealer, a consumer or in breach of the undertaking in terms of Clause (ii) or diverts the goods for other purposes. The proviso appearing under Section 5(2) of the O.S.T. Act operates when the purchasing dealer violates the undertaking and the tax liability which he had avoided on the basis of the declaration given by him. The submission of the petitioners that the amended Act providing for a declaration to the effect that the 'resale shall be subject to levy of tax under the O.S.T. Act', in fact, amounts to imposition of tax on sale in course of inter-State trade/export is not tenable. The submission is fallacious for the reason that there is no compulsion under the State Act for giving such a declaration inasmuch as it is open for the declarant not to give such a declaration in the event he at any point intended to effect sales in course of inter-State trade/export. The confusion created by the petitioners is worst confounded when the declarant on the basis of the declaration does not pay the tax to the seller though in the event of non-submission of declaration he should have paid the tax to the seller. At any event, the incidence is always on the seller. The amended Act has not put any embargo on the seller in choosing the purchaser. In the event the purchaser intended to effect the sale in course of inter-State trade/commerce to any foreign buyer, it was open to him to effect the purchase without furnishing the statutory declaration. It was further submitted that the legislature has not prevented the dealer from making the purchase by paying tax and thereafter selling the same in course of inter-State trade/export. The Legislature under the amended Act has vindicated the single point levy and never intended or desired to tax the export/inter-State sale. Thus, the submission that this amended law is hit by Article 286(1) is based on the misconception that the Legislature intended to impose tax on export/inter-State sale.
It is now well-settled that the power to impose taxes on the sale or purchase of goods, other than newspapers, belonging to State (entry 54, List II), vests in the State Legislature. But taxes on imports and exports (entry 92A, List I) are exclusively Union subjects. Article 286 is intended to ensure that sales taxes, imposed by the States do not interfere with imports, exports and inter-State trade and commerce which are matters of national concern and the taxation of which is beyond the competence of the State. Hence, Article 286 lays down certain limitations upon the power of the State to enact sales tax legislation. These restrictions are:
(a) No tax shall be imposed on sale or purchase which takes place outside the State.
(b) No tax shall be imposed on sale or purchase which takes place in the course of import into or export out of India.
As regards 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.
(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.
The above are the restrictions upon imposition of sales tax by a State. A State can exercise its taxing power and levy tax on a sale or purchase of goods only if, according to the principles formulated by Section 4 of the Central Act, such sale or purchase took place inside the State. But if, on the principles formulated by Section 3 or Section 5, as the case may be, the transactions were also determined to be a sale or purchase in the course of inter-State trade or commerce or in the course of the export of the goods out of the territory of India or the import of the goods into the territory of India, the bans imposed by Clause (1) of Article 286 would come into operation and the State could not constitutionally exercise its taxing power in respect of such sale or purchase merely because under Section 4 of the Central Act it was, a sale which had taken place inside that State. This position, however, would not alter the situs of the sale or purchase and its situs would continue to be inside the particular State as determined by the principles formulated by Section 4 of the Central Act. The pertinent thing to bear in mind is that these bans operate only for the purpose of curtailing the taxing powers of the State and not for any other purpose. See [1976] 37 STC 187 (Bom) (N.D. Georgopoulos v. State of Maharashtra).
Relying on the decisions reported in [1976] 37 STC 157 (Orissa) (State of brissa v. foharimal Gajananda) and [1976] 38 STC 189 {Orissa) [FB] (M.M.T.C. of India Ltd. v. State of Orissa) the petitioners contend that in the present cases the assessees purchased goods by giving declaration for resale in Orissa and in fact resale was inside Orissa. So they are entitled to the benefits of the above two decisions and the transactions of the petitioners being in course of inter-State trade or commerce, those cannot be made liable to sales tax as now demanded. On the other hand, it is contended by the opposite parties that no doubt what the petitioners contend is true if the declaration is given in unamended form, i.e.; resale in Orissa. But in view of the amendment of Section 5(2)(A)(a)(ii) and form No. XXXIV, the resale is to be in Orissa in the manner that such resale shall be subject to levy of tax under the O.S.T. Act. By giving the above declaration/undertaking, i.e., to resell in Orissa in a manner that such resale shall be subject to levy of tax under the O.S.T. Act, the petitioners have purchased the goods free of tax, but they have resold the goods in breach of the declaration given by them and are claiming deduction which is not permissible. For breach of the declaration the petitioners are required to pay tax which they had not paid to the registered dealers from whom they had purchased the goods free of tax by giving the declaration. For such levy of tax, it cannot be said that the export/inter-State trade or commerce has been taxed under the O.S.T. Act. The link is with the violation of the declaration. By levy of appropriate tax for the contravention of the declaration, the single point levy under the O.S.T. Act is vindicated. The petitioners had the liberty not to give an undertaking while making the purchase. Having given a declaration which is false, they cannot now turn round and take advantage of such declaration that the purchases were meant for resale inside Orissa in a manner that such resale shall be subject to levy of tax under the O.S.T. Act. Reliance was placed on a decision reported in [1981] 47 STC 376 (SC) {Hindustan Brown Boveri Ltd. v. State of Gujarat). In the above case under the Gujarat Sales Tax Act, where a dealer purchased any taxable goods under a certificate given by him under Section 13 saying that the goods would be used in the manufacture of taxable goods to be sold within the State and then used the goods for a different purpose contrary to such certificate, such dealer should be liable to pay purchase tax on the original purchase of taxable goods. The Sales Tax Officer then levied purchase tax under Section 16 of the Act on the raw materials purchased by the dealer on the ground that the undertaking given in form No. 19 had been violated. The Supreme Court held ;
Since 'taxable goods' under Section 2(33) of the Act meant goods other than those on the sale or purchase of which no tax was payable under Section 5 and Section 49 or a notification issued thereunder, the appellants in making a sale specifically exempted by notification under Section 49, had used the goods bought by them against certificate in form No. 19 for a purpose contrary to such certificate, that is to say, they had used the goods in the manufacture of goods which were not taxable goods; and hence were liable to be assessed to purchase tax under Section 16.
The petitioners contend that the above decision has no application to the facts and circumstances of the present cases.
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 O.S.T. 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 C.S.T. Act and Section 14-B of the O.S.T. Act and Rule 42-A of the O.S.T. Rules. From Section 15 of the C.S.T. 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.
A recent decision of the Supreme Court reported in [1985] 60 STC 314 (SC) (Onkarlal Nandlal v. State of Rajasthan) has been cited on behalf of the petitioners. But this decision is not of much help. The decision is in the same line as the decision of this Court reported in [1976] 37 STC 157 (State of Orissa v. Joharimal Gajananda). On the other hand, the following observation has been made in the very same decision which demolishes the arguments advanced on behalf of the petitioners :
The only consequence of the resales being sales in the course of inter-State trade or commerce was that they were not taxable under the State legislation. But there is no provision in the State Act which requires that in order that an assessee may be exempt from purchase tax in respect of purchase of goods made by him against a declaration in form NO.S.T. 17, he must resell the goods within the State in such a manner that such resale becomes exigible to tax under the State legislation.
The other argument advanced that the amendment is violative of Article 301 of the Constitution of India does not cut much ice. According to Article 301, 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 301 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 301, 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 301 have not been violated.
8. After considering the arguments of both sides and in the facts and circumstances of the case, we are of the view that the impugned amended provisions of Section 5(2)(A)(a)(ii) of the O.S.T. Act is not unconstitutional and is a valid piece of legislation. However, in view of the findings above, we are of the opinion that the assessment and imposition of tax in the cases under category (1) and (2), i.e., O.J.Cs. 676, 677 and 1413 of 1978, 960 and 1771 of 1979, 1297, 1493, 1494, 1495, 1521, 1522, 1982, 1983 and 1984 of 1980, 1132 of 1982 and 188 and 189 of 1983, applying the amending provision are invalid and are hereby quashed. But the same in the cases in category (3), i.ae., O. J. Cs. 411 of 1978, 1855 and 1891 of 1980, 1326, 1327 and 2429 of 1981, 363, 1131, 2360 and 1673 of 1982 and 28, 401, 402 and 1647 of 1983, is valid and cannot be set aside.
9. In the result, therefore, O.J.Cs. 676, 677 and 1413 of 1978, 960 and 1771 of 1979, 1297, 1493, 1494, 1495, 1521, 1522, 1982, 1983 and 1984 of 1980, 1132 of 1982 and 188 and 189 of 1983 are allowed and O.J.Cs. 411 of 1978, 1855 and 1891 of 1980, 1326, 1327 and 2429 of 1981, 363, 1131, 2360 and 1673 of 1982 and 28, 401, 402 and 1647 of 1983 are dismissed. There shall be no order as to costs.
D.P. Mohapatra, J.
10. I agree.