# I96I The Lokmanya Mills v. The Ba1si Borough Muni&ipality Shah ]. Mar&h x4

- **Citation:** [1962] 1 S.C.R. 314
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah, J. C. Shah, T. L. VENKATARAMA ArYAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i96i-the-lokmanya-mills-v-the-ba1si-borough-muni-ipality-shah-mar-h-x4-2120
- **Pages:** 6

## Headnote

Sales Tax-Transactions intra-State and inter-State-TestConstitution of India, Art. 286(2)-0rissa Sales Tax Act, r947
(XIV of r947), s. 5(2)(a)(II).
The petitioner who was a registered dealer under the Orissa
Sales Tax Act, 1947, was carrying on the business of purchasing
and reselling castor seeds, etc., in the State of Orissa. Under
a declaration given by him for the purpose of obtaining his registration certificate the goods purchased by him in Orissa were to
be resold in that State. He purchased certain commodities
inside the State but in contravention of his declaration sold the
goods to dealers outside the State. The Sales Tax Officer included in the taxable turnover of the petitioner the purchase made
by him inside the State in accordance with s. 5(2)(a)(II) of the
Act. The contention of the petitioner was that the purchase
was in course of inter-State trade and was exempted under
Art. 286(2) of the Constitution of India.
Held, that the transaction of sale which has been taxed
was wholly inside the State of Orissa and was distinct and separate from the sale made by the purchaser to dealers outside the
State. The former transaction was taxable nnder s. 5(2)(a)(II)
of the Act while the latter was exempted under Art. 286(2) of
the Constitution.
Messrs. Mohanlal Hargovind Das v. The State of Madhya
Pradesh, [1955] 2 S.C.R. 509, distinguished.
In order that a sale or purchase might be inter-State, it is
essential that there must be transport of goods from one State
'
•
•
. '
'
1 S.C.R. SUPREME COURT REPORTS
315
to another under the contract of sale or purchase. A purchase
made inside a State, for sale outside the State cannot itself be
held to be in the course of inter-State trade and the imposition
of tax thereon is not repugnant to Art. 286(2) of the Constitution.
Bmgal Immunity Company Limited v. The State of Bihar,
[1955] 2 S.C.R. 603 and State of Travaneor.-Cochin v. Shanmugha
Vilas Cashew Nut Factory, [1954] S.C..R. 53, followed.
ORIGINAL JURISDICTION:
Petition No. 12 of 1959 .
Petition under Art. 32 of the Constitution of India
for enforcement of fundamental rights.
R. Gopalakrishnan, S. N. Andley, J. B. Dadachanji,
Rameshwar Nath and P. L. Vohra, for the petitioners.
0. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer and T. 21!. Sen, for the respondents.
1961. March 14. The Judgment of the Court was
delivered by
VENKATARAMA AIYAR, J.-The petitioner is a joint
Hindu family firm carrying on business at Berhampur
in the State of Orissa, and registered as a dealer
under the provisions of the Orissa Sales Tax Act, 194 7,
hereinafter referred to as the Act. Its business consists in the purchase of castor seeds, turmeric, gingili
and other commodities locally, and selling them to
dealers outside the State. The Sales Tax Officer,
Berhampur, included in the taxable turnover of the
petitioner the purchase of goods made by it inside the
State but sold, as aforesaid, to dealers outside the
State and imposed a tax of Rs. 27,161-13-0 on account
of such sales during the sixteen quarters commencing
from April 1, 1952, and ending with March 31, 1956.
In the present application filed under Art. 32, the
petitioner challenges the validity of the tax on the
ground that the purchases in question were made in
the course of inter-State trade, and that a tax there.
, on was in contravention of Art. 286(2)
The impugned tax has been levied under s. 5 of the
•
Act, which, omitting what is not relevant, runs as
follows:-
5.
(1) The tax payable by a dealer under this
Endupuri
Narasitnham
<£. Son
v.
The State of
Orissa &- Ors.
V enkatarama
Aiyar ] .
Enrlupuri
N arasimhani
& Son
v.
The State of
Orissa & Ors.
VenJ~atararna
Aiyar ].
316
SUPREME COURT REPORTS
[1962]
Act shall be levied at the rate of one quarter of an
anna in the rupee on his taxable turnover:
(2) 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

## Text

I96I
The Lokmanya
Mills
v.
The Ba1si
Borough
Muni&ipality
Shah ].
Mar&h x4.
314
SUPREME COURT REPORTS
[1962]
These appeals must be allowed and the decrees passed by the High Court set aside and the decrees passed by the District Court of Shola pur restored with
costs in this court and the High Court. One hearing
fee.
Appeals allowed.
ENDUPURI NARASIMHAM AND SON
v.
THE STATE OF ORISSA AND OTHERS
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J. C. SHAH and T. L. VENKATARAMA ArYAR, JJ.)
Sales Tax-Transactions intra-State and inter-State-TestConstitution of India, Art. 286(2)-0rissa Sales Tax Act, r947
(XIV of r947), s. 5(2)(a)(II).
The petitioner who was a registered dealer under the Orissa
Sales Tax Act, 1947, was carrying on the business of purchasing
and reselling castor seeds, etc., in the State of Orissa. Under
a declaration given by him for the purpose of obtaining his registration certificate the goods purchased by him in Orissa were to
be resold in that State. He purchased certain commodities
inside the State but in contravention of his declaration sold the
goods to dealers outside the State. The Sales Tax Officer included in the taxable turnover of the petitioner the purchase made
by him inside the State in accordance with s. 5(2)(a)(II) of the
Act. The contention of the petitioner was that the purchase
was in course of inter-State trade and was exempted under
Art. 286(2) of the Constitution of India.
Held, that the transaction of sale which has been taxed
was wholly inside the State of Orissa and was distinct and separate from the sale made by the purchaser to dealers outside the
State. The former transaction was taxable nnder s. 5(2)(a)(II)
of the Act while the latter was exempted under Art. 286(2) of
the Constitution.
Messrs. Mohanlal Hargovind Das v. The State of Madhya
Pradesh, [1955] 2 S.C.R. 509, distinguished.
In order that a sale or purchase might be inter-State, it is
essential that there must be transport of goods from one State
'
•
•
. '
'
1 S.C.R. SUPREME COURT REPORTS
315
to another under the contract of sale or purchase. A purchase
made inside a State, for sale outside the State cannot itself be
held to be in the course of inter-State trade and the imposition
of tax thereon is not repugnant to Art. 286(2) of the Constitution.
Bmgal Immunity Company Limited v. The State of Bihar,
[1955] 2 S.C.R. 603 and State of Travaneor.-Cochin v. Shanmugha
Vilas Cashew Nut Factory, [1954] S.C..R. 53, followed.
ORIGINAL JURISDICTION:
Petition No. 12 of 1959 .
Petition under Art. 32 of the Constitution of India
for enforcement of fundamental rights.
R. Gopalakrishnan, S. N. Andley, J. B. Dadachanji,
Rameshwar Nath and P. L. Vohra, for the petitioners.
0. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer and T. 21!. Sen, for the respondents.
1961. March 14. The Judgment of the Court was
delivered by
VENKATARAMA AIYAR, J.-The petitioner is a joint
Hindu family firm carrying on business at Berhampur
in the State of Orissa, and registered as a dealer
under the provisions of the Orissa Sales Tax Act, 194 7,
hereinafter referred to as the Act. Its business consists in the purchase of castor seeds, turmeric, gingili
and other commodities locally, and selling them to
dealers outside the State. The Sales Tax Officer,
Berhampur, included in the taxable turnover of the
petitioner the purchase of goods made by it inside the
State but sold, as aforesaid, to dealers outside the
State and imposed a tax of Rs. 27,161-13-0 on account
of such sales during the sixteen quarters commencing
from April 1, 1952, and ending with March 31, 1956.
In the present application filed under Art. 32, the
petitioner challenges the validity of the tax on the
ground that the purchases in question were made in
the course of inter-State trade, and that a tax there.
, on was in contravention of Art. 286(2)
The impugned tax has been levied under s. 5 of the
•
Act, which, omitting what is not relevant, runs as
follows:-
5.
(1) The tax payable by a dealer under this
Endupuri
Narasitnham
<£. Son
v.
The State of
Orissa &- Ors.
V enkatarama
Aiyar ] .
Enrlupuri
N arasimhani
& Son
v.
The State of
Orissa & Ors.
VenJ~atararna
Aiyar ].
316
SUPREME COURT REPORTS
[1962]
Act shall be levied at the rate of one quarter of an
anna in the rupee on his taxable turnover:
(2) 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-
(ii) sales to a registered dealer of goods specified
in the purchasing dealer's certificate of registration
as being in tended for resale by him in Orissa or for
use by him in the execution of any contract in
Orissa, and on sales to a registered dealer of containers or 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.
It will be seen that under this section when a
sale takes place, the seller has to include it in his
taxable turnover; but when the sale is to a registered
dealer who declares that his purchases are for resale
in Orissa, then it is excluded from the seller's turnover. If the registered dealer-purchaser sells the
goods outside the State in broach of the condition,
the purchases by him are liable to be included in his
turnover, and assessed to sales tax. That precisely is
what has happened in this case. The sales to the
petitioner were not included in the taxable turnover
of the sellers by reason of the registration certificate
which the petitioner had obtained on a declaration
that the goods were to be resold in Orissa.
But in
violation of this declaration he sold tho goods to
dealers outside the State, and so he became liable to
be taxed under s. 5(2)(a)(ii) of the Act.
The contention of the petitioner is that these purchases were made in the course of inter-State trade,
and that the imposition of sales tax thereon is, in
•
't '
I S.C.R. SUPREME COURT REPORTS
317
consequence, ultra vires.
The provision applicable is
Art. 286(2), as it stood prior to the sixth amendment,
and it ran as follows:
"Except in so far as Parliament may by law
otherwise provide, no law of a State shall impose, or
authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase
takes place in the course of inter-State trade or
commerce."
The argument on behalf of the petitioner is that as
the goods were purchased for the purpose of being
sold to dealers outside the State, and they were in fact
so sold, the purchases were in the course of inter-State
trade, and the levy of tax thereon was within the
prohibition enacted by Art. 286(2).
We do not agree
with this contention. The transactions of sales which
have been taxed were wholly inside the State of Orissa.
They were sales by persons in t.he State of Orissa to
persons within the State of Orissa, of goods which
were in Orissa. The fact that the purchaser sold
those very goods to dealers outside the State is not
relevant, as those sales are distinct and separate from
the sales on which the taxes in question have been
imposed. The present levy is not on the sales by the
petitioner to persons outside the State, but on the
purchases by him inside the State. The former sales
are in the course of inter-State trade, and are not
taxable under Art. 286(2), but the latter are purely
intra-State sales, and a tax imposed thereon does not
offend Art. 286(2).
In support of his contention that the purchases are
hit by Art. 286(2), the petitioner relies on the decision
of this Court in Messrs. Mohanlal Hargovind Das v.
The State of Madhya Pradesh (1).
In that case, the
petitioners who were registered dealers under the
Central Provinces and Berar Sales Tax Act, 194 7,
were carrying on business in the manufacture and
sale of bidis in Madhya Pradesh. For the purpose of
their business, they imported processed tobacco from
the State of Bombay in.large quantities, rolled them
into bidis and sold them to dealers in other States.
(1) [1955] 2 S.C.R. 509.
Endupuri
1Varasimham
& Sons
v.
The State of
Orissa & Ors.
Venkalarama
Aiyar ].
Endupuri
Narasiniham
& Son
v.
The State of
Orissa & Ors.
Venkatarama
Aiyar j.
318
SUPREME COURT REPORTS
(1962]
The sales tax authorities imposed a tax on the purchases made by them, on the ground that they had,
in breach of the declaration in the registration certificate, sold them to merchants outside Madhya Pradesh.
The contention of the petitioners was that the purchases by them were in the course of inter-State trade,
and that the imposition of tax thereon was therefore
repugnant to Art. 286(2). It was this contention that
was accepted by this Court. It will be noticed that
in this case the assessment of sales tax was on the
very purchases from dealers in Bombay, under which
the goods were transported from the State of Bombay
to Madhya Pradesh. In the present case, the purchases which are sought to be assessed involved no
movement of the goods outside the State of Orissa.
In order that a sale or purchase might be inter-State,
it is essential that there must be transport of goods
from one State to another under the contract of sale
or purchase. In the Bengal Immunity Company
Limited v. The State of Bihar (1) occur the following
observations which are apposite:
"A sale could be said to be in the course of interState trade only if two conditions concur: (1) A sale
of goods, and (2) a transport of those goods from
one State to auother under the contract of sale.
Unless both these conditions are satisfied, there can
be no sale in the course of inter-State trade."
With reference to the analogous provision under
Art. 286(l)(b) prohibiting the imposition of tax on the
sale or purchase of goods in the course of import or
export, it has been held by this Court that it is only a
sale or purchase which occasions the export or import
of the goods out of or into the territory of India or a
sale in the State by the exporter or importer by transfer of shipping documents, while the goods are beyond
the customs barrier, that is within the exemption, and
that a sale which precedes such export or import or
follows it is not exempted, vide State of TravancoreCochin v. Shanmugha Vilas Cashew Nut Factory(').
On the same principles, a purchase made inside a
State, for sale outside the State cannot itself be held
(1) [1955] 2 S.C.R. 603, 784-785.
(2) [1954] S.C.R. 53.
t
)
I S.C.R. SUPREME COURT REPORTS
319
to be in the course of inter-State trade, and the imposition of a tax thereon is not repugnant to Art. 286(2)
of the Constitution. In the result this petition is dismissed with costs.
Petition dismissed.
B.K. KAR
v.
THE CHIEF JUSTICE AND HIS COMP ANION
JUDGES OF THE
HIGH COURT OF ORISSA AND ANOTHER
(K. SUBBA RAO, RAGHUBAR DAYAL and
J. R. MUDHOLKAR, JJ.)
Contempt of Court-Order of Superior Court-Nol duly communicated to subordinate court-Subordinate court acting contrary
to order-If guilty of contempt-Practice-Conviction for contempt
by High Court-Whether Chief Justice and Judges of High Court
sho1dd be made parties in appeal.
Under an order passed by the appellant, a Magistrate, one
G was put in possession of some property on October 14, 1955· In
revision the order was set aside. by the High Court on August
27, 1957. and the opposite party S applied, on November 20,
1957. to the appellant for redelivery of possession.
G applied
to the High Court for a review of its previous order and on
November 25, 1957, the application was admitted and an interim
stay was granted of the proceedings before the appellant. On
November 26, 1957. an application bearing an illegible signature
and not supported by an affidavit was filed before the appellant
indicating that the High Court had stayed the proceedings. A
telegram addressed to a pleader, not the counsel for G, was filed
along with the application. The appellant refused to act on this
application and telegram and on November 27, 1957, he passed
an order allowing the application of S for restitution. On
November 28, 1957. a copy of the order of the High Court was
received and thereupon the writ for redelivery of possession was
not issued. The High Court convicted the appellant for contempt of court for passing the order for restitution on November
27, when the High Court had stayed the proceedings. The
appellant appealed to the Supreme Court and impleaded the
Chief justice and Judges of the High Court as respondents.
z96r
Endupuri
Narasimham
c;, Son
v.
The State of
Orissa 0-- Ors.
Venkatarama
Aiyar ].
196I
March r4.