# \ THE STATE OF ASSAM v. RAMESH CHANDRA DEY AND OTHERS

- **Citation:** [1962] 1 S.C.R. 986
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** No. 167 of 1960
- **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/the-state-of-assam-v-ramesh-chandra-dey-and-others-2117
- **Pages:** 7

## Headnote

Sales Tax-Law providing for exclusion of sales of goods pur-
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chased for resale-Ammdment confining such sales to those in the 1
State-Whether amendment offends law prohibiting levy of tax on
inter-State sales-Assam Sales Tax Act, r947 (Assam r7 of r947),
'
as amended by Assam Act 4 of r95r, ss. 3(r)A(iii), r5-Assam Sales
Tax Rules, r. Bo-Constitution of India, Art. 286(2).
Section 15 of the Assam Sales Tax Act, 1947, as originally
enacted, provided that in calculating the net turnover of a
registered dealer for tax purposes, all sales made to another
registered dealer of goods specified in the latter's -certificate of
registration were to be excluded from the gross turnover, if the
goods were brought for resale. In 1951, the section was amended by the addition of the words "in the State" after the word
"resale", as a result of which the exclusion was confined only to
sales of goods for resale in the State. Rule So was framed to
give effect to the amendment. The petitioner, a registered
dealer in Assam, and whose business consisted mainly of buying
tea in Assam and selling it either in Assam or in Calcutta, challenged the legality of the amendment on the ground that the
result of the amendment was that tax could be levied on interstate sales and that, therefore, it contravened Ait. 2S6(2) of the
Constitution of India.
Held: (1) that a sale of goods to a dealer within the State
who purchased them for the purpose of selling them to dealers
outside the State, and who, in fact, so sold them, would not
make it a sale in the course of ;inter-State trade as the two
sales were distinct and separate. The first sale was an intra-State
sale and a tax imposed thereon did not offend Art. 2S6(2) of the
Constitution.
Endupuri Narasimham v. State of Orissa, [1962] I S.C.R. 314,
followed.
(2) that s. 15 of the Assam Sales Tax Act, 1947, and
Rule So framed under that Act were not ultra vires Art. 2S6(2)
of the Constitution. The object of s. 15 of the Act was to avoid
taxation at multiple points and the amendment to that section
in 1951 or Rule So did not enable the levy of tax on sales in the
course of inter-State trade twice. Such sales were expressly
sav.ed from tax by the operation of Art. 2S6(2) ands. 3(r)(A)(iii)
of the Act. Once those sales were outside the charging section
there was no need to re-enact that prohibition ins. 15 which
was a machinery section and would stand cut down by the limitation placed by the charging section and the Constitution.
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987

## Text

986
SUPREME COURT REPORTS
[1962] \...
THE STATE OF ASSAM
v.
RAMESH CHANDRA DEY AND OTHERS
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J.C. SHAH and T. L. VENKATARAMA ArYAR, JJ.)
Sales Tax-Law providing for exclusion of sales of goods pur-
~
I
I
chased for resale-Ammdment confining such sales to those in the 1
State-Whether amendment offends law prohibiting levy of tax on
inter-State sales-Assam Sales Tax Act, r947 (Assam r7 of r947),
'
as amended by Assam Act 4 of r95r, ss. 3(r)A(iii), r5-Assam Sales
Tax Rules, r. Bo-Constitution of India, Art. 286(2).
Section 15 of the Assam Sales Tax Act, 1947, as originally
enacted, provided that in calculating the net turnover of a
registered dealer for tax purposes, all sales made to another
registered dealer of goods specified in the latter's -certificate of
registration were to be excluded from the gross turnover, if the
goods were brought for resale. In 1951, the section was amended by the addition of the words "in the State" after the word
"resale", as a result of which the exclusion was confined only to
sales of goods for resale in the State. Rule So was framed to
give effect to the amendment. The petitioner, a registered
dealer in Assam, and whose business consisted mainly of buying
tea in Assam and selling it either in Assam or in Calcutta, challenged the legality of the amendment on the ground that the
result of the amendment was that tax could be levied on interstate sales and that, therefore, it contravened Ait. 2S6(2) of the
Constitution of India.
Held: (1) that a sale of goods to a dealer within the State
who purchased them for the purpose of selling them to dealers
outside the State, and who, in fact, so sold them, would not
make it a sale in the course of ;inter-State trade as the two
sales were distinct and separate. The first sale was an intra-State
sale and a tax imposed thereon did not offend Art. 2S6(2) of the
Constitution.
Endupuri Narasimham v. State of Orissa, [1962] I S.C.R. 314,
followed.
(2) that s. 15 of the Assam Sales Tax Act, 1947, and
Rule So framed under that Act were not ultra vires Art. 2S6(2)
of the Constitution. The object of s. 15 of the Act was to avoid
taxation at multiple points and the amendment to that section
in 1951 or Rule So did not enable the levy of tax on sales in the
course of inter-State trade twice. Such sales were expressly
sav.ed from tax by the operation of Art. 2S6(2) ands. 3(r)(A)(iii)
of the Act. Once those sales were outside the charging section
there was no need to re-enact that prohibition ins. 15 which
was a machinery section and would stand cut down by the limitation placed by the charging section and the Constitution.
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987
CIVIL
APPELLATE JURISDICTION:
No. 167 of 1960. ·
Civil Appeal
z96z
)
Appeal from the judgment and order dated July 16,
1956 of. the Assam High Court at Gauhati in Civil
Rule No. 128 of 1954.
A. V. Viswanatha Sastri and Naunit Lal, for the
appellant.
The Respondents did not appear.
1961. April 14. The Judgment of the Court was
delivered by
State of Ass_ani
v.
Ramesh
Chandra D6y
HIDAYATULLAH, J.-This appeal has been filed by Hidayatullah J.
~ the State of Assam against a judgment of the High
Court of Assam dated July 16, 1956. By the judgment·
under appeal, the High Court held that s. 15 of the
Assam Sales Tax Act, 1947, and Rule 80 framed under
the Act were ultra vires, being a breach of Art. 286(2)
of the Constitution.
The High Court granted a
certificate under Art. 132(1) of the Constitution.
R. C. Dey, the answering respondent, is a wholesale
dealer in tea, and has been in business since 1949.
He registered himself as a dealer under the Assam
Sales Tax Act on January 14, 1950. His business con-
) sists mainly of buying tea in Assam and selling it
either in Assam or in Calcutta. In respect of tea sold
in Calcutta, R. C. Dey consigns the tea to himself
after purchasing it in Assam. This tea is then approved by prospective purchasers, to whom the documents of title are endorsed on receipt, of the price.
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In 1951, the Assam Sales Tax Act was amended by
the Assam Sales Tax (Amendment) Act, 1951 (4 of
1951). Section 15 of the Act before the amendment
provided that in calculating the net turnover of a
registered dealer for tax purposes all sales made to
another registered dealer of goods specified in the
latter's certificate of registration were to be excluded
from the gross turnover, if the goods were bought for
resale. By the amendment in 1951, the section was
amended by the addition of the words "in the State"
__,, after the word "resale". Thus, in calculating the net
turnover of a registered dealer, the goods intended
State of Assani
v.
Ramesh
Chandra Dey
Hidayatullah ].
988
SUPREME COURT REPORTS
[1962] '
for resale in the State could alone be excluded from
the gross turnover. This amendment was followed
by amendment of the Rules. Rule 80 was enacted to
provide as follows:
"80. (1) A dealer who wishes to deduct from his
gross turnover the amount of sales on the ground
that he is entitled to make such deductions under
clause (b) of sub-section (1) of section 15 shall, on
. demand produce in respect of such sales the copy
\.
of the relevant cash memo or bill according as the
sale is a cash sale or a sale on credit, and a true
declaration in writing by the purchasing dealer or
by such responsible person duly authorised by the
purchasing dealer in this behalf that the goods in ._
question are specified in the certificate of registration of such dealer.
(2) For purposes of this rule, the declaration shall
be in the following form:-
'I/W e ......... hereby declare that I/We have purchased the goods herein mentioned for the purposes
for use in the manufacture of goods for sale in the
State, or for use in the execution of a contract in
the State or for resale in the State, and further
declare that these goods have been specified in/6ur
certificate of registration bearing No ........... .in the '
District of.. .......... '."
R. C. Dey filed a petition under Art. 226 of the
Constitution, challenging the amendment and the
Rule, and contended that they offended against Art.
286(2) and Part XIII of the Constitution, and were
thus ultra vires. He also submitted that the amend- _..
ment and the Rules were void as offending Art. 19
(l)(g). The last submission was given up in the High
Court, and the objection about Part XIII of the Constitution, which was decided against him, must be
taken to have been abandoned, because none appeared on his behalf to urge this point. We need not refer
to Art. 19 or Part XIII of the Constitution. The
High Court uμheld his contention about Art. 286(2).
In the High Court, separate judgments were delivered
by the learned Chief Justice and Ram Labhaya, J. ,..
They both agreed that s. 15, as amended, and the
Rule were ultra vires Art. 286(2).
The reasons given
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l S.C.R. SUPREME COURT REPORTS
989
by the learned Judges were different. According to
z96z
the Chief· Justice, the amendment and the Rule had State of Assani
the effect of taxing sales in the course of inter-State
v.
trade or commerce and were, therefore, illegal. Ram
Ramesh
Labhaya, J., held that the sale to R. C. Dey and the
Chandra Dey
sale by him in Calcutta were separate sales, and that
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the first sale was not in the course of inter-State trade Hidayatullah J.
or commerce, and was taxable. He, however, held
that though by s. 3, which is the charging section,
sales in the course of inter-State trade or commerce
were excluded from the ambit of the Act, this section
remained only "a pious declaration", because its effect
was not incorporated in the machinery section,
namely, s. 15. According to the learned Judge, what
was taxable under the Act was the net::-::.frnover of a
registered dealer. The machinery section showed how
the net turnover was to be ascertained, and it provided that to arrive at the net turnover, certain deduc-
- tions could be made from the gross turnover. In the
original section, anything which was sold for resale
was so excluded; but by the amendment, the exclusion was only in respect of the sale of goods for resale
in the State. According to the learned Judge, if
sales which did not lead to resale in the State were
not excluded from the gross turnover, then the net
turnover would comprehend such sales and, therefore,
there was a taxation of sale of goods in the course of
inter-State trade or commerce. Putting it briefly,
while the learned Chief Justice felt that the amendment and the Rule directly affected inter-State trade
or commerce, Ram Labhaya, J., held that they affected inter-State trade or commerce indirectly, inasmuch
as sales outside the State were not excluded from the
gross turnover.
We shall take up these two points separately. In
so far as the decision of the learned Chief Justice is
concernecj., the point has been before this Court in
another case. In Endupuri Narasimham & Son v.
State of Orissa and others (1 ), a similar question had
arisen in connection with the Orissa Sales Tax Act,
1947. In dealing with transactions such as these, this
Court pointed out that only sales which affected inter-
(•) [1962) I S.C.R. 314.
r96z
State of Assam
v.
Ramesh
Chandra Dey
Hidayatullah J.
990
SUPREME COURT REPORTS
[1962]
State trade or commerce directly and were an integral
part thereof, were saved under Art. 286(2).
On that
occasion, reference was made to all the authorities of
this Court which had discussed the question from the
angle of Art. 286( I) of the Constitution, and it was
pointed out that the same reasoning applied also to
Art. 286(2). It was observed in the case as follows:
"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 the 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 arc
purely intra-State sales, and tax imposed thereon
does not offend Art. 286(2)."
These observations are entirely applicable in the context of the facts, as are to be found in this appeal.
Indeed, all that is necessary to apply the above passage to the facts of this case is to substitute "Assam"
in the place of "Orissa". In our opinion, this point
must be held to be concluded against the respondent.
That leaves over for consideration the reasons given
by Ram Labhaya, J., in his concurring judgment.
Section 3 of the Act which created a liability to tax, was
amended by Act 4 of 1951 by the introduction of subs. (1 )A in that section. That sub-section reads as follows:
"{l)A. Nothing in sub-section (1) shall, except
in cases covered by the first proviso to sub-section (12) of section 2 of this Act, be deemed to
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1 S.C.R. SUPREME COURT REPORTS
991
render any dealer liable to tax on the sale of goods
where such sale takes place:-
(i) outside the State of Assam;
(ii) in the course of the import of the goods into,
or export of the goods out of, the territory of India;
or
(iii) in the course of inter-State trade or commerce
except in so far as Parliament may by law otherwise provide."
The introduction of sub-s. (l)A did no more than
repeat in the Act the prohibition contained in
Art. 286. The first two clauses of this sub-section
reiterate the prohibition contained in Art. 286(1), and
the third clause reiterates the prohibition contained
in Art. 286(2) of the Constitution. The first proviso
to s. 2(12), which is referred to in sub-s. (l)A, enacts
the Explanation to cl. (1) of Art. 286.
Now, it is quite clear that from the operation of the
charging section sales of a particular character are
kept out.
This provision saves from taxation all
those transactions which, if they were taxed, would
have fallen within the ban of Art. 286.
The effect of
this saving is to make such transactions immune from
taxation, and no further amendment of the law in the
machinery section was necessary. What s. 15 does,
is to grant an additional exemption in respect of sales
in which the goods, though sold to a registered dealer,
.are meant for resale in the State itself. · It is quite
easy to see that unless this exemption was granted, it
was possible that there would have been sales-tax at
more than one point, namely, at the point at which
the first registered dealer sold to the second registered dealer and again, when the second registered
dealer sold in his turn. To avoid taxation at multiple points on transactions of sale of the same
goods within the State, it was provided that the tax
shall be paid only on the last sale and not on the previous sales, so long as the previous sales were from
registered dealers to registered dealers in respect of
goods mention.ed in the registration certificate of the
latter and provided the goods were for resale in the
State. When the charging section itself excluded
taxation of sales in the course of inter-State . trade
State of Assam
v.
lla1nesh
Chandra Dey
Hidayatullah ].
State of Assain
v.
Ra1nesh
Chandra Dey
Hidayatultah ].
992
SUPREME COURT REPORTS
[1962]
or commerce, it was hardly necessary to look for a
repetition of the same exemption in the machinery
section. It is an error to think that because the
machinery section, namely, s. 15, does not repeat the
exemption given by the charging section, the turnover
of a dealer would necessarily include the sales in the
course of inter-State trade or commerce. Even if the
net turnover did. so include such sales, the dealer
would, under sub-s. (l)A of s. 3, be able to claim that
those transactions were not taxable, because they fell
within the ban of Art. 286(2) as well as s. 3(1 )A (iii)
of the Act. What has already been excluded by the
operation of the Constitution and the Act cannot
become taxable, because the net turnover has to be
calculated in a particular manner. From that net
turnover, such sales must be excluded by the operation of Art. 286(2) and s. 3(l)A of the Act. In our
opinion, the ban of Art. 286(2), which is again reenacted by s. 3(l)A, makes it incumbent that the sales
falling within those provisions should be excluded
from the net turnover.
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Reference was made to sub-s. (2) of s. 3, and it was
said that sub-s. (2) stated that every dealer to whom
sub-s. (1) did not apply, shall be liable to be taxed
under this Act, .and that there was no mention of subs. (l)A there. No doubt, sub-s. (2) does not mention
sub-s. (l)A; but sub-s. (l)A is not rendered ineffective
by the omission. Sub-section (l)A speaks of its own.
force, and has to be given effect to, along with the
remaining sub-sections ofs. 3. Sub-section (l)A has the
added support of Art. 286, and the Constitution must
prevail. Thus, both Art. 286 and sub-s. (l)A of s. 3
are there to save from taxation all sales in the course
of inter-State trade or commerce, and there is no need
to look further into the Act to see whether they are
exempted once again or not.
In our opinion, the appeal must succeed.
The
decision of the High Court under appeal is set aside,
and the petition is ordered to be dismissed with costs
here and in the High Court.
Appeal allowed.
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