MESSRS MOHANLAL HARGOVIND DAS, BID! MERCHANTS, JABALPUR (M.P.) v. THE STATE OF MADHYA PRADESH & Anr.

J.-The pet1t1oners are a firm carrying on business on a very large scale of making and sell in the ing bidis having their head office State of Madhya registered as "dealer" for the purpose of the Central Provinces and Berar Sales Tax Act, 1947. Pradesh. They are Jabalpur is blended the State of Bombay the course of their said busines, In the petitioners import tobacco in very that State by large quantities after the vendors with various other types of indigenous finished tobacco tobacco, after its imnort within the State of Madhya Pradesh various other States, the State of Uttar the Statr: of Uttar Pradesh Pr.1rlesh. into hidis which are exported by an elaborate largely is rolled process. rk:ikrs This The ' -.:. 1955 hl1ur1 Mohan/al H1W.fni1UI Das, lliJi Mntllanb, ,....(M.P.) .. Th181.t1of ~ l'wld1JJ •...nn. .......,.,. 2 S.C.R. SUPREME COURT REPORTS 511 and such other States who buy bidis from tioners sell the same sumers in those States. the peti to various other dealers and con required the petitioners under The Sales Tax authorities in the State of Madhya threat of file a statement of return of purchases of tobacco made by them out of in Madhya levy purchase tu Pradesh criminal prosecution the total Madhya Pradesh and delivered Pradesh with a view to assess and on the transactions of purchases made by the peti tioners as above. The petitioners filed under protest two returns dated the 11th September 1954 and 3rd the periods 3rd May 1954 to 29th December 1954 for July 1954 and 30th July 1954 to 26th October 1954 right to respectively but without prejudice challenge levy of the said transactions. The Sales upon the petitioners to Tax authorities deposit tax which amounts to thou5ands of rupees The petitioners the year. this petition under for a writ of mandamus the Commis from enforcing said Act and its provisions against the petitioners article 32 of or any appropriate direction or order seeking the State of Madhya Pradesh and sioner of Sales Tax, Madhya Pradesh, and for consequential reliefs. the validity of the assessment and the aforesaid further called alleged purchase in every quarter of the Constitution thereupon filed tax on · rolled the tobacco purchased by The petitioners averred imposition of tax on sale or purchase of tobacco into bidis ex the manner des ported out of Madhya Pradesh cribed was in contravention of article 286(1) (a) of the Constitution, the purpose of making bidis exported outside Madhya intended for use as raw material Pradesh was never for the making of bidis the purpose of consump tion in Madhya Pradesh and section 4, sub-section (6) so used and there was no liability tax and that to the best of the petitioners' tobacco information had not been notified hy the State Government in the Gazette the Act the puq1o<:c of section 12( A) of the Act had no application to to pay the alleged the tobacco -• 1 ~ 1955 M1ssrs Moftanlal Hargooind Das, Bi!fi Merci.ants, Jab•lpur {M.P.J v. The Stat• of Madlr!a Prad4sh and anotha 512 SUPREME COURT REPORTS [1955] therefore, not entitled the Sales Tax authorities, under and that were, to levy any tax on petitioners. The petitioners also submitted that transactions Pradesh had no authority the imposition the State authorities contravened article 286(2) of the Constitution. the Act. in question had taken place in the course of Madhya impose or to authorise that the action of provisions of of such a tax and that the State commerce, inter-State as raw material for sale by actual delivery The Respondents filed a return denying the conten the peti tions of the petitioners and submitted tioners by purchasing tobacco which was entered in their registration certificate manufacture of bidis that State made Madhya Pradesh for consumption themselves tax by exporting bidis to other States and it for a different thus utilising purpose under section 4(6) of the Act. They admitted that the petitioners the State of Bombay in the petitioners' bidi tobacco, after tories, was cleaned, sieved and large quantities but stated its arrival imported blended· tobacco to pay liable the dealers the purpose of tobacco to the petitioners are them under Rule 8 of in this context. Not only A few more facts relevant for the decision of this petition may be stated petitioners but also in Bombay who sell registered as or supply "dealers" the Central Provinces and Berar Sales Tax Act, 1947. The petitioners are the holders of a certificate of registration, No. LDG 53 obtained by the Central Provinces and Berar Sales Tax Rules, 1947. When making purchases of they also in question required by Rule 26(II) made declarations in the form declaring the said goods Shri Shah Chhaganlal Ugarchand Nipani, a registration certificate No. Blv!Y /93- dealer holding MP and from Shri Maniklal Chunanlal Baroda, a certificate No. BMY/341- dealer holding for use MP on different as raw material for sale in Madhya Pradesh for the purpose by actual delivery the return which .of consumption registration therein mentioned the manufacture of goods they had purchased that State. the tobacco In r 1955 Mes, rs Moha1Jlal Hargovind Das, Bidi Merchant.r, Jabalpur (M. 1-'.) v. The StaU of Madhya Pradtsh and anolM1. Bhagwati J. 2S.C.R. SUPREME COURT REPORTS 513 for use as raw material by the petitioners for the quarter beginning from 3rd May 1954 and ending with 29th July 1954, the petitioners mentioned Rs. 16,47,567-3-3 as purchase price of goods purchased on declaration as the registration certificate :is being goods specified the manufacture inten<led in Madhya in that State Pradesh for the return but utilisc<l In which was for the quarter beginning from 27th July 1954 and ending with 26th October figure but showed the 1954, that the Sales Tax authorities were not entitled purchase levy any tax against them in respect of the same. sale by actual delivery the purpose of consumption for any other purpose. by them they di<l not fill in any item as blank contending to authorise to impose or the course of for consumption these transactions, (2) learned Attorney-General appearing before in question were The contended ( 1) that the transac pet1t10ners inter-State commerce and were, the ban of therefore, within article 286(2) and the State of Madhya Pradesh had no imposition of tax authority in any event the goods were delivered in the State of Ut'.:ar liable to a levy of tax at the Pradesh and were not instance of that, invalid inasmuch as it section 4(6) of offended against (a), the above contentions were and lastly ( 4) that even if negatived, section 4(6) of the facts of the pre constructioil, no application to the Court was that if case. He, however, urged 0'.1 his first contention, viz., that the trans with him the course of inter actions to go into the State commerce other contentions. the Act was the provisions of article 286(1) the State of Madhya Pradesh, it was not necessary the Act had, on took place in question (3) We are of the opinion that this contention of the fa::t the State of Bom in large quantities. The Bombay suppliers pro their go<lowns situated within the tobacco learned Attorney-General i~; admitted by the RespoPdents petitioners cessed ·State tobacco of Bombay and supplied the finished sound. in their return tobacco from imported It was 1955 Mmn Mohatrlal HMtouitul Da.i, Bidi Mmlumll, Jaolp (M.P.) v. Tlw8"'*•/ ""'.,,.,,,.,, M~Proi<d ·~.,.,.,, ]. 514 SUPREME COURT REPORTS [1955] imported the petitioners in Madhya finished tioners Pradesh from business necessity, as a result of these transactions, ment of the goods across entered these suppliers the finished actions were, trade or commerc(. Pradesh. The peti into Madhya tobacco these suppliers who were carrying on the State of Bombay and there was of the mOTe the border. As a result of into by the petitioners with tobacco which was sup the petitioners moved from the State of Bom traru> inter-State to the State of Madhya Pradesh and the course of transactions therefore, themselves The only answer which was made by the learned Advocate-General of Madhya Pradesh was that Shri Shah Chhaganlal Ugarchand Nipani and Shri Maniklal Chunanlal B:!toda were dealers holding registration certificates Nos. BMY /93/MP and BMY / the provisions 341-MP being registered as such under of the Central Provinces and Berar Sales Tax Act, the transactions were bet 1947, and therefore, that, the State of Madhya ween two registered dealers internal Pradesh thus internal sales sales of the goods. there was no question of transactions the course of inter-State trade or commerce and there to the ban imposed under fore they were not article 286(2). constituted purely If they were their being therefore subject This answer dealers under the dealers who supplied registered suffers from over-simplification. No the finished tobacc0o doubt, to the petitioners were Central Provinces and Berar Sales Tax Act, 1947, but that fact by to invest itself would not be sufficient the transactions which otherwise were the course of inter-State the character trade or commerce with of intra-State · transactions or sales or pur internal chases. What one has got to look at is the real namre of the transactions and not form. A per son who carries on business of selling or supplying in Madhya Pradesh and who comes within the definition of "dealers" given in section 2(c) of the Act has, pain of penalty visited upon him uncler section 24 of the Act, to register himself as a dealer the outside 1955 Mnm Malumllll HMgaoirttl Do1, Bidi M1rcba1111, Ju•llW (M. r:r TlllSto~of "'"""'• Proifl1f! ... --""'· .,..,iJ. 2S.C.R. SUPREME COURT REPORTS 515 through to avoid inter-State transactions the course of in Madhya Pradesh these transactions sought transactions of sale of goods the Act and we arc confirmed to be and possess a registration certificate under section 8(1) the Act. Merely because he got himself registered the penalty which would otherwise as such upon him by the State it cannot be stated be visited that whatever into with other transactions he entered dealers in the State of Madhya Pradesh were all intra State transactions or internal sales or purchases irres. pcctive involved the good51, across the border and were movement of the course of clearly trade or commerce, We were taken by the inter-State the several provi• learned Attorney-General in our opinion sions of taxed by Sales Tax authorities of the State of Madhya Pradesh were transactions or commerce. The activities of selling or supplying if carried on habitually to a carrying on of the business of sell would amount ing or supplying goods in the State of Madhya Pra desh and even an outside merchant who indulged in such activities may in such event to be carry in Madhya Pradesh and would come ing on business the definition of "dealer" given in section 2(c) within of the Act. When we come, however, to section 8 which deals with the registration of dealers, that sec to pay tion requires tax under the Act shall not carry on business as a dealer unless he has been registered as such and pos sesses a registration certificate. The to pay tax under is thus postulated and unless and to pay such tax he need not get himself registered as a dealer. All the transac tions entered into by a registered dealer, however, do tax under not necessarily the Act because, whenever the question arises regard to his the Act, in spite of such liability would have to be determined inter alia, his being a registered dealer with reference, to the provisions of section 27-A of the Act which the bans w!iich have been corporates within its the State Legislatures imposed on the powers of that a dealer while being liable liabilty to pay any import a tax under a person is liable the Act liability liability be said to pay 1955 Mes!rl Mohan/al Hartovind Das, Ridi Merchants, Jabalpur (M. P.) v. Th~ State of Madhya Pro.rfesh and another Bhagawati j. 516 SUPREME COURT REPORTS [1955] If, is sought took place to be made liable tax under article 286 (1) (a) and (2) of the Constitu therefore, a dealer who has got him~elf tion. registered as dealer under the provisions of section 8 ( 1) in respect of of the Act transactions of sale effected by him he could claim transactions of liability exemption from such sale or purchase the course of inter-State trade or commerce after the 31st March, 1951, except in so far as Parliament may by law otherwise provide. In the case before us there was no such provision the transactions in question made by Parliament result were all after the 31st March, 1951, with in opera in the course tion and took place the transactions trade or commerce not only were Shri and Shri Maniklal Chhaganlal U garchand Nipani the liability to pay Chunanlal Baroda exempt but the petitioners also exempt. No liability, therefore, could were similarly be imposed either for Sales Tax or for Purchase Tax within the terms of transactions which as above stated in the course of inter State trade or commerce. the ban imposed by article 286(2) was inter-State tax on these the Act on transactions took place tax on finished the said goods that by virtue of time of making It was, however, urged the petitioners had the pur made declarations at tobacco that they had pur chases of for use as raw material.s in the chased for sale for actual delivery in manufacture of goods the purpose of consumption in Madhya Pradesh that State and the provisions of sec tion 4(6) of the Act they were liable to pay the pur the purchase price of goods which had been utilised for any other purpose. Whatever rhe State of Madhya Pradesh may be able to take in the terms of the decla regard to nbn-compliance with rations by the petitioners we are clearly of opinion the State of Madhva Pradesh · is restrained transactions of purchasr: or imposing inter-St2te in the course of sale which trade or commerce and no question of liability of the petitioners by survives initially Shri Shah Chhaganlal Ugar- ·because even any tax on the such declarations virtue of 2 S.C.R. SUPREME COURT REPORTS 517 by virtue chand Nipani and Shri Maniklal Chunanlal Baroda were not liable to pay any tax on these transactions liability for tax be transferred to nor could any such If, the petitioners liability, therefore, the declarations create any the petitioners cannot be held liable new liability and to tax even Act, the very basis of the liability sought therein having disappeared. by the operation of section 4(6) of to be there was no basis for any such themselves declarations. of such cannot 1955 Mmrs Mohdll/al J/argovind Das, Bidi Merthanls, Jabalpur (M. P.) v. Tht Stale of Madhya Pradesh and anothtr Bhagawati J. in question and The result, therefore, is that the Respondents will be restrained from enforcing the Central Provinces and its provmons against Berar Sales Tax Act, 1947, and the petitioners and from imposing a tax in respect of the transactions in particular from imposing a tax on the purchase price of goods pur chased on the declarations under Rule 26 being goods in the registration certificate as intended for specified use as raw material the manufacture of goods for sale by actual delivery in Madhya Pradesh for the in that State but utilised for purpose of consumption any other purpose under the provisions of section the Act. The Re~ondents will pay the peti 4(6) of tioners' costs of this petition. THE TROPICAL INSURANCE CO LTD. & OTHERS v. THE UNION OF INDIA & ANOTHER (and connected petition.) [S. R. DAS, ACTING C.J., BHAGWATI, VENKA1'A RAMA AYYAR, JAFER IMAM and CHANDRA SEKHARA AYYAR JJ.) 1955 Sep11m/Jel 22 Insurance-Insurer doing life insurance business along with general insurance business-Power of Central Government to appoint Administrator-Such power, if confined exclusively to life insurance business-Grounds not taken in petition under Art 32, if can be urged at the hearing-Insurance Act (IV of 1938), s. 52-A-Consti tution of India, Art 32.