M/s. Sri Balaji Industries v. The Government of Andhra Pradesh & Ors.

Otherwise, there would be no occasion to move such commodity out of the notified market area. The legal fiction was thus limited to the "moving" of the commodity from within the market area to a place outside the market area.” and submitted that the consignment sales are not covered by the provisions of the Act. He further relied upon a decision reported in STATE OF BOMBAY v. UNITED MOTORS LTD. and drawn [2] attention of the Court to paragraph 12, which reads as under: “12. Having thus provided for the freedom of inter-State trade and commerce subject to the important qualification mentioned above, the authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving inter-State elements which would avoid the doubts and difficulties arising out of the imposition of sales tax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution.

This they did by enacting cl. (1) (a) with the Explanation and cl. (2) of Art. 286. Clause (1) (a) prohibits the taxation of all sales or purchases which take place outside the State, but a localised sale is a troublesome concept, for, a sale is a composite transaction involving as it does several elements such as agreement to sell, transfer of ownership, payment of the price, delivery of the goods and so forth, which may take place at different places. How, then, is it to be determined, whether a particular sale or purchase took place within or outside the State? It is difficult to say that any one of the ingredients mentioned above is more essential to a sale or purchase than the others. To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated, and that is what, in our opinion, the Explanation was intended to do. It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place, notwithstanding the property in such goods passed in another State.

Why an "outside" sale or purchase is explained by defining what is an inside sale and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear. The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test : Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States. The latter States are prohibited from taxing the sale or purchase; the former alone is left free to do so Multiple taxation of the same transaction by different States is also thus avoided.” Learned counsel for the petitioner also relied upon a Judgment of the Apex Court reported in BENGAL IMMUNITY Co. v. STATE OF BIHAR [3] for the proposition that the Writ Petition is maintainable when an authority assumes jurisdiction, which was not vested in it.

In the said decision, it was observed as under:

6…………The contention of the appellant company is that the Act which authorises the assessment, levying and collection of sales tax on interstate trade contravenes and constitutes an infringement of Art. 286 and is, therefore, 'ultra vires', void and unenforceable. If, therefore, this contention be well founded, the remedy by way of a writ must, on principle and authority, be available to the party aggrieved.

Per contra, learned counsel for the respondent-Market Committees contended that the issue involved in question is no more res integra and the same has already been decided by this Court in Writ Petition Nos.8387 and 8412 of 2003, dated 16-7-2004 wherein it was held that the Agricultural Market Committee is at liberty to make an enquiry and can pass appropriate orders including that of assessment of market fees, by specifying the persons who are liable to pay the same.

The application of provisions of Explanation I to Section 12 of the Act are subject to verification of records and enquiry. Therefore, it cannot be said that the respondents have no power under the Act to levy market fee on the so- called consignment sales. He relied upon the very same decision as was relied upon by the learned counsel for the petitioners in SHALIMAR CHEMICAL WORKS LTD. case (1 supra) and drawn attention of the Court to paragraphs 27 and 28 and submitted that a matter of this nature is always decided only on the basis of enquiry and the evidence let therein; but it cannot be said that the authorities have no power to enquire into as to consignment sales etc. I have given my earnest consideration to the respective submissions made by the learned counsel on either side and gone through the impugned demand notices/assessment orders and other material made available on record. At the outset, I am of the opinion that no sales have been effected by the petitioners within the notified market area.

It is not the case of the respondents that the petitioners while transporting cotton seeds on lorries to the other States like Maharashtra and Rajasthan, the way bills and other required information was not furnished. The petitioners are supposed to file returns only as to the goods, which are supposed to be subjected to levy of market fees and not of other goods. The fact that weighment of the goods, loading the same into lorries and transporting them to other States itself does not mean that a presumption can be drawn that the goods were subject to sale in the notified market area. Rule 75 of the Andhra Pradesh (Agricultural Produce & Livestock) Market Rules,1969 contemplates that no person shall transport any notified agricultural produce purchased or sold in the notified market area, from the limits thereof, except on production of receipt for payment of prescribed fees in respect of such notified agriculture produce.

Petitioners have been showing all the documents at the check post and passing through the same, since the goods are not purchased or sold within the notified market area. Only on the basis of some presumption and on the basis of sales-tax returns, the impugned demand notices/assessment orders have been passed by the authorities, without properly considering the provisions of law. The very demand notices issued by the respondent-Market Committee on the basis of the assessment orders issued by the Sales Tax Officer concerned reveal that the market fees is levied on the net sales value at outside State. May be, the petitioners were asked to submit their explanation. They have, in fact, submitted their explanation stating that they are consignment sales and no sale, physically and practically, effected within the notified market area; therefore, they are not liable for payment of market fees. It is not the case of the respondents that the petitioners have not submitted the monthly returns as usual or they have suppressed any information when the goods were passing through the check posts.

Therefore, the respondents cannot assume jurisdiction of the sales that are made outside the State and subject those goods to the market fees in the guise of presumption under Section 12 of the Act. In fact, the presumption is rebutted by their own demand notices that the sales were effected outside the State. The Judgments relied upon by the learned counsel for the petitioners support the case of the petitioners as to what extent and under what circumstances, the presumption under Explanation I to Section 12 of the Act is available in cases of this nature. The decision relied upon by the learned counsel for the respondents has no relevance to the facts of the present cases. In the above backdrop, I am of the opinion that the goods weighed, loaded and transported by the petitioners are meant for consignment sales i.e. sales to be effected in other States. Therefore, they cannot be subjected to market fees on the presumption that the goods are taken out of the notified market area.