JUDGMENT
K.L. Pandey, J.
1. At the instance of the applicant, the Board of Revenue, Madhya Pradesh (Tribunal) has, under Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, formulated and referred to this Court for its opinion the following question of law:
Whether in the facts and circumstances of the case the inclusion of the purchases for Rs. 2,62,919.67 in the turnover of the appellant for assessment to tax under Section 4(6) of the C.P. and Berar Sales Tax Act, 1947, was justified?
2. The facts of the case so far as they are necessary for this reference may be briefly stated. The applicant, who is a registered dealer, purchases timber locally and sells such timber mostly to persons outside this State. He was assessed to tax on sales made by him in the year 9th November, 1957, to 22nd October, 1958. He had purchased timber worth Rs. 2,62,919.67 on declarations but, instead of selling the timber in this State for the purpose of consumption in this State as he undertook to do by his declarations, he exported the timber. Therefore, under Section 4(6) of the Central Provinces and Berar Sales Tax Act, 1947, the purchase price of the timber was included in the turnover. In the two successive appeals filed by the applicant, he challenged the inclusion of the purchase price in the turnover. The ground on which he did so will be clear from the following statement of the case:
Under his order, the assessing officer had included purchases for Rs. 2,62,919.67 nP. in the turnover of the appellant under Section 4(6) of the old Act on the ground that the goods were purchased by the appellant on declarations that they were intended for resale by him by actual delivery in Madhya Pradesh for the purpose of consumption in that State but were exported by him out of the State of Madhya Pradesh in violation of the declarations. It was contended by the applicant in his second appeal before this Tribunal that these transactions should not have been included in his turnover under Section 4(6) of the old Act as the goods were sold to the Railways in Madhya Pradesh and delivery of the goods was given to the Railways in Madhya Pradesh. This contention was rejected by this Tribunal by its order of 24th November, 1961, on the ground that to resist successfully the inclusion of these purchases in the turnover under Section 4(6) of the old Act the applicant will also have to show that the sales by him were for the purpose of consumption in Madhya Pradesh and that has not been done as the sales to the Railways were clearly for the purpose of export from this State and the goods were actually exported.
3. Having heard the counsel, we are clearly of opinion that Rs. 2,62,919.67 paid by the applicant for purchasing the timber which he exported to a place outside the State was rightly included in the turnover. Section 4(6) of the 1947 Act reads:
Where any goods are purchased by a registered dealer as being intended for resale by him by actual delivery in Madhya Pradesh for the purpose of consumption in that State, or as being goods specified in such dealer’s certificate of registration as intended for use by him as raw materials in the manufacture of any goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State and such goods are utilised by him for any other purpose, the price paid by him for such goods shall be included in his turnover and be liable to tax in accordance with the provisions of this Act.
If the applicant purchased the timber by giving declarations that he would resell the timber in this State by actual delivery for the purpose of consumption in this State, he clearly failed to utilise it for that purpose when he exported it to a place outside the State. It is, however, urged that, since he actually delivered the timber to the railway authorities at various railway stations in this State, he could not be blamed if they, on their own, exported it to a place outside the State. This contention is not well-founded because, in terms of the contract under which the timber was supplied, the consignee was the Works Manager, Northern Railway, Jodhpur. That means that it was contemplated from the start that the timber would be sent to Jodhpur and not consumed in this State. That being so, it is not necessary for us to decide in this case whether delivery to the railways is actual delivery within the meaning of Section 4(6) of the 1947 Act. We consider it sufficient to say that that section was attracted because the sale was not made for the purpose of consumption in this State.
4. It is next urged that the timber was sold to the railway authorities in the course of inter-State trade and could not, therefore, be taxed under the State law. In support of this view, reliance is placed upon Messrs Mohanlal Hargovind Das v. The State of Madhya Pradesh [1955] 2 S.C.R. 509. In our opinion, that case is of no assistance to the applicant because there the initial sales, for which declarations were given, were not liable to tax. This is what the Supreme Court stated:
It was, however, urged that the petitioners had made declarations at the time of making the purchases of this finished tobacco that they had purchased the said goods for use as raw materials in the manufacture of goods for sale for actual delivery in Madhya Pradesh for the purpose of consumption in that State and that by virtue of the provisions of Section 4(6) of the Act they were liable to pay the purchase tax on the purchase price of goods which had been utilised for any other purpose. Whatever steps the State of Madhya Pradesh may be able to take in regard to non-compliance with the terms of the declarations by the petitioners, we are clearly of opinion that the State of Madhya Pradesh is restrained from imposing any tax on the transactions of purchase or sale which take place in the course of inter-State trade or commerce and no question of liability of the petitioners by virtue of such declarations survives because even initially Shri Shah Chhaganalal Ugarchand Nipani and Shri Maniklal Chunanlal Baroda were not liable to pay any tax on these transactions nor could any such liability for tax be transferred to the petitioners by virtue of such declarations. If, therefore, there was no basis for any such liability, the declarations by themselves cannot create any new liability and the petitioners cannot be held liable to tax even by the operation of Section 4(6) of the Act, the very basis of the liability sought to be imposed therein having disappeared.
In the instant case, the first sales, which were made to the applicant, were liable to tax because they were inside sales. They were not taxed because, in view of the declarations made by the applicant, the one-point tax could be recovered subsequently when, as undertaken, the applicant sold the timber by actual delivery in this State for the purpose of consumption in this State. Having purchased the timber cheaply, that is, without the tax being included in the price paid by him, he cannot escape his liability under Section 4(6) ibid if he acted contrary to his declarations and so prevented the State from recovering the tax subsequently.
5. In the view we have taken, we answer this reference in the manner indicated above. We also direct that the applicant shall pay all costs of this reference. Hearing fee Rs. 100.
