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PETITIONER: K.B. HANDICRAFTS EMPORIUM AND ORS.  ETC.

       Vs.

RESPONDENT: STATE OF HARYANA AND ORS.

DATE OF JUDGMENT28/04/1993

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALA N. (J)

CITATION:  1994 AIR 1220            1993 SCR  (3) 454  1993 SCC  Supl.  (4) 589 JT 1993 (4)   545  1993 SCALE  (2)675

ACT: % Haryana General Sales Tax Act 1973: Sections  9. 24 read with Rule 21, ST Form- 15, the  Haryana General  Sales Tax Rules and read with Section 5 (1) of  the Central  Sales Tar Act and Form A of the General  Sales  Tax Rules-Raw   material   purchased  within   Haryana-Sale   of manufactured  goods out of such raw material to  dealers  at Delhi, who exports them-Purchase tax whether leviable. Constitution of India. 1950: Article 32-Writ Petition-Whether a particular sale is intra- state  sale, inter-State sale or export  sale-Supreme  Court cannot determine in writ jurisdiction. W.P.(C) No. 983511983

HEADNOTE: Petitioners-firms  were registered sales tax dealers.   They manufactured  and sold handicraft items.  As they  purchased raw material within the State against declaration forms  ST- 15 prescribed under Rule 21 of the Haryana general Sales Tax Rules read with Section 24 of the Haryana General Sales  tax Act, purchase tax was not paid. The petitioners sold the items of handicrafts to dealers  in Delhi  who  exported the same out of India.   As  the  Delhi dealers  issued Form H, prescribed under the  Cectral  Sales Tax Rules, they did not pay tax on the said sale/purchase. Following the High court decision in M/s.  Murli Manohar and company, Panipat & ors. v. State of Haryana & Ors.  C.W. P. No.  1227 of 1980.  The Sales Tax Authorities levied purchase tax  u/s 9  of the Haryana General Sales Tax Act for  the  assessment years  in question on the purchase of raw material  made  by the  petitioners, computing the tax with reference’  to  the purchase  value of the goods exported against Form H. Hence the present writ petition before this Court was  filed challenging 454 155 the impugned order of levying purchase tax. Meanwhile  this court allowed the appeals preferred  against the  decision  of  the  High  Court  in  Murli  Manohar  and Company’s  case,  setting  aside the judgment  of  the  High

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Court. As a common question arose in this batch of writ  petitions, all petitions heard together. The  petitioners contended that in view of the  decision  of this  Court  in  Murli Manohar 1991 [1] SCC  377,  the  writ petitions were to be allowed. Disposing of the writ petitions, this Court, S.. HELD:     1.1,.  The  decision in Murli  Manohar  says  that there can be only three types of sales, namely,  intra-state sales, inter-state sales and export  sales a nd no other.  A sale  to an exporter would be either at% intrastate sale  or an  inter-state sale; in either case, the decision says,  it does  not  attract the purchase tax(on raw  material)  under Section 9 of the Haryana General Sales Tax Act.  However, in the  light of the decision in Hotel Balaji, it must be  held that  there  is one more category in addition to  the  three categories mentioned above.  The fourth category is where  a dealer  in Haryana takes his goods (out of Haryana  (without effecting a sale, within the State), and effects the sale in the other State.  According to Section 9 of the Haryana Act, as explained in Hotel Balaji, purchase tax can be levied and collected  on the raw material purchased by the  manufacture within  Haryana,  which was utilised for  manufacturing  the goods so sold in the other State. (458-D-F) Murli Manohar case. [1991] 1 S.C.C. 377, followed. Good  year India Lid. and Ors. v. State of Haryana and  Anr. [1990] 2 S.C.C. 71, referred to. Hotel Balaji and Ors. etc. etc. v. State of Andhra Pradesh & ors. etc. etc.  J.T. (1992) 6 S.C. 182 explained 2.1. In  a petition under article 32 of the Constitution  it is  not the province of the Supreme Court to go into  facts. As repeatedly emphasised by this Court, the question whether a  particular  sale is an intra-state sale, an  inter  state sale, an export sale within the meaning of Section 5(1) or a 456 penultimate  sale  within the meaning of  section  5(3),  or otherwise, is always a question of fact to be decided by the appropriate  authority  in  the  light  of  the   principles enunciated by Courts. (459-C) 2.2. In these circumstances, it is directed that the matters be disposed of by the authorities under the Act in the light of  the law declared by this Court in Murli  Manohar,  Hotel Balaji and in this judgment. (459-D)

JUDGMENT: ORIGINAL  JURISDICTION:  Writ Petition (c) Nos.  9835-38  of 1983. (Under Article 32 of the Constitution of India)                             WITH W.P.(C)Nos.7468-7469/81,3838-39/83,5398/85,5435/85,386/84, 1489/  86, 12691/85, 489-90/83, 81/83, 68/86 & 1065/87 Lakshmi  Chandra Goyal, B.B. Sahni and Serve Mitter for  the Petitioners D.P. Gupta, Solicitor General, Ms. Indu Malhotra, Ms.  Aysha Khatri,  Ms.  V.  Mohana  and  Ms.  Nisha  Bagchi  for   the Respondents. The Judgment of the Court was delivered by B.P. JEEVAN REDDY J. A common question arises in this  batch of  writ petitions.  We may take the facts in writ  petition (C) No. 9835 of 1983 filed by M/s K. B. Handicrafts Emporium &  Ors.,  as representative of the facts in all  the  cases. The  petitioners  are firms engaged in the  manufacture  and sale  of handicrafts items.  They are registered  Sales  Tax

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Dealers  in  the  State  of  Haryana.   They  purchased  raw material  within the State against declaration  forms  ST-15 prescribed  under Rule 21 of the Haryana General  Sales  Tax Rules read with Section 24 of the Act.  By issuing Form  ST. 15, the petitioners undertook that the goods manufactured by them  out  of the said raw material would be  sold  by  them either  within  the State or in the  course  of  inter-state trade  and  commerce or in the course of export  within  the meaning  of  Section 5(1) of the Central Sales Tax  Act.   A dealer  issuing the said Form need not pay the purchase  tax on  such  raw material.  After manufacturing  the  items  of handicrafts, the petitioners say, they sold them to  dealers in  Delhi who, in turn, exported them out of India.  At  the time  of  sale of handicrafts to Delhi  dealers,  the  Delhi dealers  issued Form-H, prescribed under the  Central  Sales Tax  Rules which means that the goods purchased  were  meant for   export.    Neither  party  paid  tax   on   the   said sale/purchase. 457 For  the  assessment  years  in  question,  the  Sales   Tax Authorities  of Haryana levied purchase tax on the  purchase of  raw  material  made by  the  petitioner,  following  the decision  of  the  Punjab and Haryana  High  Court  in  M/s. Murli.  Manohar  and  Company Panipat & Ors.   V.  State  of Haryana  &  0rs. (Civil Writ., Petition No. 1227  of  1980), under  section  9 of the Haryana General  Sales  Tax.   Act, 1973.   However,  the assessing authority computed  the  tax with  reference to the purchase value of the goods  exported against Form-H.  The petitioners. did not choose to file  an appeal  but  directly approached this Court by way  of  this writ petition on the ground that in view of the decision  of the Punjab and Haryana.  Hig h Court in Murli Manohar  there was no point in their pursuing the remedies under the Act in that State. Appeals were preferred in this court against the decision of the  Punjab  and Haryana High Court in Murli  manohar  which have  been  disposed of by this Court on  October  25,  1990 (reported in [1991] 1 S.C.C. 377).  This.  Court allowed the appeal and set aside the judgment of the High Court. When these writ petitions came up for hearing, it was, urged by  the learned counsel for the petitioners that in view  of the  decision  of  this Court- in  Murli  Manohar  the  writ petitions  must be allowed stria ghtway.  This was  demurred to-by  the  learned  Solicitor  General  appearing  for  the respondent-State. We  are  of the opinion that the decision of this  Court  in Murli  Manohardoes cover the point raised in  these  appeals but  it  is necesary to add a clarification.  Before  we  do that, it is necessary to state a little background.  Earlier to the. rendering of the decision in Murli Manohar, a  Bench of   this.Court   comparising   Sabyasachi   Mukharji    and Ranganathan,  JJ. held in Good year  India Ltd. and Ors.  v. State  ofHaryana and Anr. [1990] 2 S.C.C.71 that  where  the goods  manufactured  are  taken  out  of  Haryana   (without effecting  a  sale)  to the branch office or  depot  of  the Manufacturer  or  to the office or depot of  his  agent,  no purchase tax can be levied under section 9 of the Act on the raw  material  purchased within the State and  used  in  the manufacture  of such goods.  It was held that imposing  such ta  would  amount to levying tax on consignment,  which  the State Legislature was not’ competent to do.  Section 9 as it then  stood, stated expressly that no such purchase  tax  on raw material was leviable, if the goods manufactured out  of such raw material were sold either within the State or  were sold in the course of inter-state Trade and Commerce or were

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sold  in the course of export within the meaning of  Section 5(1) of the Central Sales Tax Act.  MurliManohar was decided in  the  light.  of the law  declared,in  Goodyear.   Later, However, a Bench of three.  Judges comprising S.Ran anathan, v. Ramaswami, JJ. and one of us(B.P.Jeevan Reddy, J.)  held that.Goodyear  does not lay down the correct law-vide  Hotel Balaji and 458 Ors.  etc. etc. v. State of Andhra Pradesh & Ors. etc.  etc. JT  (1992)  6 S.C. 182.  It was held in  Hotel  Balaji  that having regard to the scheme of and the objective  underlying section 9 it was competent for the State Legislature to levy purchase  tax  on raw material purchased  within  the  State where  the goods manufactured out of such raw  material  are taken out of the State (without effecting a sale within  the State  or otherwise than by way of aninter-state sale or  by way of an export-sale within’the meaning of Section 5(1)  of the  Central Sales Tax Act).  It was held that  such  a  tax does not amount to consignment tax.  It is this decision  in Balaji  that  calls  for  a  certain  clarification  of  the principles enunciated in Murli Manohar. The facts in Murli Manohar Were substantially similar to the facts  herein.  The  dealers within  the  State  of  Haryana purchased  raw  material without  paying  tax,  manufactured goods  out  of the same and sold the manufactured  goods  to dealers  who in turn exported those goods out of India.   On these facts it was held by the Punjab and Haryana High Court that  inasmuch  as the sale to exporters was  a  penultimate sale falling under section 5(3) of the Central Sales Tax Act and further inasmuch as Section 9 of the State Act  exempted only export sales within the meaning of section 5(1)-of  the Central  Sales Tax Act but not the penultimate sale  falling under  Section 5(3), tax under Section 9 was  leviable.   On appeal,  this court affirmed that Section 9 of  the  Haryana Act (before it was amended by Haryana Act 1 of 1988) did not exempt as sale falling under Section 5(3) but exempted  only a sale failing under section 5(1).  Even so, the appeal  was allowed  on the following reasoning "the sales made  by  the assesses  can only fall within one of the three  categories. They  are either local sales or inter-state sales or  export sales.............  We  are unable to conceive of  a  fourth category of sale which could, be neither a local sale nor an interstate  sale  nor an export sale." In other  words,  the decision  says that there can be only three types of  sales, namely,  intrastate  sales,  inter-:state  sales,and  export sales  and no other.  A sale to an exporter would be  either an  intrastate sale or an inter-state sale; in either  case, it does not attract the purchase tax (on raw material) under Section  9 of the Haryana Act, says the decision: It  is  on this reasoning that the appeals were allowed inspite of  the clear enunciation that the sales failing under Section  5(3) of the Central Sales Tax Act were not exempt under Section 9 of the Haryana Act, as it then stood. The above holding is evidently influenced by the decision in Goodyear,  which was good law at the time Murli Manohar  was decided.   However,  in the light of the decision  of  Hotel Balaji,  it must be held that there is one more category  in addition  to  the  three categories  mentioned  above.   The fourth  category  is where a dealer in  Haryana  takes,  his goods  out  of  the Haryana without effecting  a  sale.   An illustration would serve to highlight what we say: a Haryana manufacturer  takes his goods to Delhi without  effecting  a sale.  In Delhi. if he finds it more profitable, 459 he  will  sell it to a dealer in Delhi.  Or if he  finds  it

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more  profitable to sell it to an exporter in Delhi he  will sell the same to such exporter.  These two sales are neither intrastate  sales  nor inter-state sales, nor  export  sales within the meaning of Section 5(1) of the Central Sales  Tax Act.  In one Case, it is a sale in Delhi and. in. the other, it is a punultimate sale within the meaning of Section  5(3) of the Central Sales Tax Act.  According to Section 9 of the Haryapa Act, as explained in Hotel Balaji and Murli  Manohar purchase  tax  can  be  levied and  collected  on  the  raw. material purchased by the manufacturer within Haryana, which was utlised for manufacturing the goods so sold in these two situations. We must make it clear that in a petition under Article 32 of the  Constitution, it is not our province to go into  facts. As  repeatedlly  emphasised  by this  court,  the.  question whether  a particular sale is an intra-state sale,an  inter- state  sale  ,an export sale within the meaning  of  section 5(1)  or  a penultimate sale within the meaning  of  section 5(3),  or  otherwise,  is always a question of  fact  to  be decided  by  the  apporiate authority in the  light  of  the principles enunciated by Courts.  In these circumstances, we content  ourselves by declaring the law and leave it  to  be applied  by  the appropriate authorities.  Counsel  for  the petitioners  says  that all the sales effected  by  all  the petitioners  are inter-State sales.  May be,or may  not  be. We  leave the matters to be, disposed of by the  authorities under the Act in the light of the law declared by &.Is Court in Murli Manohar, Hotel Balaji and in this judgment. The  writ petitions are disposed of with the  aforementioned clarification and, observations.  No costs. V.P.R.                                  Petitions disposed of. 460