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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