A EBRAHIM AND COMPANY Vs. STATE OF BOMBAY

JUDGEMENT

(1.) The applicant before us, a proprietary concern, is a registered dealer doing wholesale and retail business of selling separated parts of ship machinery and ferrous and non-ferrous metals. The applicant purchased a ship by name "Jala Veera" from the Scindia Steam Navigation Company. On 9th March, 1954, the applicant entered into an agreement with Messrs Compania Naveira Heredia Limitada Costa Rica, to sell the said ship for a consideration of Rs. 4,52,547-10-6. At the time of the agreement, the ship sold was lying in the docks of the Bombay Port. Clause (1) of the agreement states that the steamer shall be accepted as and where she now lies. In clause (4), it is stated that the steamer shall be delivered as and where she lies in Bombay free from claims of other parties against the steamer. Clause (5) says that the vendors agree to allow the purchasers or their representatives to go on board the steamer at the port of delivery. Clause (6) is to the effect that the steamer shall be deemed ready for delivery as soon as the vendors receive Government of India's sanction for its transfer to the Costa Rican flag and as soon as the bill of sale is ready for delivery to the Westminster Bank Ltd., London. Clause (15) states that the agreement is subject to the vendors' obtaining a transfer of flag to the Costa Rican Registry from the Government of India and that in the event of transfer of flag not being granted the contract is to become null and void. Clause (16) states that the purchasers are to have liberty of placing a watchman aboard the vessel at their own expense upon the signing of the agreement. Clause (17) is to the effect that the purchasers are to have liberty to use the vessel for trading or for breaking up at their option. It appears that sometime before 15th April, 1954, the Government of India granted permission for sale of the ship and for transfer of the flag of the ship to the Costa Rican flag. On 15th April, 1954, the ship sailed out of Indian waters.

(2.) In the assessment of the applicant to sales tax for the period 1st April, 1953, to 31st March, 1954, the applicant claimed deduction of the aforesaid amount of Rs. 4,52,547-10-6 from his taxable turnover and was allowed deduction by the Sales Tax Officer on the ground that the sale took place outside the Indian Dominion. Purporting to act under section 31 of the Bombay Sales Tax Act, 1953, the Assistant Collector of Sales Tax, suo motu, issued a notice to the applicant, calling upon him to show cause why the said sale price of the ship of Rs. 4,52,547-10-6 should not be included in his taxable turnover. In response to the notice issued, the applicant appeared and contended that the said sale price was not liable to be included in his taxable turnover. The Assistant Collector overruled the contentions raised by the applicant and included the sale price in the applicant's taxable turnover. The applicant filed an appeal before the Additional Collector against the order of the Assistant Collector, but to no avail. The applicant then filed a revision before the Sales Tax Tribunal, and before the Tribunal, the contentions raised by the applicant were four-fold : (1) The Assistant Collector had no jurisdiction to issue notice under section 31, and therefore, the assessment was bad; (2) selling ship was not the business of the applicant, and therefore sale of the ship "Jala Veera" by him was not effected by him in his capacity as the dealer, but was only a stray adventure, and, therefore, its sale price was not liable to be included in his taxable turnover; (3) that, at any rate, the sale was an export sale or in the alternative in the course of an export, and therefore was exempt from tax under Article 286(1)(b) of the Constitution of India; and (4) the sale was outside the State of Bombay, and therefore not liable to tax. None of these contentions succeeded before the Tribunal. On an application made by the applicant, the Tribunal has drawn up the statement of the case, and has referred to us the following five questions :

(3.) To appreciate the argument of Mr. Ganatra on the first question, it would be convenient to refer to certain provisions of the Act. The material part of section 31 provides that subject to such rules as may be prescribed and for reasons to be recorded in writing, the Collector may, upon application or of his own motion, revise any order passed under this Act or the Rules thereunder by a person appointed under section 3 to assist him and, subject as aforesaid the Tribunal may, upon application, revise any order passed by the Collector. Sub-section (1) of section 3 empowers the State Government to appoint any person to be a Collector of Sale Tax and such other persons to assist him as the State Government thinks fit. Sub-section (2) of section 3 provides that a person appointed under sub-section (1) shall, within the limits of the area specified to be within his jurisdiction, exercise such powers as may be conferred and perform such duties as may be imposed on him by or under this Act. In exercise of its power under section 45, the State Government made rules for carrying out the purposes of this Act. Chapter 11 thereof [i.e., The Bombay Sales Tax (Procedure) Rules, 1954] deals with appointment of Sales Tax Authorities. Sub-rule (1) of rule 3 occurring in this Chapter empowers the State Government to appoint Assistant Collector of Sales Tax, Sales Tax Officer and Inspector of Sales Tax, to assist the Collector. Sub-rule (2) provides that the Inspector of an area shall be subordinate to the Sales Tax Officer exercising jurisdiction therein. The Sales Tax Officer shall in any matter in which he has jurisdiction be subordinate to the Assistant Collector exercising jurisdiction in respect of that matter; and sub-rule (3) provides that all such Inspectors, Sales Tax Officers and Assistant Collectors shall be subordinate to the Collector and shall, in the exercise of their powers and in the discharge of their duties and functions under the provisions of the Act, or any rules made thereunder, follow such directions as the Collector may issue from time to time. Referring to the aforesaid provisions, Mr. Ganatra contends that the Collector no doubt has a power to revise of his own motion the orders made by Sales Tax Officers appointed by the State Government to assist him, but the Assistant Collector has no jurisdiction to exercise those powers inasmuch as no officer is appointed to assist him. The officers which are appointed under section 3, read with the rules, are the officers appointed to assist the Collector of Sales Tax only. The Advocate-General, on the other hand, places reliance oil section 44 of the Act, and the notification issued by the Collector on 18th May, 1953, delegating to all Assistant Collectors of Sales Tax his power exercisable by him under the various sections and rules mentioned in the notification, which included section 31 of the Act. Material part of section 44 is in the following terms :