1967 (2) TMI 67 - SC - VAT and Sales Tax

Whether the sales were to be treated as sales in Bihar for the purposes of the Bihar Sales Tax Act or as sales in the course of inter- State trade and commerce for purposes of the Central Sales Tax Act? Held that - Appeal allowed by way of remand. There is nothing to show that any further evidence beyond documents produced to illustrate sample sales was necessary. Nor did the learned Additional Solicitor-General suggest that this was going to be an issue of fact rather than of law. It would certainly have avoided circuity of action and proved altogether more satisfactory if the High Court had considered whether the sample transaction as illustrated by the documents, disclosed a transaction of sale outside the State of Bihar and not in the course of inter-State trade or commerce. On that depended the payment of tax of the order of Rs. 1,73,00,000 and odd for two quarters alone. We are clearly of opinion that the High Court ought to have taken jurisdiction in this case at least to issue a rule nisi to see what the Assistant Commissioner had to say. The High Court could always decline to decide the case if disputed questions of fact requiring finding thereon arose, but so far as we can see, no such question was likely to arise.

Issues:
1. Jurisdiction of the Assistant Commissioner to tax sales outside the State of Bihar.
2. Whether the High Court should have exercised jurisdiction under Article 226 of the Constitution.
3. Exhaustion of remedies available under the taxing statutes before approaching the High Court.

Analysis:
1. Jurisdiction of the Assistant Commissioner to tax sales outside the State of Bihar:
The appellant, a public limited company, sold products from its stock-yards located in States other than Bihar. The Assistant Commissioner assessed the company for sales made from these stock-yards, resulting in a demand for a significant sum of tax. The appellant challenged this assessment, arguing that these sales were not taxable in Bihar. The High Court dismissed the petition on the grounds that internal remedies under the Sales Tax Act had not been exhausted. However, the Supreme Court held that the High Court should have considered the claim made by the appellant regarding the nature of these sales. The Court emphasized that the Assistant Commissioner's jurisdiction did not extend to taxing sales outside Bihar unless proven otherwise. The case was remitted for further consideration, highlighting the need to determine whether the sales from stock-yards were in the course of inter-State trade or commerce.

2. Exercise of jurisdiction under Article 226 of the Constitution:
The High Court's decision to dismiss the petition based on the failure to exhaust internal remedies was challenged. The Supreme Court analyzed the limitations of Article 226 jurisdiction, emphasizing that it should not substitute ordinary legal remedies. However, exceptions exist, such as when action is taken under an invalid law or without legal sanction. In this case, the Court found the situation to be exceptional, warranting the High Court's intervention to prevent hardship. The Court criticized the High Court's summary dismissal and directed a more thorough examination of the appellant's claims, indicating that the High Court should have at least issued a rule nisi to allow the Assistant Commissioner to respond to the appellant's contentions.

3. Exhaustion of remedies available under the taxing statutes:
The appellant faced a preliminary objection regarding the exhaustion of remedies available under the taxing statutes before approaching the High Court. The Additional Solicitor-General argued that the appellant should have pursued the right of appeal and revision provided by the statutes. The Supreme Court acknowledged the importance of exhausting internal remedies but also highlighted the exceptional circumstances of the case. The Court noted that the High Court should have considered the appellant's claims more thoroughly before dismissing the petition summarily. The appellant's right to challenge the assessment and seek appropriate remedies was upheld, leading to the remittal of the case for further consideration.

In conclusion, the Supreme Court's judgment focused on the jurisdictional aspects of taxing sales outside Bihar, the exercise of Article 226 jurisdiction by the High Court, and the requirement to exhaust internal remedies under the taxing statutes. The Court emphasized the need for a more detailed examination of the appellant's claims and directed a reconsideration of the case to ensure a fair assessment of the tax liability related to sales from the stock-yards.

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