1959 (1) TMI 17 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on a company for two different periods in the district of Patna, Bihar. Interpretation of Article 286(2) of the Constitution regarding the imposition of sales tax on goods delivered for consumption within the State of Bihar. Jurisdiction of the taxing authorities to levy sales tax based on the definition of "sale" under the Bihar Sales Tax Act.

Analysis:
The case involves the assessment of sales tax on a company for two distinct periods in the district of Patna, Bihar. The company, engaged in iron and steel manufacturing, was ordered to pay sales tax for goods delivered for consumption within Bihar. The company contended that the sales were part of inter-State trade and commerce, thus exempt from taxation under Article 286(2) of the Constitution. The High Court was tasked with determining the lawfulness of taxing these sales. The Board of Revenue referred the question of law to the High Court for clarification.

Regarding the first period, the Court noted that the President had promulgated the Sales Tax Continuance Order, 1950, allowing the levy of tax until March 31, 1951, despite Article 286(2) restrictions. Therefore, the tax imposed for this period was deemed valid under the Order, and the company's objection was dismissed.

For the second period, the company conceded that the tax was valid due to the Sixth Amendment of the Constitution and Central Act 7 of 1956, which overcame the Article 286(2) restrictions. The Court accepted this concession and upheld the validity of the tax imposed during this period.

A separate argument was raised concerning the definition of "sale" under the Bihar Sales Tax Act. The company claimed that the transactions did not fall under the Act's definition of sale as the title passed outside Bihar. However, the Court deemed this argument beyond the scope of the question referred by the Board of Revenue. The Court highlighted that factual investigations were necessary to determine the passing of title in each transaction, which had not been conducted by the taxing authorities.

In conclusion, the Court held that the company had been lawfully taxed for the sales of goods delivered for consumption in Bihar during the assessment periods. The question of law was answered in favor of the State of Bihar, and the company was directed to pay the costs of the reference.

The judgment provides a detailed analysis of the legal provisions, factual circumstances, and jurisdictional issues involved in the assessment of sales tax on the company, ensuring a thorough examination of the relevant constitutional and statutory provisions governing the taxation of inter-State transactions and the definition of sale under the Bihar Sales Tax Act.