1962 (4) TMI 84 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of X-ray equipment for sales tax purposes.
2. Applicability of sales tax rate on X-ray equipment.
3. Petitioner's standing to file the petition under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Classification of X-ray equipment for sales tax purposes:
The petitioner, a doctor specializing in radiology, purchased X-ray equipment from Respondent No. 3. The equipment included a high tension generator, control device, X-ray tube, stand, and X-ray couch. The petitioner claimed that these appliances were solely for diagnostic and treatment purposes. However, the Commissioner of Sales Tax and the Assistant Commissioner of Sales Tax issued a circular categorizing X-ray equipment as photo goods, which are luxury items taxed at 7%. The petitioner argued that X-ray equipment should be classified as electro-medical equipment, which is taxed at 4%.

2. Applicability of sales tax rate on X-ray equipment:
The petitioner was informed by Respondent No. 3 that X-ray equipment was to be taxed at 4% as electro-medical equipment. However, the sales tax authorities decided to tax it at 7% under the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi. The petitioner presented evidence, including the Government Red Book, which classified X-ray apparatus under electro-medical apparatus with a lower duty rate compared to photo equipment. The court referenced a similar case, International Radio Company v. The State of Bombay, which highlighted the distinctions between ordinary photographic cameras and X-ray apparatus. The court concluded that X-ray apparatus and films used for medical purposes do not fall under item No. 6 of the First Schedule of the Act, which pertains to photographic and other cameras. Therefore, X-ray equipment should be taxed at 4%.

3. Petitioner's standing to file the petition under Article 226 of the Constitution:
The main argument against granting relief was that the sales tax is levied on a dealer, not the purchaser, and the petitioner, being a consumer, could not maintain the petition. The court examined precedents, including Chiranjit Lal Chowdhury v. The Union of India and Dwarkadas Shrinivas v. The Sholapur Spinning & Weaving Co. Ltd., which discussed the rights of shareholders and the enforcement of company rights. The court noted that the petitioner was directly affected by the imposition of the higher tax rate and had been recognized by the sales tax authorities as the party bearing the burden of the tax. The court held that the petitioner was aggrieved by the illegal tax rate and had no other remedy, thus justifying the exercise of extraordinary powers under Article 226.

Conclusion:
The court held that the imposition of sales tax at 7% on X-ray equipment under item No. 6 of the First Schedule was illegal. The petition was allowed, and the court issued a writ directing respondents not to realize sales tax at the rate of 7% from the dealers for sales made to the petitioner. Each party was ordered to bear its own costs.