1961 (4) TMI 69 - SC - VAT and Sales Tax

Whether section 15 of the Assam Sales Tax Act 1947 and rule 80 framed under the Act were ultra vires being a breach of Article 286(2) of the Constitution? Held that - Appeal allowed. Sub-section (2) stated that every dealer to whom sub-section (1) did not apply shall be liable to be taxed under this Act and that there was no mention of sub-section (1)A there. No doubt sub-section (2) does not mention sub-section (1)A; but sub-section (1)A is not rendered ineffective by the omission. Sub-section (1)A speaks of its own force and has to be given effect to along with the remaining sub-sections of section 3. Sub-section (1)A has the added support of Article 286 and the Constitution must prevail. Thus both Article 286 and sub-section (1)A of section 3 are there to save from taxation all sales in the course of inter- State trade or commerce and there is no need to look further into the Act to see whether they are exempted once again or not.

Summary

Issues:
Challenge to the constitutionality of section 15 of the Assam Sales Tax Act, 1947, and rule 80 framed under the Act under Article 286(2) of the Constitution.

Detailed Analysis:

1. Background and Facts:
- The appeal was filed by the State of Assam against a judgment of the High Court of Assam declaring section 15 of the Assam Sales Tax Act, 1947, and rule 80 as ultra vires Article 286(2) of the Constitution.
- The respondent, R.C. Dey, a wholesale tea dealer, challenged the amendment to section 15 and the rule, arguing they violated constitutional provisions.

2. Judicial Interpretation - Chief Justice's View:
- The Chief Justice and Ram Labhaya, J., both agreed that the amended section and rule were ultra vires Article 286(2) but for different reasons.
- The Chief Justice opined that the amendment and rule directly taxed sales in the course of inter-State trade or commerce, rendering them illegal.

3. Judicial Interpretation - Ram Labhaya, J.'s View:
- Ram Labhaya, J., held that the amendment indirectly affected inter-State trade or commerce by not excluding sales outside the State from the gross turnover, leading to taxation of such sales.
- He emphasized that the machinery section (section 15) of the Act needed to exclude sales in the course of inter-State trade or commerce to align with the charging section (section 3).

4. Precedent and Application:
- The judgment referred to a previous case involving a similar issue under the Orissa Sales Tax Act, where it was held that only sales within the State were taxable, not those leading to inter-State sales.
- The Court concluded that the same reasoning applied in the present case, rejecting the argument that sales for inter-State purposes were taxable within the State.

5. Constitutional Provisions and Exemptions:
- The introduction of sub-section (1)A in section 3 reiterated the prohibitions under Article 286(1) and (2) of the Constitution, saving certain transactions from taxation.
- The Court emphasized that sales in the course of inter-State trade or commerce were already excluded from taxation under the Act and the Constitution, making further exemptions in the machinery section unnecessary.

6. Decision and Conclusion:
- The Court allowed the appeal, setting aside the High Court's decision and dismissing the petition with costs.
- The judgment clarified that sales falling within the ban of Article 286(2) and section 3(1)A should be excluded from the net turnover, ensuring compliance with constitutional provisions.

This detailed analysis highlights the various viewpoints presented in the judgment regarding the constitutionality of the Assam Sales Tax Act provisions and the ultimate decision of the Court in allowing the appeal.