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1962 (11) TMI 27 - SC - VAT and Sales TaxWhether the sales by the petitioner of (sic.) goods which were actually delivered in Bihar as a direct result of such sales for the purpose of consumption in Bihar during the period 26th January 1950 to 30th September 1951 were sales which took place in the course of inter-State trade or commerce within the meaning of Article 286(2) of the Constitution of India as it stood prior to the passing of the Constitution (Sixth Amendment) Act 1956 and as such were not liable to the levy of Bihar sales tax or whether in view of the subsequent passing by the Parliament of the Sales Tax Laws Validation Act 1956 (Act VII of 1956) such sales became liable to the levy of Bihar sales tax for any part of the above period say from 1st April 1951 up to 30th September 1951? Held that - Appeal allowed. The High Court was in error in holding that the levy of the tax on the sales by the appellant between January 26 1950 and March 31 1951 with which this case is concerned was covered by the Sales Tax Continuance Order 1950. We will set aside the judgment of the High Court in so far as it so holds and answer the question which we have earlier set out in so far as it is outstanding in the negative. In our view these sales were not liable to tax.
Issues:
1. Assessment of sales tax on inter-State sales under Bihar Sales Tax Act, 1947. 2. Interpretation of Article 286 of the Constitution of India. 3. Validity of Sales Tax Continuance Order, 1950. 4. Applicability of Sales Tax Laws Validation Act, 1956. 5. Definition of sale under Bihar Sales Tax Act, 1947. 6. Interpretation of section 33 of the Bihar Sales Tax Act, 1947. Analysis: The judgment by the Supreme Court of India dealt with the assessment of sales tax on inter-State sales under the Bihar Sales Tax Act, 1947. The appellant, a machinery company based in Calcutta, sold machinery to parties in Bihar between January 26, 1950, and September 30, 1951. The appellant contended that the sales were inter-State sales and thus not liable to tax under the Bihar Act due to Article 286(2) of the Constitution. The assessing authority initially upheld the tax assessment based on the Bengal Immunity Company Ltd. v. State of Bihar case but subsequent judgments clarified the limitations of State taxation on inter-State sales. The appellant challenged the tax assessments through various levels of appeal, ultimately reaching the High Court. The High Court ruled that the Sales Tax Continuance Order, 1950, covered the period from January 26, 1950, to March 31, 1951, and the Sales Tax Laws Validation Act, 1956, validated the tax for the period from April 1, 1951, to September 30, 1951. The appellant contested the application of the Sales Tax Continuance Order, arguing that the sales did not fall under the definition of sale in the Bihar Act and were not taxed by the Act. The Supreme Court analyzed the relevant provisions of the Bihar Sales Tax Act, 1947, including the definition of sale and section 33, which imposed conditions on the imposition of tax on inter-State sales. The Court determined that the sales in question were not subject to tax under the Bihar Act before the Constitution came into force, and the Sales Tax Continuance Order, 1950, did not apply to these sales. The Court clarified that the issue was not whether the sales were inter-State sales but focused on the tax liability under the Bihar Act. In conclusion, the Supreme Court allowed the appeal, holding that the sales in question were not liable to tax under the Bihar Sales Tax Act, 1947. The Court emphasized that the sales were in the course of inter-State trade but were not subject to taxation under the State law. The appellant's challenge to the application of the Sales Tax Continuance Order was upheld, and the judgment was set aside in favor of the appellant.
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