1966 (11) TMI 72 - SC - VAT and Sales Tax

Taxability of tobacco - Held that - Appeal dismissed. As in the present case the third Explanation to section 2(g) incorporates into the definition of sale the Explanation occurring in Article 286 in contrast to the Madras Act where there is no such incorporation in the definition of sale under section 2(h) of that Act thus the argument of the appellant must be rejected on this aspect of the case. The contention of the appellant is that the purchase of tobacco cannot be taxed because it was not specified in the dealer s certificate of registration as intended for use by him as raw materials in the manufacture of any goods for the purpose of sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State as required by section 4(6) of the Act is unable to accept the argument of the appellant as correct.

Issues Involved:
1. Applicability of Section 27-A of the Central Provinces and Berar Sales Tax Act, 1947.
2. Validity and applicability of the Sales Tax Laws Validation Act, 1956.
3. Interpretation and application of Section 4(6) of the Central Provinces and Berar Sales Tax Act, 1947.
4. Technical omission in the certificate of registration and its impact on tax liability.

Detailed Analysis:

1. Applicability of Section 27-A of the Central Provinces and Berar Sales Tax Act, 1947
The appellant argued that Section 27-A of the Act imposed a restriction on the power of the taxing authorities and that as long as it remained unrepealed, there was no pre-existing law authorizing the imposition of tax on sales made in the course of inter-State trade or commerce. The Supreme Court rejected this argument, citing the precedent set in M.P.V. Sundararamier and Co. v. The State of Andhra Pradesh and Another, which held that similar provisions in the Madras Sales Tax Act had a positive content authorizing the State to impose tax on sales falling within its purview. The Court concluded that Section 27-A of the Act similarly authorized the State to impose tax on such sales.

2. Validity and Applicability of the Sales Tax Laws Validation Act, 1956
The appellant contended that the Sales Tax Laws Validation Act, 1956, which lifted the ban on taxing inter-State sales, had no application because there was no pre-existing law imposing such a tax. The Supreme Court dismissed this contention, holding that the Validation Act was applicable and validly lifted the ban imposed by Article 286(2) of the Constitution, thereby validating the imposition of tax on inter-State sales during the specified period.

3. Interpretation and Application of Section 4(6) of the Central Provinces and Berar Sales Tax Act, 1947
The appellant argued that Section 4(6) of the Act did not apply because tobacco was not specified in the certificate of registration as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State. The Court rejected this argument, stating that the certificate must be fairly construed in the light of the language of Section 8 and other relevant provisions of the Act. The Court noted that the appellant had made declarations to Bombay dealers stating that the tobacco was for use as raw material in the manufacture of goods for sale in Madhya Pradesh, thereby satisfying the requirements of Section 4(6).

4. Technical Omission in the Certificate of Registration and Its Impact on Tax Liability
The appellant contended that a technical omission in the certificate of registration should exempt it from tax liability. The Supreme Court dismissed this argument, stating that the certificate must be construed in the context of the amended Section 8 of the Act and the declarations made by the appellant. The Court held that the technical omission did not confer any benefit on the appellant if there was other incontrovertible evidence showing that the appellant purchased the goods specified in the certificate as raw materials for manufacturing goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State.

Conclusion
The Supreme Court dismissed the appeal, holding that the appellant was liable to pay tax on the purchases of tobacco imported from Bombay dealers during the relevant periods. The Court found that the requirements of Section 4(6) of the Act were satisfied and that the technical omission in the certificate of registration did not exempt the appellant from tax liability. The appeal was dismissed with costs.

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