1967 (8) TMI 100 - SC - VAT and Sales Tax

Whether the Madras State had jurisdiction to levy sales tax on the alleged Explanation sales by the respondent during the period between April 1 1955 to September 5 1955 by virtue of explanation (2) to section 2(h) of the Madras General Sales Tax Act 1939? Held that - Appeal dismissed. The High Court came to the conclusion that the goods were delivered to places outside the Madras State for the purpose of consumption in the delivery States. The High Court added that it was hardly worth-while in these circumstances to direct a remand of the case to the Appellate Tribunal for a fresh enquiry. It is manifest that the finding of the High Court on this point is a finding on a question of fact and as there is proper material to support the finding of the High Court it is not possible to accept the contention of the appellant that the finding is in any way defective in law.

Issues Involved:
1. Jurisdiction of Madras State to levy sales tax on inter-State sales.
2. Inclusion of inter-State purchases in the taxable turnover.
3. Validity of affidavits taken into evidence by the High Court during revisional proceedings.

Detailed Analysis:

1. Jurisdiction of Madras State to Levy Sales Tax on Inter-State Sales:

The primary issue was whether the Madras State had jurisdiction to levy sales tax on the respondent's inter-State sales during the period from April 1, 1955, to September 5, 1955. The respondent was a beedi manufacturer assessed to sales tax by the Deputy Commercial Tax Officer. The respondent contested the inclusion of certain amounts in the taxable turnover, arguing that they represented either second purchases or purchases made outside Madras State. The Appellate Assistant Commissioner enhanced the assessment by including inter-State purchases. The Sales Tax Appellate Tribunal upheld this inclusion and further enhanced the assessment by including sales to non-resident buyers.

The High Court ruled that the inclusion of inter-State purchases was invalid as the Appellate Assistant Commissioner lacked jurisdiction. It also held that the sales in question were "Explanation sales" under Article 286(1) of the Constitution, meaning the goods were delivered outside the State for consumption, thus Madras State had no jurisdiction to tax these sales. The Supreme Court upheld this view, stating that the Validation Act lifted the ban under Article 286(2) but not under Article 286(1)(a), which continued to apply. Therefore, Madras State could not tax sales where goods were delivered outside its territorial limits for consumption.

2. Inclusion of Inter-State Purchases in the Taxable Turnover:

The respondent challenged the inclusion of Rs. 1,15,406-14-9 as inter-State purchases in the taxable turnover. The High Court found this inclusion invalid as the Appellate Assistant Commissioner had no jurisdiction to include it. The Supreme Court agreed, emphasizing that even if the Validation Act lifted the ban under Article 286(2), the ban under Article 286(1)(a) remained effective. This meant that the Madras State could not tax inter-State sales where goods were delivered outside the State for consumption.

3. Validity of Affidavits Taken into Evidence by the High Court:

The appellant argued that the High Court acted illegally by entertaining and relying upon affidavits filed by the respondent while exercising its revisional powers under section 38 of the Madras General Sales Tax Act, 1959. The Supreme Court noted that the High Court had no express power under section 38 to take additional evidence. However, since the appellant did not object to the affidavits being taken into evidence at the High Court, it was not open to the appellant to challenge this now. The Supreme Court rejected the appellant's argument, noting that the transactions in question took place nearly 12 years back and it was not practical to remand the case for fresh investigation.

Conclusion:

The Supreme Court dismissed the appeals, upholding the High Court's decision that the Madras State had no jurisdiction to levy sales tax on the inter-State sales in question. The inclusion of inter-State purchases in the taxable turnover was invalid, and the High Court's acceptance of affidavits was not contested at the appropriate time by the appellant.

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