1968 (8) TMI 158 - SC - VAT and Sales Tax

Liability of the appellant to payment of additional sales tax under section 3(2) of the General Sales Tax Act as amended in 1951 in respect of sales of tobacco made by the appellant in the erstwhile State or Travancore-Cochin out of purchases from dealers outside that State for the assessment years 1953-54 and 1954-55 Held that - Appeal dismissed. The appellant has failed to show that the non-resident dealers or sellers from whom he had purchased tobacco could fall within the meaning of the following critical words of rule 6 by the person who in the State is the first dealer in such goods . No contention has been raised before us by the counsel for the appellant that rule 6 was not applicable. It has therefore only to be seen as to who would be a person who in the State would be the first dealer in such goods. It appears to us that the person to be the first dealer has to be in the State and not outside the State.

Summary

Issues:
1. Liability of the appellant to payment of additional sales tax under section 3(2) of the General Sales Tax Act for sales of tobacco made in the erstwhile State of Travancore-Cochin.

Detailed Analysis:
The judgment by the Supreme Court of India involved an appeal regarding the liability of the appellant to pay additional sales tax under section 3(2) of the General Sales Tax Act for sales of tobacco made in the erstwhile State of Travancore-Cochin. The appellant, a dealer in tobacco, purchased tobacco from non-resident dealers outside the state. The assessing authorities held the appellant liable for tax as the sales were not covered by the explanation to article 286(1)(a) of the Constitution. The appellant appealed to various tribunals and the High Court of Kerala, all of which upheld the tax liability. The appellant then sought special leave from the Supreme Court, which was granted for further review.

The relevant charging section 3 of the Act specified the levy of taxes on sales of goods, with subsection (2) outlining the tax on specific goods like tobacco. Rule 6 of the Travancore General Sales Tax Rules mandated that the tax on goods mentioned in section 3(2) would be levied at the stage of sale by the first dealer in the state. The appellant argued that as a purchaser, he was not the first dealer, and it was the non-resident sellers who should be liable for the tax.

The High Court, citing previous decisions and the Sales Tax Laws Validation Act, 1956, held that the Act authorized the imposition of tax on inter-State sales subject to parliamentary authorization. The High Court interpreted rule 6 to tax the first inter-State sale by a dealer not exempt from taxation. However, the Supreme Court focused on the interpretation of rule 6, emphasizing that the first dealer must be in the state and not outside. The Court rejected the appellant's argument that the non-resident sellers should be considered the first dealers for tax liability, as the language of the rule was clear in attributing tax responsibility to the first dealer within the state.

Additionally, the Court addressed a previous case where a non-resident dealer was considered a "dealer" under specific circumstances, noting that such arguments were not raised in the present case. Ultimately, the Court found no merit in the appellant's contentions and dismissed the appeals, upholding the tax liability with costs awarded to the respondent.