1950 (5) TMI 17 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Section 5(2)(a)(v) of the Bihar Sales Tax Act, 1944.
2. Eligibility for deduction under Section 5(2)(a)(ii) of the Bihar Sales Tax Act, 1944.
3. Assessment of sales amounting to Rs. 46,90,246-0-10 under Section 5(2)(a)(ii).
4. Whether the assessee is a "dealer" under the Bihar Sales Tax Act, 1944.
5. Whether the tax on the first sale by a manufacturer is an excise duty.

Issue-wise Detailed Analysis:

1. Interpretation of Section 5(2)(a)(v) of the Bihar Sales Tax Act, 1944:
The primary issue was whether the assessee could claim a deduction of Rs. 2,93,15,373-11-4 from the gross turnover under Section 5(2)(a)(v). The court analyzed the conditions for deduction under this provision, which include: (1) sales of goods, (2) goods despatched to an address outside Bihar, and (3) despatch by or on behalf of the dealer. The Commissioner found that the property in the goods had passed to the Imperial Tobacco Company before despatch, making the despatch on behalf of the purchaser. The court concluded that the statute must be construed strictly, and the crucial test is where the goods are despatched and by whom. The majority opinion held that the assessee was not entitled to the deduction because the goods were despatched on behalf of the purchaser, not the dealer.

2. Eligibility for Deduction under Section 5(2)(a)(ii) of the Bihar Sales Tax Act, 1944:
The assessee claimed an alternative deduction under Section 5(2)(a)(ii), arguing that the sales were made to a registered dealer. The court examined whether the Imperial Tobacco Company, with its place of business in Calcutta, was a registered dealer under the Act. The court found that the registration was specific to the place of business in Muzaffarpur and not Calcutta. Therefore, the sales made through the Calcutta office did not qualify for the deduction under Section 5(2)(a)(ii). The court held that the assessee was not entitled to this deduction.

3. Assessment of Sales Amounting to Rs. 46,90,246-0-10 under Section 5(2)(a)(ii):
The Commissioner had remanded the case for verification of whether the sales amounting to Rs. 46,90,246-0-10 were made to a registered dealer within Bihar. The court agreed with this approach, stating that the deduction could be allowed if the transactions were verified as genuine and passed through the Bihar depot of the Imperial Tobacco Company. The court upheld the Commissioner's direction for further examination and verification.

4. Whether the Assessee is a "Dealer" under the Bihar Sales Tax Act, 1944:
The court addressed the argument that the assessee was not a "dealer" under Section 2(c) of the Act and that the transactions did not amount to sales. This argument was raised for the first time during the reference to the High Court and was not part of the original proceedings. The court decided not to expand the scope of the case to include this new question, as it did not arise from the orders passed by the Commissioner and the Board. The court proceeded on the assumption that the assessee was a dealer liable to assessment, leaving the new question to be decided in future if necessary.

5. Whether the Tax on the First Sale by a Manufacturer is an Excise Duty:
Mr. Das argued that a tax on the first sale by a manufacturer is essentially an excise duty and outside the scope of the taxing statute. He initially relied on certain case laws but later conceded that the Privy Council's decision in Governor-General in Council v. Province of Madras, which was binding on the court, was against his contention. The Privy Council had affirmed that a tax on the first sale by a manufacturer is levied on him as a seller, not as a manufacturer. The court found it unnecessary to consider this question further.

Conclusion:
The court, by majority, held that the assessee was not entitled to claim the deduction of Rs. 2,93,15,373-11-4 under Section 5(2)(a)(v) because the goods were despatched on behalf of the purchaser. The court also held that the assessee could not claim the alternative deduction under Section 5(2)(a)(ii) as the sales were made through the Calcutta office, which was not a registered dealer in Bihar. The court upheld the Commissioner's direction for further verification of the sales amounting to Rs. 46,90,246-0-10. The arguments regarding the assessee's status as a dealer and the nature of the tax as an excise duty were not considered further.