1952 (12) TMI 25 - HC - VAT and Sales Tax

Summary

Issues:
- Whether a writ of prohibition should be issued restraining the State of Bihar from levying tax on sale and purchase of coal outside the state.
- Constitutionality of the second proviso to Section 2(g) of the Bihar Sales Tax Act.
- Jurisdiction of Sales Tax Authorities in making assessments based on an ultra vires provision.
- Availability of writ of certiorari for an error of law apparent on the face of the record.
- Applicability of Article 286(1) of the Constitution in determining tax liability on goods sold outside the state.

Analysis:
The petitioner, a coal trading company, sought a writ of prohibition against the State of Bihar to prevent the levy of sales tax on coal sold outside Bihar. The dispute arose from the interpretation of Section 2(g) of the Bihar Sales Tax Act, particularly the second proviso, which was amended by Bihar Act VII of 1951. The petitioner argued that the second proviso was void post the Constitution's enactment, citing Article 286(1) which restricts states from taxing sales outside their jurisdiction. The petitioner contended that the tax authorities erred in assessing tax on coal sold outside Bihar, leading to an excess tax liability claim of Rs. 790-1-0. However, the court held that the assessment made under the Sales Tax Act machinery, even if based on an ultra vires provision, was not void as the Commissioner had jurisdiction under Section 13 to assess tax based on the petitioner's return.

The court further deliberated on the availability of a writ of certiorari for errors of law in tax assessments. While the petitioner argued for such a writ citing legal precedents, the court emphasized the existence of statutory remedies for challenging tax assessments under the Sales Tax Act. The court highlighted that the Act provided avenues for appeal, revision, and reference to the High Court for legal questions, rendering a writ of certiorari unnecessary for mere errors of law. The judgment underscored the importance of exhausting statutory remedies before seeking extraordinary writs.

Regarding the interpretation of Article 286(1) of the Constitution and the applicability of the explanation appended to it, the court acknowledged the complexity of the issue. The Sales Tax Officer's assessment, based on the hypothesis that Article 286(2) did not apply, was challenged by the petitioner invoking Article 286(1)(a) to claim exemption from taxation on goods sold outside Bihar. The court noted the prima facie strength of the petitioner's argument but refrained from a detailed analysis, emphasizing that even if the tax authorities relied on an ultra vires provision, the assessment was not without jurisdiction. The court emphasized that the party aggrieved could seek redressal through the Act's procedural mechanisms, aligning with the principles laid down in relevant legal precedents.

The judgment ultimately dismissed the application for a writ of prohibition, highlighting the availability of statutory remedies and the need to follow the established procedures for challenging tax assessments. The court refrained from delving into the constitutional validity of the second proviso to Section 2(g) and the interpretation of Article 286, emphasizing the importance of utilizing the statutory mechanisms for addressing grievances related to tax assessments.