1952 (5) TMI 11 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the despatches of 41 consignments of jute constitute a "sale" for purposes of the Assam Sales Tax Act, 1947, and if the turnover therefrom is taxable.
2. Whether the despatches of five consignments to the commission agent constitute a "sale" in terms of the Act and if the turnover therefrom is taxable.
3. Whether the Assam Sales Tax Act, 1947, is ultra vires of Section 297 of the Government of India Act, 1935.
4. Whether the assessments under subsection (4) of Section 17 were illegal.

Detailed Analysis:

Issue 1: Whether the despatches of 41 consignments of jute constitute a "sale" for purposes of the Assam Sales Tax Act, 1947, and if the turnover therefrom is taxable.

The court examined whether the 41 consignments sent from Assam against prior contracts of sale made in Calcutta are subject to a sales tax as being sales made in Assam. According to the definition of "sale" in sub-section (12) of Section 2 of the Assam Sales Tax Act, 1947, a sale means "any transfer of property in goods for cash or deferred payment or other valuable consideration and includes a transfer of property in goods involved in the execution of a contract." The court noted that the learned Commissioner of Taxes, Assam, had erred in his interpretation, particularly in assuming that the goods were actually in Assam at the time the contracts were entered into in Calcutta. The court emphasized that the goods must be in Assam at the date of the contract of sale, not at the date of appropriation. The court concluded that the property in the goods did not pass to the buyers in Assam when the goods were made over to the steamer company in Assam for transmission to the buyers. Therefore, the despatches of 41 consignments did not constitute a "sale" for the purposes of the Assam Sales Tax Act, 1947, and were not liable to be taxed.

Issue 2: Whether the despatches of five consignments to the commission agent constitute a "sale" in terms of the Act and if the turnover therefrom is taxable.

The court reviewed the functions of the commission agent and concluded that the transfer of property in goods to the commission agent was in the nature of one for 'deferred payment' and took place at the time the goods were placed aboard a steamer or rail and consigned to him. However, the court found that the despatches of five consignments to the commission agents did not constitute a "sale" in terms of the Assam Sales Tax Act of 1947, and therefore, were not taxable.

Issue 3: Whether the Assam Sales Tax Act, 1947, is ultra vires of Section 297 of the Government of India Act, 1935.

This issue was not pressed by the assessees. The court agreed with the conclusion of the appellate authorities that Section 297(1)(a) of the Government of India Act, 1935, has no application to any legislation other than with respect to entry 27 and entry 29 in the Provincial Legislative List, and the Act challenged is with respect to entry 48 of the list. The court also noted that the tax does not discriminate between jute produced in Assam and outside it. Therefore, the Assam Sales Tax Act of 1947 is intra vires Section 297 of the Government of India Act, 1935.

Issue 4: Whether the assessments under subsection (4) of Section 17 were illegal.

This issue was also not pressed before the court. The court found that the assessments made under sub-section (4) of Section 17 of the Assam Sales Tax Act of 1947 were legal. However, since the contracts of sale relating to the consignments did not constitute "sales" for the purposes of the Assam Sales Tax Act of 1947, the assessees were not liable to be assessed.

Conclusion:

The court answered the questions as follows:
1. The despatches of 41 consignments of jute did not constitute a "sale" for the purposes of the Assam Sales Tax Act, 1947, and were not liable to be taxed.
2. The despatches of five consignments to the commission agents did not constitute a "sale" in terms of the Assam Sales Tax Act of 1947, and were not taxable.
3. The Assam Sales Tax Act of 1947 is intra vires Section 297 of the Government of India Act, 1935.
4. The assessments made under sub-section (4) of Section 17 of the Assam Sales Tax Act of 1947 were legal, but the assessees were not liable to be assessed.

The court also clarified that the question of whether the contracts of sales covered by the despatches constitute sales within the meaning of the Explanation to sub-section (12) of Section 2 of the Act is left undetermined and is open for further consideration by the taxing authorities.