1953 (7) TMI 1 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on the petitioner for quarters ending 30th June, 1951, and 30th September, 1951.

Detailed Analysis:

The judgment pertains to an application seeking revision of the Collector of Sales Tax's order regarding the assessment of sales tax on the petitioner for two quarters. The dealer claimed deductions from the gross turnover for sales allegedly made in the course of inter-State trade for both quarters. The Collector found that if the goods purchased by the dealer for resale were used for purposes other than specified in the certificate of registration, the price of such goods would be included in the taxable turnover. The Collector considered this as a penalty for defrauding the state and not a tax, indicating that Article 286 of the Constitution would not protect the dealer if the goods were used contrary to the certificate's purpose.

Regarding the interpretation of "intended for resale," the Collector argued that it should be construed as intended for resale within the state. However, the court disagreed, stating that the right of the State Government to tax did not depend on the exact location of the sale transaction. The court emphasized that a taxing law must be strictly construed, and in this case, the dealer was covered under the statute as he had resold the articles, even though outside the state. The court highlighted the absence of a specific territorial limitation in the definition of sale under the Act.

The court further discussed the extra-territorial aspect of sales post the Constitution under Article 286, allowing states to have an extra-territorial right to tax. The judgment concluded that the dealer was not liable for taxation on the turnover under the relevant provision of the Act. The court also noted that a sale transaction with a jute mill outside the state would be exempted under Article 286(1)(a) of the Constitution. Consequently, the petition was allowed, and the transactions in question were deemed allowable as rebates from the turnover for the specified periods, with the assessment to be corrected accordingly.