1952 (6) TMI 21 - HC - VAT and Sales Tax

Issues Involved:
1. Maintainability of the appeal under Clause 15 of the Letters Patent.
2. Interpretation of Section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of the exemption from sales tax for sales made to the Ministry of Industry and Supply.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal under Clause 15 of the Letters Patent:

The preliminary objection raised by the respondents was whether an appeal lies to the High Court against the judgment of a single judge exercising jurisdiction under Article 226 of the Constitution. The Constitution does not explicitly provide for an appeal from decisions under Article 226. However, it was argued that principles laid down in the National Telephone Co.'s case and reaffirmed by the Privy Council in Adaikappa Chettiar v. Chandrasekhara Thevar apply, allowing an appeal if the judgment falls within Clause 15 of the Letters Patent. Clause 15 allows an appeal from the judgment of a single judge unless it is passed in the exercise of appellate, revisional, or criminal jurisdiction.

The court concluded that the exercise of jurisdiction under Article 226 is original jurisdiction, and thus, an appeal lies from the judgment of a single judge exercising this jurisdiction. The rule and determination under which the single judge exercised jurisdiction were pursuant to Article 225 of the Constitution, which preserved the powers originally given by Section 108 of the Government of India Act, 1915. Therefore, the judgment of Bose, J., was appealable under Clause 15 of the Letters Patent.

2. Interpretation of Section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act, 1941:

The core issue was whether the sales made by Messrs. Shree Ganesh Jute Mills Ltd. to the Ministry of Industry and Supply could be considered sales to the Supply Department of the Government of India under Section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act, 1941, thereby exempting them from sales tax. The statute provides that "taxable turnover" excludes sales to the Indian Stores Department, the Supply Department of the Government of India, and any railway or water transport administration.

The court analyzed the historical context, noting that the Supply Department ceased to exist on January 6, 1946, and was replaced by the Department of Industries and Supplies, later re-designated as the Ministry of Industry and Supply. The court held that the newly created department was not the same as the old Supply Department, despite taking over some of its functions. The specific mention of the Supply Department in the statute indicated a legislative intent to limit the exemption to sales to that department alone.

3. Applicability of the Exemption from Sales Tax for Sales Made to the Ministry of Industry and Supply:

The respondents argued that the sales to the Ministry of Industry and Supply should be exempt as this ministry took over the functions of the old Supply Department. However, the court held that the exemption was specifically for sales to the Supply Department and not to any other department, even if it performed similar functions. The court emphasized that taxation statutes should be construed strictly, and any ambiguity should benefit the taxpayer. However, exemptions from taxation should not be extended beyond the clear language of the statute.

The court concluded that the sales in question were not to the Supply Department of the Government of India and thus could not be excluded in calculating the taxable turnover. Consequently, the appeal was allowed, and the order of Bose, J., was set aside, reinstating the demand for sales tax.

Conclusion:

The appeal was allowed with costs, and the judgment of Bose, J., was set aside. The sales made by Messrs. Shree Ganesh Jute Mills Ltd. to the Ministry of Industry and Supply were not exempt from sales tax under Section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act, 1941.

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