1954 (6) TMI 10 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Board of Revenue erred in interpreting the agreement and refusing to make a reference under section 23(1) of the Central Provinces and Berar Sales Tax Act, 1947.
2. Whether the despatches of bidis outside the State amount to 'sales' within the meaning of the Act.
3. Whether the Board of Revenue is obligated to make a reference to the High Court whenever a question of law arises.

Detailed Analysis:

1. Error in Interpretation and Refusal to Make Reference:
The primary issue is whether the Board of Revenue erred in its interpretation of the agreement between the assessee and the so-called agent, and in refusing to make a reference under section 23(1) of the Central Provinces and Berar Sales Tax Act, 1947. The Board concluded that the transactions amounted to sales within the meaning of the Act, relying on its decision in Hirji Govindji, In re. The assessee's counsel argued that the Board misinterpreted clause 5 of the agreement, failed to consider clause 2, and did not interpret the agreement as a whole. The High Court noted that questions of law do arise on the facts of the case, and the Board's refusal to make a reference was not justified. The Board's refusal was based on the belief that the legal position was clear and derived from statute law, thereby negating the need for a reference.

2. Despatches as 'Sales':
The second issue concerns whether the despatches of bidis outside the State amount to 'sales' within the meaning of the Act. The Board's decision was based on the terms of the 'agency' agreement and the form and contents of the bills issued by the assessee. The High Court observed that the ultimate decision on whether the transactions constituted sales is a question of law. The Board of Revenue must refer such questions to the High Court for a final decision. The High Court emphasized that the Board's decision on a question of law is not final and must be reviewed by the High Court to ensure correctness.

3. Obligation to Make Reference:
The third issue is whether the Board of Revenue is obligated to make a reference to the High Court whenever a question of law arises. The High Court clarified that the Board must state and refer the case to the High Court whenever questions of law arise out of its order, except where the law is well-settled by a decision of the Supreme Court. The High Court emphasized that the assessee has a right to demand a reference if a question of law arises. The Board's refusal to make a reference on the grounds that the question of law was well-settled was not justified. The High Court cited several precedents, including Lakshmi Pat Mahadevi Garu v. Commissioner of Income-tax and Dhanrajmal Chatandas v. Commissioner of Income-tax, to support its position.

Separate Judgment:
One judge concurred with the decision to allow the application and direct the Board of Revenue to state the case and refer it to the High Court. However, the judge expressed disagreement on some points, particularly the extent of the exception regarding well-settled questions of law. The judge questioned whether the Board of Revenue must state a case even if the question of law is settled by a decision of the High Court, suggesting that the matter should be left to the discretion of the Tribunal.

Conclusion:
The High Court set aside the Board of Revenue's order refusing to make a reference and directed the Board to state the case and refer the question of law to the High Court. The application was allowed with costs, and the Board was instructed to determine whether the despatches of bidis outside the State amounted to 'sales' within the meaning of the Act, and whether the amount of Rs. 3,34,217-14-3 could be included in the taxable turnover.

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