1955 (3) TMI 22 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the petitioner is a dealer within the meaning of Section 2(3) of the Assam Sales Tax Act.
2. Whether the Assam Sales Tax Act violates Articles 265, 301, 304, and 19(1)(g) of the Constitution.
3. Jurisdiction of the State of Assam to levy sales tax on goods delivered for consumption within the state.
4. Territorial nexus and its sufficiency for the imposition of sales tax.

Issue-wise Detailed Analysis:

1. Whether the petitioner is a dealer within the meaning of Section 2(3) of the Assam Sales Tax Act:

The petitioner, a company incorporated under the Indian Companies Act, 1913, with its registered office in Bombay, contended that it was not a dealer carrying on business within the State of Assam because it had no factory or branch office in Assam. The petitioner supplied goods to dealers and consumers in Assam, but the sales were arranged by its branch office in Calcutta. The Assam Sales Tax Act defines a dealer as "any person who carries on the business of selling or supplying goods in the State." The court held that the petitioner was indeed a dealer since it supplied goods for consumption in Assam, fulfilling the criteria of carrying on business in the state. The fact that the petitioner had no fixed place of business in Assam did not exempt it from being classified as a dealer.

2. Whether the Assam Sales Tax Act violates Articles 265, 301, 304, and 19(1)(g) of the Constitution:

The petitioner argued that the requirement to register under the Assam Sales Tax Act violated Articles 265 (taxation only by authority of law), 301 (freedom of trade, commerce, and intercourse), 304 (restrictions on trade, commerce, and intercourse among states), and 19(1)(g) (right to practice any profession or to carry on any occupation, trade, or business) of the Constitution. The court found that the Assam Sales Tax Act was within the legislative competence of the State Legislature and did not violate any constitutional provisions. The Act did not regulate inter-state or intra-state trade and commerce but imposed a tax on the sale of goods, which was permissible under the Constitution.

3. Jurisdiction of the State of Assam to levy sales tax on goods delivered for consumption within the state:

The court examined Section 2(12) of the Assam Sales Tax Act, which defines "sale" and includes a proviso that deems sales to have taken place in Assam if goods are delivered in the state for consumption as a direct result of such sales. This proviso aligns with the explanation attached to Article 286(1)(a) of the Constitution. The court held that the State of Assam had the jurisdiction to levy sales tax on goods delivered for consumption within the state, regardless of where the sale took place under general law. The delivery of goods in Assam for consumption constituted a sufficient territorial nexus for the state to impose the tax.

4. Territorial nexus and its sufficiency for the imposition of sales tax:

The court referred to several decisions, including those of the Patna High Court and the Supreme Court, to establish that the jurisdiction to tax does not depend on the residence or domicile of the dealer but on the delivery of goods for consumption within the state. The Supreme Court's decision in State of Bombay v. United Motors (India) Ltd. confirmed that the delivery of goods for consumption in a state provides a sufficient territorial nexus for the state to impose sales tax. The court concluded that the transactions carried out by the petitioner were subject to sales tax under the Assam Sales Tax Act due to the territorial nexus created by the delivery of goods in Assam.

Conclusion:

The court dismissed the petition, holding that the petitioner was a dealer under the Assam Sales Tax Act and was liable to register and pay sales tax on goods delivered for consumption in Assam. The Act did not violate any constitutional provisions, and the state's jurisdiction to levy the tax was upheld based on the territorial nexus of goods delivery for consumption within the state. The application was dismissed with costs.

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