1954 (11) TMI 38 - HC - VAT and Sales Tax

Issues Involved:
1. Denial of deduction under Rule 7(1)(k) read with Rule 20(2) of the Travancore-Cochin General Sales Tax Rules, 1950.
2. Inclusion of sale price of cocoanut oil sold outside the State in the turnover for purposes of the Travancore-Cochin General Sales Tax Act, 1125.
3. Conformity of the Travancore-Cochin General Sales Tax Act, 1125, with Article 286 of the Constitution.
4. Violation of Part XIII of the Constitution by affording a concession when the sale of oil is made within the State and denying the same when it is effected outside the State.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Rule 7(1)(k) read with Rule 20(2):
The petitioner, a registered manufacturer of cocoanut oil and cake, was denied the deduction under Rule 7(1)(k) read with Rule 20(2) because he sold the cocoanut oil outside the State of Travancore-Cochin. The court examined whether the sale price of the cocoanut oil sold outside the State could be considered as part of his turnover for purposes of the Travancore-Cochin General Sales Tax Act, 1125. The court noted that the definitions of "sale" and "turnover" in Section 2 of the Act include sales outside the State, thus making the prices obtained for such sales part of the turnover.

2. Inclusion of Sale Price of Cocoanut Oil Sold Outside the State in Turnover:
The court referred to the definitions in Section 2 of the Act, which clearly include sales outside the State in the turnover. The court also examined the provisions applicable to registered manufacturers of groundnut oil and cake under the Madras General Sales Tax Act, 1939, and similar rules, concluding that the objective is to avoid double taxation by the State. The court found that the petitioner is not entitled to the deduction under Rule 7(1)(k) read with Rule 20(2) because the oil was sold outside the State, thus only one tax (purchase tax on copra) could be realized.

3. Conformity with Article 286 of the Constitution:
The court discussed the implications of Article 286, which restricts the imposition of a tax on the sale or purchase of goods outside the State or in the course of inter-State trade or commerce. Section 26 of the Travancore-Cochin General Sales Tax Act, 1125, was added to bring the Act into conformity with Article 286. The court assumed the petitioner's contention that the definition of "sale" in Section 2(j) was not amended by Section 26, but noted that the definitions apply only in the absence of "anything repugnant in the subject or context." The court concluded that the definitions in Section 2(j) and (k) are inapplicable to the provisions concerned, as the intent was to avoid double taxation.

4. Violation of Part XIII of the Constitution:
The petitioner argued that the provisions violate Part XIII of the Constitution by affording a concession when the sale of oil is made within the State and denying it when the sale is outside the State. The court examined Articles 301 and 303(1) of the Constitution, which ensure freedom of trade, commerce, and intercourse throughout India and prohibit discriminatory legislation by States. The court concluded that the provisions impugned are not open to challenge under Article 303(1) as sales tax legislation by a State is supported by Entry 54 of List II of the Seventh Schedule, not by Entry 26 of List II. The court also referenced the distinction between regulation and prohibition of inter-State trade, concluding that any restriction on the freedom of trade and commerce resulting from the provisions impugned cannot be considered a direct and immediate result of the provisions themselves.

Conclusion:
The court dismissed the petition, stating that the petitioner is not entitled to the deduction under Rule 7(1)(k) read with Rule 20(2) as the sale of cocoanut oil was outside the State. The court found no violation of the Constitution and upheld the provisions of the Travancore-Cochin General Sales Tax Act, 1125. The petition was dismissed with costs, and the advocate's fee was set at Rs. 150.

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