1956 (10) TMI 26 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the sales tax assessment for inter-State sales.
2. Claim for exemption under Article 286(2) of the Constitution.
3. Validity of the President's Sales Tax Continuance Order, 1950.
4. Application of the Bengal Immunity case and Ram Narain Sons case.
5. Territorial nexus and legislative jurisdiction.
6. Compliance with the Board of Revenue's order.
7. Entitlement to a writ of mandamus for refund of tax.

Issue-wise Detailed Analysis:

1. Legality of the Sales Tax Assessment for Inter-State Sales:
The petitioner, an incorporated company manufacturing cigarettes and tobacco, was assessed to sales tax for the financial year 1950-51 by the Superintendent of Sales Tax, Monghyr. The assessment order dated 7th May 1952 included a tax amount of Rs. 7,46,876-1-3, which encompassed sales of goods dispatched outside Bihar and delivered for consumption in other states.

2. Claim for Exemption under Article 286(2) of the Constitution:
The petitioner claimed exemption under Article 286(2) of the Constitution for sales of goods outside Bihar, arguing that such sales were not liable to tax. The Superintendent of Sales Tax rejected this claim, citing the President's Sales Tax Continuance Order, 1950, which allowed the taxation of inter-State sales up to 31st March 1951.

3. Validity of the President's Sales Tax Continuance Order, 1950:
The President's Sales Tax Continuance Order, 1950, authorized the imposition of sales tax contrary to Article 286(2) for the period from 26th January 1950 to 31st March 1951. The Sales Tax Laws Validation Act, 1956, further validated such imposition for the period from 1st April 1951 to 6th September 1955.

4. Application of the Bengal Immunity Case and Ram Narain Sons Case:
The petitioner relied on the Supreme Court's decision in the Bengal Immunity case, which emphasized the prohibition on taxation of inter-State sales imposed by Article 286(2). However, the court found that the President's Order and the Sales Tax Laws Validation Act had lifted this ban for the relevant periods. The Ram Narain Sons case was distinguished as it dealt with a different category of sales.

5. Territorial Nexus and Legislative Jurisdiction:
The court examined the territorial nexus and legislative jurisdiction, noting that the cigarettes and tobacco were manufactured and the title passed at Monghyr. The court concluded that there was sufficient territorial nexus to justify the imposition of sales tax by the State of Bihar.

6. Compliance with the Board of Revenue's Order:
The Board of Revenue had allowed the petitioner's revision application, directing the recalculation of tax payable. However, the respondents refunded only part of the tax, retaining the amount related to goods consumed in states other than the state of first destination. The court assumed in favor of the petitioner that the Board intended to grant relief for both categories of sales but emphasized that the real issue was the legality of the tax imposition.

7. Entitlement to a Writ of Mandamus for Refund of Tax:
The court held that the petitioner was not entitled to a writ of mandamus for the refund of the tax. The imposition of sales tax on the second category of transactions was deemed legally valid, and there was no statutory obligation on the respondents to refund the tax realized.

Conclusion:
The applications for a writ of mandamus were dismissed with costs, as the court found no legal basis for the petitioner's claim for a refund of the sales tax. The consolidated hearing fee was set at Rs. 400 for both cases.