1956 (4) TMI 49 - HC - VAT and Sales Tax

Summary

Issues:
Jurisdiction of Madras State Authorities to assess petitioner under Sales Tax Act.
Applicability of Article 286 of the Constitution to exempt sales tax on inter-State transactions.

Jurisdiction Issue:
The petitioner, a resident of Hyderabad State exporting goods to Madras State, challenged the jurisdiction of the Deputy Commercial Tax Officer to assess sales tax. The respondent insisted on registration and provisional assessment, leading to the writ petition. The Court dismissed the petitioner's argument based on non-residency, emphasizing that the locus of transactions, not residence, determines tax liability. Citing Vakkan v. State of Madras, the Court clarified that residence is irrelevant for taxation.

Applicability of Article 286 Issue:
The crucial issue revolved around whether the transactions, involving goods brought into Madras, were exempt under Article 286(2) of the Constitution. The Court noted that while the transactions fell under the Explanation to Article 286(1)(a) as inside sales, they were also inter-State trade under Article 286(2). Referring to the United Motors and Bengal Immunity cases, the Court concluded that the transactions were exempt from taxation as inter-State trade. However, the validity of the tax levy was upheld under Ordinance III of 1956, rendering the tax valid despite the inter-State nature of the transactions.

Conclusion:
The Court ruled against the petitioner, dismissing the writ petition challenging the sales tax assessment. The judgment clarified the application of Article 286 and the impact of Ordinance III of 1956 on tax liabilities. The case was reported as Mettur Industries Limited v. The State of Madras [1956] 7 S.T.C. 691.