1956 (2) TMI 52 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability to sales tax in respect of sales of imported cloth.
2. Validity of sub-rule (d1) of rule 2 of the Rules made under the Act.
3. Validity of the Notification of 8th June, 1948.

Analysis:
1. The petitioner, a wholesale cloth business, contested the liability to sales tax on sales of imported cloth. The petitioner argued that sales to retail dealers in the course of inter-State trade were exempt under Article 286(2) of the Constitution. The court referred to the State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory case, where it was established that the first sale by a wholesale dealer of goods imported into a State was not considered a transaction in the course of inter-State trade. The court rejected the petitioner's contention, upholding that the first sale by an importer was not exempt from liability to sales tax.

2. The second contention raised the validity of sub-rule (d1) of rule 2 of the Rules made under the Act, defining "importer." The sub-rule outlined different scenarios for determining an importer, impacting the liability to pay tax. The court analyzed the clauses and their relevance to the definition of "importer." Given the restricted interpretation of "in the course of" in Article 286(2), the court concluded that the petitioner fell under the definition of importer as per the clauses. Thus, this contention was dismissed.

3. The final argument challenged the validity of the Notification of 8th June, 1948, citing variance with section 3A of the Act. The court noted the discrepancy between the Notification and the amended sub-section (1) of section 3A post the 1950 amendment. Despite the inconsistency, the court found that the petitioner's tax liability would not be affected by the discrepancy. Consequently, the court dismissed the petitioner's plea to quash the Notification, ultimately dismissing the petition with costs assessed at Rs. 300.