1956 (3) TMI 30 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the definition of sale under the Bihar Sales Tax Act contravenes Article 286 of the Constitution of India.
2. Whether the assessee could be taxed for sales of goods delivered outside the State of Bihar post the Constitution.

Detailed Analysis:
The case involved a reference under section 25(1) of the Bihar Sales Tax Act concerning the assessment of sales tax for the year 1950-51 on the gross turnover of the assessee, Messrs. Indian Cable Co., Ltd. The assessee claimed a deduction for goods sold outside Bihar, which was initially refused by the Superintendent of Sales Tax. The matter was taken to the Deputy Commissioner of Sales Tax, who allowed a deduction for certain sales but not for others, leading to further appeals and a reference to the High Court.

The primary legal issue revolved around the definition of "sale" under the Bihar Sales Tax Act and its compatibility with Article 286 of the Constitution of India. The definition of sale included provisions that deemed certain sales to have taken place in Bihar, thus subjecting them to taxation. The assessee argued that this definition was ultra vires the Provincial Legislature as it contravened Article 286, which restricts states from taxing sales outside their jurisdiction.

The counsel for the assessee relied on Supreme Court decisions to support their argument that the definition of sale indeed contravened Article 286, and the assessee should not be taxed for sales made outside Bihar. The Government Pleader for the State of Bihar conceded that the Supreme Court decisions favored the assessee's position, leading to a conclusion that the definition of sale was indeed ultra vires and the assessee should not be taxed for such sales.

Ultimately, the High Court agreed with the arguments presented and held in favor of the assessee, ruling that the definition of sale under the Bihar Sales Tax Act was indeed ultra vires to the extent it contravened Article 286 of the Constitution. Consequently, the assessee could not be legally taxed for sales of goods delivered outside Bihar post the Constitution. The reference was answered in favor of the assessee, and no costs were awarded in the circumstances.