1956 (12) TMI 33 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of the second proviso to section 2(12) of the Assam Sales Tax Act, 1947.
2. Legality of the tax assessments made under the impugned proviso.
3. Availability and exhaustion of alternative remedies by the petitioner.
4. Jurisdiction of taxing officers to assess tax on specific goods.

Detailed Analysis:

1. Constitutionality of the Second Proviso to Section 2(12) of the Assam Sales Tax Act, 1947:

The primary issue was whether the second proviso to section 2(12) of the Assam Sales Tax Act, 1947, which deemed the use of goods by a dealer from his stock to be a sale, was ultra vires the Government of India Act, 1935, and the Constitution of India. The proviso was challenged on the grounds that it exceeded the legislative powers conferred by Entry 48 of List II of the Government of India Act, 1935, and Entry 54 of List II of the Seventh Schedule to the Constitution, which authorized the State Governments to impose tax only on sales and not on the use of goods.

The judgment emphasized that the term "sale" had a well-defined meaning involving a transfer of property in goods from a seller to a buyer for a pecuniary consideration. The court cited precedents, including Sales Tax Officer v. Budh Prakash Jai Prakash and Gannon Dunkerley and Co. (Madras) Ltd. v. State of Madras, to support the interpretation that mere use does not constitute a sale. The court concluded that the State Legislature could not enlarge the scope of "sale" to include use, as this would exceed the powers conferred by the Constitution.

2. Legality of the Tax Assessments Made Under the Impugned Proviso:

The court found that the assessments made under the second proviso to section 2(12) were illegal and void. The proviso was deemed constitutionally invalid and unenforceable because it involved an excessive use of legislative power by the State Legislature. The court held that the assessments lacked legal sanction and were therefore illegal. Consequently, the assessment orders for the three periods in question were quashed.

3. Availability and Exhaustion of Alternative Remedies by the Petitioner:

The petitioner had argued that all remedies under the Sales Tax Act had been exhausted, leaving no other remedy available except invoking the extraordinary jurisdiction of the court under Article 226. The court noted that the appeals filed by the petitioner were dismissed as time-barred, and the Commissioner of Taxes had upheld the dismissal. The court observed that the petitioner had not fully utilized the available remedies, such as seeking a reference to the court. However, given that the assessments were found to be illegal, the court exercised its discretion to issue a writ of mandamus to prevent a miscarriage of justice.

4. Jurisdiction of Taxing Officers to Assess Tax on Specific Goods:

The petitioner contended that the tea chests and machinery parts taxed did not form part of his stock as a dealer under the Act. The court did not find it necessary to examine this contention in detail, as the proviso itself was found to be void. However, the court acknowledged that the taxing officers lacked jurisdiction to assess tax on goods not mentioned in the dealer's registration certificate, as the dealer was not dealing in machinery parts or tea chests.

Conclusion:

The court concluded that the second proviso to section 2(12) of the Assam Sales Tax Act, 1947, was ultra vires and unconstitutional. The assessments made under the proviso were illegal and without legal sanction. The court issued writs of mandamus directing that the assessment orders should not be enforced against the petitioner. The application was allowed, and the assessment orders were quashed.

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