1956 (7) TMI 47 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether section 18A of the Bombay Sales Tax Act, under which the assessment to tax was made, was ultra vires of the State Legislature.

Analysis:
The suit in question arose when a company went into liquidation, and the Sales Tax Authority assessed the company to sales tax on its remaining assets after cancellation of its registration certificate. The main issue was the vires of section 18A of the Bombay Sales Tax Act, which imposed tax on unsold stock of goods at the time of certificate cancellation. The plaintiff argued that the Act only allowed taxing actual sales, not assets, and section 18A was ultra vires as it taxed assets. The Advocate-General contended that goods purchased by the company were intended for resale, thus already taxed, but tax was now due due to business suspension. The court held that taxing goods intended for resale under section 18A was valid, but taxing plant, machinery, and equipment was not justified. The court emphasized strict construction of taxing statutes and found no clear liability for taxing assets like machinery under section 18A. The intention of the Legislature did not clearly express taxing assets, hence the company was not liable to pay sales tax on plant and machinery.

In conclusion, the court directed the matter back to the lower court for further proceedings based on the judgment. The costs were to be decided as per the final outcome of the case.