1959 (9) TMI 32 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover related to sales of machinery to buyers outside the State for consumption in those States under the President's Sales Tax Continuance Order, 1950.

Analysis:
The judgment pertains to the assessment year 1950-51 and focuses on the turnover of sales of machinery to buyers outside the State for consumption in those States. The contention was that these sales fell within the scope of the explanation to Article 286(1)(a) of the Constitution, exempting them from taxation within the State of Madras. The Tribunal initially did not decide if these were explanation sales or sales in the course of inter-State trade under Article 286(2), as they believed that the sales tax would apply under the President's Sales Tax Continuance Order. However, the court reevaluated the situation in light of Bengal Immunity Co. Ltd. v. State of Bihar and Ram Narain v. Assistant Commissioner of Sales Tax.

The judgment highlighted that an explanation sale under Article 286(1)(a) could be a sale in the course of inter-State trade, subject to the ban under Article 286(2). The lifting of this ban by the President's Sales Tax Continuance Order raised the question of which State could tax the transaction. If the sales were deemed outside sales falling within the explanation to Article 286(1)(a), Madras State could not tax them under the President's Sales Tax Continuance Order. The court emphasized the principle established in Ram Narain v. Assistant Commissioner of Sales Tax regarding the taxation of sales of machinery outside the State of Madras for consumption in the States of delivery.

Given the Tribunal's failure to decide on the nature of the sales in question, the court remanded the proceedings for a fresh assessment limited to determining the liability of the turnover related to sales of machinery. The Tribunal was instructed to allow the assessee to present additional evidence if necessary and to consider whether any portion of the turnover constituted sales of articles delivered for consumption outside the State of Madras, exempt from taxation under the President's Sales Tax Continuance Order. The court upheld the Tribunal's findings on other aspects of the case and set aside the order to the extent indicated, directing a rehearing of the appeal in accordance with the law, with no costs awarded for the proceedings before the court.