1959 (10) TMI 22 - HC - VAT and Sales Tax

Issues Involved:
1. Taxability of "hessian" under the Bombay Sales Tax Act, 1953.
2. Applicability of the Bombay Sales Tax Laws (Special Exemptions) Act, 1957 to "hessian".
3. Legality of taxing machinery parts sold and delivered outside the State of Bihar under the Bihar Sales Tax Act, 1947.
4. Rejection of the petitioner's claim for deduction on account of sales to registered dealers under the Bihar Sales Tax Act, 1947.

Detailed Analysis:

1. Taxability of "hessian" under the Bombay Sales Tax Act, 1953:
The primary issue is whether "hessian" falls within the classes of goods mentioned in Schedule I to the Bombay Sales Tax Laws (Special Exemptions) Act, 1957. The Additional Collector of Sales Tax determined that a tax is payable on the sale of hessian under the Bombay Sales Tax Act, 1953. Entry 24-A of Schedule B to the Bombay Sales Tax Act, 1953, explicitly includes hessian, subjecting it to sales tax. The appellants contended that the sale of hessian is exempt under the Bombay Sales Tax Laws (Special Exemptions) Act, 1957. However, the court noted that hessian is distinctly mentioned in Entry 24-A and not under other entries related to cloth, indicating it is treated differently.

2. Applicability of the Bombay Sales Tax Laws (Special Exemptions) Act, 1957 to "hessian":
The appellants argued that hessian should be exempt under the Exemptions Act, 1957, which applies to designated goods and scheduled goods. Schedule I of the Exemptions Act refers to varieties of cloth, sugar, and tobacco. Mr. Mehta conceded that hessian is not subject to additional duty of excise but contended it should still be exempt. The court rejected this argument, stating that the Exemptions Act applies only to goods subject to additional duty of excise or certain handloom textiles, neither of which includes hessian. Therefore, hessian does not fall within the exemptions provided by the Act.

3. Legality of taxing machinery parts sold and delivered outside the State of Bihar under the Bihar Sales Tax Act, 1947:
For the financial year 1947-48, the court examined whether the sum for machinery parts contracted to be sold, delivered, and consumed outside Bihar was legally taxed. The assessee argued that the title did not pass within Bihar, and the second proviso to section 2(g) of the Bihar Sales Tax Act, as it stood before the amendment in 1949, should apply. However, the court noted that the argument was not raised before the Board of Revenue or the appellate authority. The court upheld the tax imposition, referencing the decision in Tata Iron and Steel Company Limited v. State of Bihar, and concluded that the transactions were outright sales within Bihar, thus taxable.

4. Rejection of the petitioner's claim for deduction on account of sales to registered dealers under the Bihar Sales Tax Act, 1947:
The assessee's claim for deduction was based on sales to registered dealers, which was rejected by the Sales Tax Authorities. The argument was that rule 36(2) of the old Act ceased to exist after the enactment of rule 18 under the new Act. The court found no inconsistency between rule 36(2) and the new Act, stating that rule 36(2) continued to apply. Therefore, the rejection of the deduction claim was upheld, and the second question of law was answered in favor of the State of Bihar.

Conclusion:
The court dismissed the appeal concerning the taxability of hessian under the Bombay Sales Tax Act, 1953, and upheld the Additional Collector of Sales Tax's decision. Regarding the Bihar Sales Tax Act, 1947, the court answered both questions of law in favor of the State of Bihar, confirming the taxability of machinery parts sold outside Bihar and the rejection of the deduction claim. The assessee was ordered to pay the costs of the reference.

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