1959 (9) TMI 39 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether purchases of cotton imported from abroad by a spinning mill are liable to be taxed under sales tax laws.
2. Whether the purchases were in the course of import or inter-State commerce.
3. Validity and enforceability of rule 4-A(iv) of the Turnover and Assessment Rules.

Analysis:

1. The High Court considered the case of a spinning mill assessed for sales tax on purchases of cotton imported from abroad. The Tribunal held the purchases were taxable, which the assessee challenged. The Tribunal summarized the transactions involving import of cotton from Egypt through Bombay dealers to Cochin and then to the assessee in Tirupur. The Tribunal concluded the sales were intra-State and not protected under Article 286 of the Constitution.

2. The assessee contended that the purchases were in the course of import or inter-State commerce, thus not subject to Madras taxation. The Court analyzed the nature of transactions, concluding that the purchases were made after import and delivery within India, not falling under Article 286 protection. The goods moved from Cochin to Tirupur by rail, satisfying the delivery and consumption requirements under Article 286(1)(a).

3. The assessee argued that rule 4-A(iv) was invalid as it did not comply with the single point levy requirement of section 5(ii) of the Act. The Court examined the rule's language, which directed tax on the spinning mill as the purchaser, but the economic and statutory incidence aligned. The Court determined that the rule provided a single point for taxation and did not allow for multi-point levy, ensuring precision in tax assessment.

4. The Court upheld the validity of rule 4-A(iv) as intra vires and not conflicting with section 5(ii) of the Act. All contentions of the assessee were dismissed, affirming the Tribunal's decision to tax the purchases of imported cotton. The petition was dismissed with costs, and the validity of the rule was confirmed.