1960 (11) TMI 94 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Article 286 of the Constitution.
2. Determination of whether the transactions constituted inter-State sales.
3. Applicability of the Hyderabad General Sales Tax Act.
4. Implications of the Colliery Control Order, 1945.
5. Relevance of the Central Sales Tax Act, 1956.

Detailed Analysis:

Interpretation of Article 286 of the Constitution:
The central question was whether the turnover in dispute was protected by the ban imposed by Article 286 of the Constitution. The petitioners argued that their sales, which resulted in deliveries outside the State, fell within the connotation of inter-State trade or commerce and were thus not amenable to tax under the Hyderabad General Sales Tax Act. The court examined several precedents, including rulings from the Supreme Court and High Courts, to determine the applicability of Article 286.

Determination of Whether the Transactions Constituted Inter-State Sales:
The petitioners contended that the transactions involved sales to parties outside the State and the transport of goods from this State to other States, thus constituting inter-State trade or commerce. The court analyzed various cases, such as Mohanlal Hargovind v. State of Madhya Pradesh, Bengal Immunity Co. v. State of Bihar, and State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory, to understand the essential elements that constitute inter-State trade or commerce. The court concluded that the movement of goods from one State to another must be an integral part of the sale, and the delivery of goods outside the State must be traceable to a bargain between the parties.

Applicability of the Hyderabad General Sales Tax Act:
For the relevant period, the Hyderabad General Sales Tax Act was applicable. The court noted that coal, being a controlled commodity, had its prices and distribution controlled by the Ministry of Works, New Delhi. The court found that the transactions did not constitute inter-State trade or commerce, as the delivery of goods to the railway for conveyance to the buyers constituted delivery to the buyers who furnished the rail-head program. Therefore, the sales were complete within the State and were subject to the Hyderabad General Sales Tax Act.

Implications of the Colliery Control Order, 1945:
Clause 10-A of the Colliery Control Order, 1945, was examined to determine if the sales fell within the prohibition enacted in Article 286. The court found that the Coal Controller's power to divert coal to another person while in transit did not alter the nature of the transaction. The property in the goods passed to the buyer when the goods were put on rail, and the seller was not responsible for the diversion. Therefore, the transactions did not constitute inter-State trade or commerce.

Relevance of the Central Sales Tax Act, 1956:
The petitioners argued that the transactions post-5th January 1957 should not be subject to tax under the Central Sales Tax Act, 1956. The court noted that Section 3 of the Central Sales Tax Act defines inter-State trade or commerce and that the sale must occasion the movement of goods from one State to another. The court concluded that the transactions did not meet the criteria for inter-State trade or commerce as defined by the Act, and thus, the sales were subject to tax under the Hyderabad General Sales Tax Act.

Conclusion:
The court dismissed the revision petition, holding that the transactions did not constitute inter-State trade or commerce and were amenable to sales tax under the Hyderabad General Sales Tax Act. The petitioners were ordered to pay costs, with the Advocate's fee fixed at Rs. 500.