1961 (9) TMI 51 - HC - VAT and Sales Tax

Summary

Issues:
1. Applicability of the proviso to section 3(2) of the Madras General Sales Tax Act to the sales turnover.
2. Classification of goods purchased from non-resident sellers as first or second sales under the Act.
3. Constitutionality of the first proviso to section 3(2) of the Act under Article 14 of the Constitution.

Detailed Analysis:

1. The petitioner, a textile firm, contested the assessment of their sales turnover by the Deputy Commercial Tax Officer, objecting to the levy of tax under the proviso to section 3(2) of the Madras General Sales Tax Act. The petitioner argued that the sales turnover in question should not be subject to additional levy as it did not constitute "the first sales" in the Madras State. The appellate authorities upheld the decision of the assessing authority, leading to the petitioner's appeal to the Sales Tax Appellate Tribunal, which also ruled against the petitioner. The main contention was that the sales turnover should not suffer any additional levy beyond what is properly chargeable under the main charging section of the Act.

2. The petitioner further argued that the goods sold, which formed part of the sales turnover in question, were purchased from non-resident sellers through their resident agent in Madras. They contended that these sales should be classified as second sales and not "the first sales" as per the Act. The Tribunal dismissed these contentions, emphasizing that the proviso to section 3(2) considers the sale by the petitioner of goods purchased from outside the territory as the first sale. The Tribunal highlighted that the purchase by the petitioner from non-resident sellers cannot be deemed the first sale by a dealer residing in the State of Madras.

3. Regarding the constitutionality of the first proviso to section 3(2) of the Act under Article 14 of the Constitution, the petitioner argued that it was discriminatory and violated the equality clause. The petitioner claimed that the sales in question were conducted with Bombay merchants having branches or agents in Madras, and thus, the first sale was in their favor by the non-resident seller. However, the Court found the petitioner's argument to be unsubstantial, stating that the proviso did not discriminate between residents and non-residents. The Court held that the provision did not offend Article 14 and that even discriminatory legislation could be upheld if based on a reasonable classification or distinction.

In conclusion, the Court dismissed the petition, upholding the applicability of the proviso to section 3(2) to the sales turnover, classifying the goods purchased from non-resident sellers as first sales, and ruling the first proviso as constitutional under Article 14 of the Constitution. The petitioner's arguments were deemed unfounded, and the petition was dismissed with costs.