1962 (2) TMI 63 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax as a tax on the sale of goods or the commodity sold.

Analysis:
The case involved a reference under section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, to determine whether sales tax is a tax solely on the sale of goods or also on the commodity sold. The assessee, Tata Aircraft Limited, was assessed for sales tax by the Commercial Tax Officer, which was disputed by the assessee based on its agreement with the Government of India for disposal of surplus stores. The Commissioner of Commercial Taxes held that the assessee, as the seller of the goods, was liable to pay sales tax regardless of the ownership of the goods. The Board of Revenue rejected the assessee's contention that no tax could be levied on property belonging to the Central Government under the Government of India Act, 1935. The Board referred the sole question of law to the High Court for determination.

The High Court analyzed the provisions of the Bengal Finance (Sales Tax) Act, 1941, which defined a dealer as a person carrying on the business of selling goods in West Bengal, including the Government. The Act imposed a tax on the sale of goods to add to the revenues of West Bengal. The Court considered various legal authorities, including judgments from the Federal Court of India and the Supreme Court, to determine the nature of sales tax. The Court emphasized that sales tax is a tax on the sale of goods and not on the goods themselves. The Court cited precedents that clarified the distinction between a tax on sales and a duty of excise, emphasizing that sales tax is an incident to the sale and not on the goods per se.

The Court rejected the assessee's argument that sales tax was a tax on the goods, emphasizing that the tax was on the sale of goods as explicitly stated in the Act. The Court concluded that sales tax, as imposed by the Act, is a tax on the sale of goods and not on the goods themselves. Therefore, the assessee was held liable to pay the sales tax as assessed. The judgment was delivered by the High Court of Calcutta, and the reference was answered accordingly.

In conclusion, the High Court determined that sales tax under the Bengal Finance (Sales Tax) Act, 1941, is a tax on the sale of goods and not on the goods themselves. The judgment clarified the legal nature of sales tax and upheld the assessment of the tax on the assessee based on the sale transactions conducted by the assessee, irrespective of the ownership of the goods sold.