1962 (1) TMI 45 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of Article 286 of the Indian Constitution.
2. Definition and scope of "inside sales" and "inter-State sales."
3. Interpretation of "actual delivery" under Article 286(1)(a).
4. Legislative competency of the State to impose sales tax.
5. Validity of the taxing power under the Constitution (Sixth Amendment) Act, 1956.
6. Costs and procedural fairness in the hearing process.

Detailed Analysis:

1. Applicability of Article 286 of the Indian Constitution:
The petitioner contended that the disputed turnover was protected by Article 286 of the Indian Constitution, as it stood before its amendment in 1956, and section 27 of the Mysore Sales Tax Act, which mirrors Article 286. The petitioner argued that the disputed transactions were sales effected outside the Mysore State and thus exempt from sales tax under Article 286(1)(a). Alternatively, they should be considered inter-State sales protected by Article 286(2).

2. Definition and Scope of "Inside Sales" and "Inter-State Sales":
The court analyzed whether the sales were "inside sales" or "inter-State sales." The Mysore Sales Tax Appellate Tribunal had concluded that the ore was sold and delivered in Mysore State, making it taxable under the Mysore Sales Tax Act. They based this on the premise that delivery to a common carrier is "actual delivery" as per the Explanation to Article 286(1)(a). The court noted that the Supreme Court had debated the scope of Article 286 extensively, but not all controversies had been resolved.

3. Interpretation of "Actual Delivery" under Article 286(1)(a):
The court examined the meaning of "actual delivery" and concluded that delivery to a common carrier does not constitute "actual delivery" as intended in the Explanation to Article 286(1)(a). This view was supported by previous judgments, including those from the Supreme Court and various High Courts. The material on record was insufficient to determine whether the manganese ore was "actually" delivered in Mysore State to the buyer or his agent.

4. Legislative Competency of the State to Impose Sales Tax:
The court discussed the legislative competency of the State to impose sales tax under Article 286. It was noted that a State could tax sales where the property in the goods sold passed within the State, provided the sales did not fall within the scope of the Explanation to Article 286(1)(a). The court referred to multiple Supreme Court decisions to support this interpretation.

5. Validity of the Taxing Power under the Constitution (Sixth Amendment) Act, 1956:
The court acknowledged the argument that the ban on the States' power to tax inter-State sales was lifted by the validating Act (Act VII of 1956) for sales that took place before 6th September 1955. This position was uncontested by the opposite side and supported by the Supreme Court decision in Sundararamier & Co. v. The State of Andhra Pradesh.

6. Costs and Procedural Fairness in the Hearing Process:
The court addressed the procedural fairness during the hearing. The petitioner's counsel was not present, and a junior argued the case without proper briefing. The court appreciated the fairness of the learned Government Pleader and the assistance provided by another advocate, which prevented the dismissal of the case. Consequently, the court decided not to award costs to the petitioner in C.R.P. No. 864 of 1959, even if he ultimately succeeded before the Mysore Sales Tax Appellate Tribunal. However, the petitioner would be liable to pay the respondent's costs if he failed before the Tribunal.

Conclusion:
The orders of the Mysore Sales Tax Appellate Tribunal were set aside, and the cases were remitted to the Tribunal for disposal in accordance with the court's findings and directions. The Tribunal was instructed to re-examine the cases with the principles enunciated in the judgment.

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