1963 (5) TMI 53 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the Board of Revenue under Section 34 of the Madras General Sales Tax Act, 1959.
2. Taxability of inter-State sales under the Madras General Sales Tax Act.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Board of Revenue under Section 34 of the Madras General Sales Tax Act, 1959:
The core issue here is whether the Board of Revenue acted within its jurisdiction when it revised the order of the Deputy Commercial Tax Officer (DCTO) beyond the four-year limitation period specified in Section 34 of the Madras General Sales Tax Act, 1959. The relevant provision, Section 34(2), states: "The Board of Revenue shall not pass any order under sub-section (1) if...........(c) more than four years have expired after the passing of the order."

The Board contended that the four-year period should be computed from the date of the Commercial Tax Officer's (CTO) appellate order, not from the DCTO's original order. However, the Court clarified that the period of limitation should be computed from the date of the DCTO's order, which was 31st August 1957. Since the Board's notice was issued on 10th March 1962, it was beyond the four-year limitation period that ended on 30th August 1961.

The Court heavily relied on a precedent that established the principle that the period of limitation should be computed from the date of the original order if the appellate authority did not modify or interfere with the order of the assessing authority. The Court concluded that the Board's action was beyond the period of limitation and thus, the exercise of its powers was "wholly incompetent."

2. Taxability of inter-State sales under the Madras General Sales Tax Act:
The second issue involved the taxability of inter-State sales of snuff by the assessee. The Board of Revenue had canceled the exemption granted to the assessee on the grounds that the inter-State sales were taxable under the Madras General Sales Tax Act, relying on the Supreme Court decision in Ashok Leyland v. State of Madras.

The Court examined the manner in which the sales were conducted, noting that goods were dispatched by post (V.P.P.) or rail, with the payment being made upon delivery. The Court referred to the Supreme Court decision in Commissioner of Income-tax v. P. M. Rathod & Co., which established that the property in the goods passes to the buyer only upon payment, meaning the sales took place outside the Madras State.

Moreover, the Court analyzed the impact of the Sales Tax Laws Validation Act, 1956, and the constitutional provisions under Article 286. The Court noted that the Validation Act lifted the ban under Article 286(2) only to the extent that it allowed the delivery-cum-consumption State to tax the inter-State sale, not the State from which the goods originated.

The Court reviewed several Supreme Court decisions, including the Bengal Immunity case and William Jacks and Company v. State of Bihar, which clarified that the removal of the ban under Article 286(2) did not affect the ban under Article 286(1)(a), which prohibited a State from taxing a sale that took place outside its jurisdiction.

The Court concluded that the sales in question were indeed inter-State sales and took place outside the Madras State. Therefore, the Madras State was not competent to tax these sales, and the Board of Revenue's order was based on an incorrect appreciation of the legal position.

Conclusion:
The appeal was allowed on both grounds. The Board of Revenue's exercise of revisional powers was beyond the statutory period of limitation, rendering it incompetent. Additionally, the inter-State sales were not taxable under the Madras General Sales Tax Act, as they were conducted outside the Madras State. Consequently, the order of the Board of Revenue was set aside, and no costs were awarded.

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