1965 (1) TMI 59 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption from tax under Article 286(1)(b) of the Constitution and Section 29 of the Punjab General Sales Tax Act.
2. Application of judicial mind by the Assessing Authority.
3. Appropriateness of using Article 226 for redressal.

Detailed Analysis:

1. Exemption from Tax under Article 286(1)(b) and Section 29:
The core issue concerns whether the transactions in question qualify for exemption from tax under Article 286(1)(b) of the Constitution and Section 29 of the Punjab General Sales Tax Act. Article 286(1)(b) states, "No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into, or export of the goods out of, the territory of India." Similarly, Section 29 of the Punjab Act provides for exemption where the sale or purchase takes place in the course of import or export.

The petitioner argued that the cotton purchased in Punjab was for the purpose of export, thereby integrating the activities of purchase and export. Evidence was presented to the Assessing Authority showing that the cotton was exported from Bombay. However, the Assessing Authority did not accept this submission and imposed a purchase tax.

The court referred to multiple Supreme Court decisions, including State of Travancore-Cochin v. S.V.C. Factory and Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, which clarified that sales and purchases that occasion the export or import of goods fall within the exemption. The court emphasized that for a sale to be in the course of export, there must be an "inextricable connection or bond between the sale and the export," and the sale must itself occasion the export.

2. Application of Judicial Mind by the Assessing Authority:
The petitioner contended that the Assessing Authority did not exercise its independent judgment and was influenced by a letter from the Excise and Taxation Commissioner. The court examined this claim and found no evidence that the Assessing Authority failed to apply its own judicial mind. The court noted that the petitioner did not produce the letter or its substance, and the impugned order did not indicate that it was based on an executive command.

3. Appropriateness of Using Article 226 for Redressal:
The court reiterated that in taxation matters, parties should generally seek redress through the statutory machinery provided by the taxing statutes. The High Court is not an appellate authority on facts under the Punjab General Sales Tax Act, and challenges to questions of fact should not be encouraged under Article 226. The court emphasized that the jurisdiction under Article 226 is not intended to supersede the authority of the assessing hierarchy.

The court also addressed the petitioner's concern that an appeal would be an idle formality due to the alleged influence of the letter. The court dismissed this concern, asserting that the appellate authority would independently assess the evidence and apply the law without undue influence from any such letter.

Conclusion:
The court dismissed both writ petitions, holding that the petitioner should seek redress through the statutory appellate machinery. The court found no merit in the contention that the Assessing Authority failed to apply its independent judgment or that the appellate process would be ineffective. The petitions were dismissed without costs.