1966 (1) TMI 64 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of sales tax on coal supplied to East Pakistan.
2. Applicability of Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of Article 286(1)(b) of the Constitution.
4. Interpretation of Clause 12E of the Colliery Control Order, 1945.
5. Availability of alternative remedies under the Act.

Detailed Analysis:

1. Liability of Sales Tax on Coal Supplied to East Pakistan:
The appellant, a private company owning a coal mine, supplied coal to East Pakistan under an agreement between the Governments of India and Pakistan. The appellant was made liable for sales tax under the Bengal Finance (Sales Tax) Act, 1941. The appellant contended that it was not liable for sales tax as the coal was meant for export and was, in fact, exported out of India. This contention was rejected by the Sales Tax Authorities, leading the appellant to file a petition under Article 226 of the Constitution, which was initially dismissed.

2. Applicability of Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941:
The appellant argued that the transaction fell under Section 5(2)(a)(v) of the Act, which allows deduction from taxable turnover for sales not taking place in West Bengal or in the course of inter-State trade or commerce, or in the course of export out of India. The appellant contended that the sale did not occur in West Bengal and was part of an export transaction. The court held that the export of coal to East Pakistan was an integral part of the transaction and could not be separated from the sale. Thus, the sale was exempt under Section 5(2)(a)(v).

3. Applicability of Article 286(1)(b) of the Constitution:
The appellant further argued that the sale was exempt under Article 286(1)(b) of the Constitution, which prohibits taxation of sales taking place in the course of export out of India. Citing the Supreme Court's decision in State of Travancore-Cochin v. The Bombay Company Ltd., the court held that the sale and export formed an integrated transaction. Even if the sale occurred in West Bengal, it was in the course of export and thus exempt under Article 286(1)(b).

4. Interpretation of Clause 12E of the Colliery Control Order, 1945:
The appellant contended that under Clause 12E of the Colliery Control Order, 1945, the transaction could not be regarded as a sale liable to tax. Clause 12E stipulates that coal cannot be sold or transported without the Central Government's permission. The court, referencing the Supreme Court's decision in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar, agreed that the transaction was not a sale under the Act as it was made under the Central Government's authority and conditions, not under a contract between the parties.

5. Availability of Alternative Remedies under the Act:
The respondents argued that the appellant should not be granted relief as it had an alternative remedy under the Act, which it did not fully exhaust. The court acknowledged that while alternative remedies existed, the appellant had already pursued two of the statutory remedies. The court held that the existence of an alternative remedy does not bar the jurisdiction under Article 226, especially when the appellant challenges the jurisdiction of the Sales Tax Authorities and the nature of the transaction as a sale.

Conclusion:
The court allowed the appeal, setting aside the previous judgment and order, and ruled in favor of the appellant. The court held that the transaction was exempt from sales tax under both Section 5(2)(a)(v) of the Act and Article 286(1)(b) of the Constitution. The court also agreed that the transaction could not be regarded as a sale under Clause 12E of the Colliery Control Order, 1945. The appellant was entitled to costs of the trial and appellate courts.