1965 (12) TMI 129 - HC - VAT and Sales Tax

Issues Involved
1. Levy of sales tax on coal supplied to allottees outside the State of Madhya Pradesh.
2. Applicability of Article 286(1)(a) and Article 286(2) of the Constitution.
3. Jurisdiction of the State to levy sales tax on inter-State sales.
4. Alternative remedy of appeals and the requirement of deposit of one-third tax amount.

Detailed Analysis

Levy of Sales Tax on Coal Supplied Outside Madhya Pradesh
The petitions were filed by four coal companies against the levy of sales tax under the Central Provinces and Berar Sales Tax Act, 1947, and the Madhya Pradesh General Sales Tax Act, 1958. The coal was supplied to allottees outside Madhya Pradesh as per the directions issued by the Coal Controller under the Colliery Control Order, 1945. The taxing authorities included these despatches in the taxable turnover, treating them as sales taxable under local enactments.

Applicability of Article 286(1)(a) and Article 286(2) of the Constitution
The assessees argued that even if the despatches amounted to sales, they were prohibited under Article 286(1)(a) and Article 286(2) of the Constitution. The Supreme Court's decision in The Singareni Collieries Co. Ltd. v. State of Andhra Pradesh was cited, which held that sales tax on coal delivered outside the taxing State for consumption therein was not leviable due to the Explanation to Article 286(1) and the nature of inter-State sales.

Jurisdiction of the State to Levy Sales Tax on Inter-State Sales
The Supreme Court in the Singareni Collieries case concluded that coal transported from the colliery to consumers outside the taxing State as a result of the contract of sale constituted inter-State sales, not liable to tax under the local sales tax acts. The Supreme Court also noted that during different periods, the power to tax inter-State sales was governed by the Central Sales Tax Act, 1956, and not by the State Acts.

Alternative Remedy of Appeals and Requirement of Deposit
The petitioners had filed appeals against the assessment orders but had not deposited one-third of the tax amount, which was a prerequisite for the appeals to be admitted. The petitioners argued that pursuing the appeals would cause considerable inconvenience and hardship, as the matter was already conclusively covered by the Supreme Court's decision in the Singareni Collieries case. The court agreed that forcing the petitioners to pursue appeals would be unnecessary and unjust, given the clear precedent and the financial burden of the deposit requirement.

Conclusion
The court held that the transactions in question were inter-State sales and not liable to be taxed under the C.P. and Berar Sales Tax Act, 1947, and the M.P. General Sales Tax Act, 1958. The assessment orders and demand notices were quashed, and the taxing authorities were restrained from recovering the assessed amounts. The court also emphasized that the rule requiring the exhaustion of statutory remedies before the grant of a writ of certiorari is a rule of policy, not a rule of law, and can be bypassed in cases of palpable injustice or lack of jurisdiction.

Orders
The court allowed all the petitions, quashed the assessment orders, and restrained the authorities from recovering the amounts. The petitioners were awarded costs, and the security deposits were ordered to be refunded.

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