1971 (1) TMI 101 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption from sales tax for sales outside the State under Article 286(1)(a) of the Constitution.
2. Exemption from sales tax for sales made to the Madhya Pradesh Electricity Board under Section 2(j)(a)(iii) of the Central Provinces and Berar Sales Tax Act, 1947.
3. Consideration of alternative remedy under Article 226 of the Constitution.

Detailed Analysis:

1. Exemption from Sales Tax for Sales Outside the State under Article 286(1)(a) of the Constitution:

Assessment Orders and Claims:
The petitioner, a public limited company engaged in the manufacture and sale of cement, challenged the assessment orders for the years 1954-55 and 1955-56, claiming that certain sales were outside the State and thus exempt from tax under Article 286(1)(a) of the Constitution as it stood before the Sixth Amendment.

Assistant Commissioner's Findings:
The Assistant Sales Tax Commissioner concluded that the sales were not outside sales, emphasizing conditions such as free delivery at the works siding, the responsibility for transit risks lying with the buyers, and the railway receipt being taken in the name of the consignee.

Court's Analysis:
The Court found the Assistant Commissioner's focus on notional delivery, passing of property, and shifting of responsibility to be misplaced. The Court emphasized the importance of "actual delivery" as defined by the Supreme Court, meaning physical delivery or possession by the purchaser. The Court concluded that the goods were actually delivered outside Madhya Pradesh, thus qualifying for exemption under Article 286(1)(a).

Relevant Case Law:
The Court referred to several Supreme Court decisions, including Bajrang Jute Mills v. State of A.P., Singareni Collieries Co. v. Commissioner of Commercial Taxes, and B.T. Trading Co. v. Commissioner of Sales Tax, M.P., which supported the interpretation that "actual delivery" means physical delivery at the destination.

Conclusion:
The Court held that the sales to outside purchasers were exempt under Article 286(1)(a) and could not be taxed by the State of Madhya Pradesh.

2. Exemption from Sales Tax for Sales Made to the Madhya Pradesh Electricity Board:

Petitioner's Claim:
The petitioner claimed exemption for sales made to the Madhya Pradesh Electricity Board, asserting that the cement was used for generating and distributing electrical energy.

Assistant Commissioner's Findings:
The Assistant Commissioner found that the cement was used for constructing buildings for the Board's staff and offices, which did not qualify for exemption under Section 2(j)(a)(iii) of the Central Provinces and Berar Sales Tax Act, 1947.

Court's Analysis:
The Court agreed with the Assistant Commissioner, stating that the exemption applies only to sales made for direct use in the generation or distribution of electrical energy. The use of cement for constructing office buildings and staff quarters was deemed too remote to qualify for the exemption.

Relevant Case Law:
The Court cited a similar decision by the High Court of Punjab and Haryana in S.D. Singh & Co. v. Punjab State, which held that the sale of timber for constructing a power-house did not fall within a similar exemption clause.

Conclusion:
The Court upheld the Assistant Commissioner's rejection of the exemption claim for sales made to the Madhya Pradesh Electricity Board.

3. Consideration of Alternative Remedy under Article 226 of the Constitution:

Respondents' Argument:
The respondents argued that the petitioner should not be granted relief under Article 226 because they did not avail the alternative remedy of appeal.

Court's Analysis:
The Court noted that an appeal under the Sales Tax Act requires payment of tax, and the existence of an alternative remedy is not an absolute bar to interference under Article 226. The Court considered the admitted facts and the heavy tax amount, concluding that it would not be a sound exercise of discretion to refuse interference.

Conclusion:
The Court decided to exercise its discretion under Article 226 and partially allowed the petitions.

Final Judgment:
The petitions were partly allowed. The assessment orders were quashed to the extent that they disallowed the exemption claimed under Article 286(1)(a) of the Constitution. The respondents were directed not to recover any tax on the turnover of outside sales. There was no order as to costs, and the security deposits were ordered to be refunded to the petitioner.