1977 (3) TMI 136 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the assessment order dated 21st August 1963.
2. Classification of the transaction as a "sale" under the Bengal Finance (Sales Tax) Act, 1941.
3. Jurisdiction and authority of the Commercial Tax Officer.
4. Maintainability of the petition under Article 226 post the Constitution (Forty-second Amendment) Act, 1976.
5. Alternative remedies available under the Act.
6. Enforcement of fundamental rights under Part III of the Constitution.

Detailed Analysis:

1. Validity of the Assessment Order:
The petitioner challenged the assessment order dated 21st August 1963, and certain notices issued under the Bengal Finance (Sales Tax) Act, 1941. The Commercial Tax Officer assessed the petitioner to sales tax on the basis that the supplies made to the Public Works Department (PWD), Government of West Bengal, amounted to a sale of goods within the meaning of the Act. Dr. Debi Prosad Pal, representing the petitioner, argued that the transaction did not amount to a sale and thus the assessment order was invalid.

2. Classification of the Transaction as a "Sale":
Dr. Pal contended that the petitioner was merely collecting and supplying stone materials as per the contract with the PWD and that the property in the goods always belonged to the State of West Bengal. He cited the Supreme Court decision in Commissioner of Sales Tax, M.P. v. Purshottam Premji, where it was held that similar transactions did not constitute a sale but a works contract. The court agreed, noting that the stones remained the property of the State and the payment of royalty did not transfer ownership to the petitioner. Consequently, the transaction did not amount to a sale under the Act.

3. Jurisdiction and Authority of the Commercial Tax Officer:
The Commercial Tax Officer's decision was based on a misinterpretation of the legal position regarding the ownership of the stones. The court held that the officer erred in treating the transaction as a sale and imposing sales tax. The assessment and notices were therefore without jurisdiction.

4. Maintainability of the Petition under Article 226:
Mr. Dutta, representing the State of West Bengal, argued that the petition was not maintainable under the amended Article 226 due to the availability of alternative remedies. However, Dr. Pal conceded that the petition was a "pending petition" under section 58 of the Constitution (Forty-second Amendment) Act, 1976, and thus governed by the substituted Article 226.

5. Alternative Remedies Available under the Act:
Mr. Dutta argued that the petitioner had alternative remedies under sections 20(3) and 20(4) of the Act. However, the court noted that these sections pertain to "assessment made" or "order passed" and do not cover notices. The court held that the impugned notices were not orders and thus the petitioner had no alternative remedy under these provisions.

6. Enforcement of Fundamental Rights:
Dr. Pal argued that the assessment order deprived the petitioner of property without authority of law, violating Article 31(1) of the Constitution. The court agreed, referencing the Supreme Court's decision in Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, which held that a demand for tax not leviable under law amounts to deprivation of property without authority of law. Thus, the petition was for the enforcement of a fundamental right under Part III of the Constitution, making Article 226(3) inapplicable.

Conclusion:
The court quashed the assessment order dated 21st August 1968, and the order dated 1st June 1968, along with the related notices. The matter was remanded to the respondents for reassessment in light of the court's observations. The operation of the order was stayed for four weeks to allow for any further appeal. The petition was allowed with no order as to costs.

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