1976 (6) TMI 67 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioners' transactions are "sales" within the meaning of the Bihar Sales Tax Act, 1959.
2. Whether the petitioners are "dealers" under the Bihar Sales Tax Act, 1959.
3. Whether the definition of "sale" in the Bihar Sales Tax Act, 1959, is ultra vires and unconstitutional.
4. The liability of the petitioners to pay additional sales tax under section 3B of the Bihar Sales Tax Act, 1959.
5. Validity of the notice issued under section 16(5) of the Bihar Sales Tax Act, 1959.

Detailed Analysis:

1. Whether the petitioners' transactions are "sales" within the meaning of the Bihar Sales Tax Act, 1959:
The court examined whether the transactions conducted by the petitioners, who run Government Fair Price Shops, qualify as "sales" under the Bihar Sales Tax Act, 1959. The petitioners argued that their transactions do not constitute "sales" as defined under the Sale of Goods Act, 1930, due to the lack of mutual assent and the compulsory nature of the transactions. However, the court referred to the definition of "sale" in the Bihar Sales Tax Act, which includes any transfer of property in goods for valuable consideration. The court noted that despite the regulation of price and quantity by the government, the element of volition was not completely excluded, as ration card holders had the choice not to purchase certain commodities. Therefore, the transactions between the petitioners and the ration card holders were deemed "sales" within the meaning of the Bihar Sales Tax Act.

2. Whether the petitioners are "dealers" under the Bihar Sales Tax Act, 1959:
The court analyzed the definition of "dealer" under clause (f) of section 2 of the Bihar Sales Tax Act, which includes any person who sells goods for commission or remuneration. The petitioners, who run fair price shops and sell commodities to ration card holders, fall within this definition. Consequently, the court concluded that the petitioners are "dealers" under the Act.

3. Whether the definition of "sale" in the Bihar Sales Tax Act, 1959, is ultra vires and unconstitutional:
The petitioners contended that the definition of "sale" in the Bihar Sales Tax Act is contradictory to that in the Sale of Goods Act, 1930, and thus ultra vires and unconstitutional. The court, however, found that the concept of "sale" under the sales tax laws must be understood as "sale of goods" within the meaning of section 4 of the Sale of Goods Act. The court held that the definition of "sale" in the Bihar Sales Tax Act is not in conflict with the Sale of Goods Act, as both require the transfer of property in goods for a price. Therefore, the definition in the Bihar Sales Tax Act was not deemed ultra vires or unconstitutional.

4. The liability of the petitioners to pay additional sales tax under section 3B of the Bihar Sales Tax Act, 1959:
Since the transactions were deemed "sales" and the petitioners were identified as "dealers," the court addressed the liability to pay additional sales tax under section 3B of the Act. Section 3B mandates that every dealer liable to pay tax under sections 3 or 3A must also pay additional tax on their gross turnover. The court upheld the validity of section 3B, as previously affirmed in Chakardharpur Biri and Tobacco Merchants' Association v. State of Bihar. Consequently, the petitioners were liable to pay additional sales tax under section 3B.

5. Validity of the notice issued under section 16(5) of the Bihar Sales Tax Act, 1959:
The petitioners challenged the notice issued under section 16(5) of the Act, which required them to produce their books of account and register under the Act. The court found that the notice was issued for the purpose of assessing additional tax on the petitioners' gross turnover. Section 16(5) allows the prescribed authority to assess tax if a dealer has failed to apply for a registration certificate. The court concluded that the notice was valid and necessary for the levy of additional tax, and no invalidity was found in the notice.

Conclusion:
The court dismissed the writ petition, holding that the petitioners' transactions are "sales," the petitioners are "dealers," the definition of "sale" in the Bihar Sales Tax Act is not ultra vires, the petitioners are liable to pay additional sales tax under section 3B, and the notice issued under section 16(5) is valid. The petition was dismissed with no order as to costs.