1975 (8) TMI 118 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notice under section 14(1) of the Bengal Finance (Sales Tax) Act, 1941 regarding sales tax liability on salt sold in gunny bags.

Analysis:
The petitioner, a partnership firm, challenged a notice to produce books of account and supporting documents under section 14(1) of the Bengal Finance (Sales Tax) Act, 1941. The issue revolved around whether the salt sold in gunny bags was liable to sales tax based on whether the gunny bags were sold separately or not. The Supreme Court precedent in Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. clarified that the value of containers can be assessed to tax if there is an agreement for their sale, regardless of separate pricing. A trade circular by the Government of West Bengal addressed the taxation of containers for goods exempt from tax, emphasizing taxability even without separate pricing. The petitioner contended that tax imposition through circulars was improper, but the court clarified that the tax liability was based on the Act, not the circulars.

In assessing the sales tax liability, the court considered the facts of each case, as highlighted in the case of Shamsuddin Akbar Khan & Co. v. State of Orissa. The petitioner cited Bengal Immunity Co. Ltd. v. State of Bihar regarding tax realization in violation of constitutional provisions, but the court differentiated the circumstances. The court also referenced the decision in United Excise v. Commissioner of Sales Tax, M.P., Indore, emphasizing that the assessing authority must act within its jurisdiction. The court distinguished cases where taxes were imposed ultra vires and clarified that in this instance, the tax imposition was in accordance with the law.

The court reiterated that the question of whether there was an agreement for the sale of gunny bags was a factual determination within the jurisdiction of the assessing authority. The petitioner's argument that tax imposition through circulars exceeded jurisdiction was dismissed, as the tax liability was based on the statutory provisions. Ultimately, the court discharged the rule nisi challenging the notice under article 226 of the Constitution, with no order as to costs, allowing the petitioner to present legal grounds before the assessing authority while staying the operation of the order for a fortnight.