1986 (2) TMI 329 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the term "purchases" under section 2(13) of the Bombay Sales Tax Act, 1953.
2. Determination of whether the impugned purchases were made outside the State of Bombay as per the Constitution of India.

Analysis:

1. The case involved references under section 34(1) of the Bombay Sales Tax Act, 1953, relating to the accounting periods from 1954 to 1956. The assessees, running spinning and weaving mills, purchased coal from collieries in Bihar for their business. The Sales Tax Tribunal initially set aside the levy of purchase tax, prompting two questions for determination. The first question regarding the definition of "purchases" under the Act was already answered affirmatively by a previous Division Bench judgment. Hence, the focus shifted to the second question.

2. The second question pertained to whether the impugned purchases were made outside the State of Bombay, as per the Constitution of India. The Division Bench remanded the matter to the Tribunal for further evidence on the actual delivery location of the coal. However, the Supreme Court clarified that the High Court must answer the question based on existing evidence. The High Court found that the coal was delivered at the nearest railhead in Bihar, outside the State of Bombay, based on the contract terms and available documentation. Consequently, the sale was deemed to have taken place in Bihar, not within the State of Bombay.

3. The judgment emphasized the importance of determining the actual delivery location of goods due to constitutional provisions and relevant sales tax laws. The explanation to article 286 of the Constitution and section 46 of the Bombay Sales Tax Act, 1953, highlighted that sales tax does not apply if the sale or purchase occurs outside the State. In this case, the evidence indicated that the coal was physically delivered in Bihar, leading to the conclusion that the sale did not fall within the jurisdiction of the State of Bombay.

4. Ultimately, the High Court answered the question in favor of the assessees, confirming that the impugned purchases were made outside the State of Bombay. Considering all circumstances, no costs were awarded. The reference was resolved in the affirmative, affirming that the sales were not taxable within the State of Bombay.