1988 (7) TMI 398 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of sales tax on declared goods purchased outside the State of Bihar and sold within the State.
2. Interpretation of Section 3A of the Bihar Sales Tax Act, 1959.
3. Constitutional validity of Section 3A.
4. Allegation of discriminatory tax treatment under Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Liability of Sales Tax on Declared Goods Purchased Outside the State of Bihar and Sold Within the State:
The core issue in the writ petitions is whether declared goods purchased outside Bihar and sold within the State are subject to sales tax. The petitioners argued that such goods should be immune from sales tax under Section 3A of the Bihar Sales Tax Act, 1959. However, the court held that mere declaration of goods as liable to purchase tax under Section 3A does not automatically exempt them from sales tax unless purchase tax has been levied within the State. Therefore, since the goods in question were purchased outside Bihar, they did not bear purchase tax within the State, making them liable to sales tax when sold within Bihar.

2. Interpretation of Section 3A of the Bihar Sales Tax Act, 1959:
Section 3A allows the State Government to declare goods liable to purchase tax, and if such tax is levied, no sales tax is payable on those goods. The court interpreted that the term "levy" encompasses both the assessment and collection of tax. It clarified that the exemption from sales tax applies only if the goods have actually borne purchase tax within Bihar. The court rejected the petitioners' argument that declared goods are inherently exempt from sales tax, emphasizing that the exemption is conditional upon the prior levy of purchase tax.

3. Constitutional Validity of Section 3A:
The court upheld the constitutionality of Section 3A, referencing the Supreme Court's decision in Hansraj Bagrecha v. State of Bihar, which confirmed that Section 3A does not infringe upon rights guaranteed under Article 301 of the Constitution. The court found that Section 3A is consistent with Entry 54 of the State List, which empowers the State to impose tax on the sale or purchase of goods. The provision ensures that either purchase tax or sales tax is levied on declared goods, but not both, thereby maintaining legislative competence and avoiding double taxation.

4. Allegation of Discriminatory Tax Treatment under Article 14 of the Constitution:
The petitioners contended that imposing sales tax on declared goods purchased outside Bihar and sold within the State would result in discriminatory tax treatment, violating Article 14 of the Constitution. They argued that the sale price, including transportation and other costs, would be higher than the purchase price, leading to a higher tax burden. The court dismissed this argument, stating that the tax rate on both purchase and sale of declared goods is the same. It emphasized that the tax incidence might vary due to different purchase and sale prices, but this does not constitute discrimination since the tax rate remains uniform for all similarly situated persons.

Conclusion:
The court concluded that the writ petitions lacked merit and dismissed them without any order as to costs. The judgment reaffirmed the validity and interpretation of Section 3A of the Bihar Sales Tax Act, 1959, and upheld the imposition of sales tax on declared goods purchased outside Bihar and sold within the State, provided they had not borne purchase tax within Bihar. The court also rejected claims of discriminatory tax treatment, confirming the uniform application of tax rates.