1963 (3) TMI 83 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on transactions with Nepal parties under Bihar Sales Tax Act, 1947; Interpretation of Article 286(1)(b) of the Constitution regarding tax imposition on sales or purchases during import or export.

Analysis:
The petitioner, a firm registered under the Bihar Sales Tax Act, contested the assessment of sales tax on transactions with Nepal parties by the Superintendent of Sales Tax. The Superintendent rejected the petitioner's claim for exemption, stating that the sales were interstate and completed in India, making them liable for assessment under the Act. The petitioner moved the High Court under Article 227 of the Constitution, arguing that the tax imposition was unconstitutional under Article 286(1)(b) of the Constitution, which prohibits tax on sales during import or export. The High Court agreed with the petitioner, citing the Supreme Court's decision in State of Travancore-Cochin v. Bombay Co., Ltd., Alleppey, emphasizing that sales leading to export fall under the exemption of Article 286(1)(b). The court noted that the goods were exported to Nepal parties, following the contract of sale, and the transactions were integral to the export process, warranting exemption from sales tax.

The respondents contended that delivery of goods in India to Nepal parties indicated the sales were not in the course of export, as per Article 286(1)(b). However, the High Court disagreed, stating that the delivery location was not determinative of the exemption. Referring to the Supreme Court's decision, the court highlighted that the crucial aspect is whether the sale and export are integrated activities leading to the delivery of goods for transport out of the country. The court emphasized that the sale must occasion the export, and if the sale and export are part of a single transaction, the exemption applies. In this case, as the goods were exported to Nepal parties and met the criteria set by the Supreme Court, the petitioner was entitled to exemption from sales tax.

Consequently, exercising its authority under Article 227, the High Court set aside the Superintendent's assessment order and remanded the case for a fresh assessment in compliance with the law and the directions provided in the judgment. The court allowed the petitioner's application, ruling in favor of the petitioner's entitlement to exemption, without awarding costs.