1961 (4) TMI 136 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Authority of Sales Tax Officer to demand tax under the Colliery Control Order, 1945.
2. Applicability of Article 286 of the Constitution regarding sales outside the State of Rajasthan.
3. Fundamental right of free trade and the legality of tax imposition.
4. Preliminary objections: alternative remedy, laches, and acquiescence.
5. Nature of the transaction between the petitioner and the State of Rajasthan.
6. Definition and scope of 'dealer' under the Rajasthan Sales Tax Act.
7. Interpretation of the term 'supply' in the context of sales tax liability.
8. Jurisdiction of the High Court under Article 226 of the Constitution.

Detailed Analysis:

1. Authority of Sales Tax Officer to Demand Tax:
The petitioner argued that the Sales Tax Officer had no authority under the law to demand tax for the supply of coal under the Colliery Control Order, 1945. The Court examined the provisions of the Control Order, particularly Clauses 4, 5, 6, and 12E, which regulate the sale and distribution of coal and found that the petitioner acted as a broker or del credere agent, not as a seller. The Court concluded that the petitioner had no title in the coal and thus could not be taxed for its sale.

2. Applicability of Article 286:
The petitioner contended that under Article 286 of the Constitution, the State of Rajasthan could not impose tax on sales or purchases of goods occurring outside its jurisdiction. The Court agreed, stating that the transactions in question did not constitute sales within the State of Rajasthan, as the coal was supplied directly from collieries outside the state to the State of Rajasthan's power houses.

3. Fundamental Right of Free Trade:
The petitioner claimed that the imposition of the tax infringed upon its fundamental right to free trade. The Court recognized that the right to carry on trade and commerce is a fundamental right and that any tax levied without legal authority violates this right. The Court held that the Sales Tax Officer's demand was without authority and thus an infringement of the petitioner's fundamental rights.

4. Preliminary Objections:
The Government Advocate raised preliminary objections, arguing that the petitioner had an alternative remedy, was guilty of laches, and had acquiesced by submitting consolidated returns. The Court overruled these objections, citing precedents that allow for writ petitions under Article 226 when fundamental rights are involved and noting that the petitioner had adequately explained the delay in seeking relief.

5. Nature of the Transaction:
The Court examined the nature of the transaction between the petitioner and the State of Rajasthan. It found that the petitioner was merely a broker or del credere agent and not a seller. The coal was supplied directly from the collieries to the State's power houses, and the petitioner did not acquire any title to the coal. Therefore, the transaction could not be characterized as a sale by the petitioner.

6. Definition of 'Dealer':
The Government contended that the petitioner, being a registered dealer, was liable for tax under the extended definition of 'dealer' in the Rajasthan Sales Tax Act. The Court, however, held that the petitioner acted as a broker and not as a dealer in the context of the transactions in question. Thus, the petitioner was not liable for sales tax on the coal supplied to the State.

7. Interpretation of 'Supply':
The Court reviewed the term 'supply' in the definition of 'dealer' under the Rajasthan Sales Tax Act. It referred to precedents that interpreted 'supply' to include elements of sale. The Court concluded that the petitioner's role did not involve any sale or transfer of title in the coal, and thus, the petitioner was not liable for tax on the basis of 'supply.'

8. Jurisdiction under Article 226:
The Court emphasized its jurisdiction under Article 226 to issue writs when fundamental rights are violated. It rejected the argument that the petitioner should have sought alternative remedies under the Sales Tax Act, noting that the imposition of the tax was without legal authority and thus warranted judicial intervention.

Conclusion:
The Court quashed the order dated 20th December 1956, to the extent it related to the price paid by the State of Rajasthan to the collieries for the supply of coal. It also quashed the order imposing a penalty for non-payment of tax on this part of the turnover. The petition was allowed, and the parties were ordered to bear their own costs.