1969 (3) TMI 102 - SC - VAT and Sales Tax

Summary

Issues:
1. Validity of sales tax assessment on imported "bardana" under a notification.
2. Legality of penalty imposed for not filing returns in time.
3. Constitutionality of sales tax levy on imported "bardana" in comparison to locally produced "bardana."
4. Validity of the notification under Section 4(2) of the Rajasthan Sales Tax Act.
5. Interpretation of Articles 301 and 304 of the Constitution in relation to the case.

Analysis:

1. The Rajasthan High Court held the assessment of sales tax on imported "bardana" invalid under a notification issued under Section 4(2) of the Rajasthan Sales Tax Act. The court found that the imposition of penalty for not filing returns in time was also illegal. The court determined that the tax levy on imported "bardana" was discriminatory and contravened Article 301 of the Constitution, as it did not extend to locally produced "bardana."

2. The Respondent, a partnership firm acting as a commission agent, filed a petition under Article 226 of the Constitution challenging the sales tax assessment and penalty. The High Court acknowledged the government's obligation to refund the tax collected on imported "bardana" but denied relief due to insufficient details on the tax amount paid and timing of payments by the Respondent.

3. The State contended that the notification validly exempted the sale of "bardana" meaning gunny bags made from jute, not all types of containers. The State argued that the exemption did not cover sales tax on imported "bardana" at the first point of sale by the importer. The High Court's decision was based on the broad interpretation of "bardana" to include various containers, leading to discrimination in taxation between imported and locally produced goods.

4. Articles 301 and 304 of the Constitution were considered in the context of the case. Article 301 guarantees free trade, commerce, and intercourse within India, while Article 304(a) allows states to impose taxes on imported goods similar to locally produced goods without discrimination. The court emphasized the need to prevent discrimination in taxation between imported and locally produced goods, as illustrated in a prior judgment involving excise duty on foreign liquor.

5. The High Court's decision was upheld by the Supreme Court, emphasizing the discriminatory nature of the tax levy on imported "bardana." The court noted that the term "bardana" encompassed various containers, not just gunny bags, leading to an unconstitutional distinction in taxation. The court directed the High Court to determine the refund amount for the tax paid on imported "bardana" and dismissed the appeals with costs.