1958 (2) TMI 30 - SC - VAT and Sales Tax

Whether in the circumstances of the case the assessment is legal being based on the position that mere contract for sale within the State of Orissa and the export of goods from Orissa is sufficient for taxation under the Orissa Sales Tax Act 1947? Held that - We have come to the conclusion that the reference directed by the Orissa High Court was itself incompetent because no such question of law as was formulated by that Court arose on the facts of the case and it was quite unnecessary to answer such a question in the present case. Appeal allowed.

Summary

Issues:
- Interpretation of the Orissa Sales Tax Act, 1947 regarding the taxation of sales within the state.
- Validity of assessment based on the definition of "sale" under the Act.
- Application of the second proviso to the definition of "sale" in determining the situs of the sale.
- Competency of the reference directed by the High Court of Orissa.

Analysis:
The case involved an appeal by the Collector of Commercial Taxes, Orissa, against Messrs. Bharat Sabai Grass Ltd. The dispute arose from the assessment of sales tax on the company's transactions involving the sale of bamboo and sabai grass to mills in Orissa and Bengal. The appellant contended that the sales made by the company were taxable under the Orissa Sales Tax Act, 1947. The assessment was based on the definition of "sale" under the Act, particularly focusing on the second proviso which deemed sales of goods in Orissa at the time of the contract to have taken place in Orissa for taxation purposes.

The High Court of Orissa directed a reference on the question of whether the assessment was legal based on the interpretation of the Act. The High Court found the assessment to be illegal, questioning the imposition of tax on mere agreements to sell. However, the Supreme Court analyzed the facts of the case and determined that no such question of law actually arose. The Court emphasized that the assessment was not based on mere agreements to sell but on completed sales of goods within Orissa. The Court distinguished the case from previous judgments and highlighted that the second proviso of the Act did not tax agreements to sell but determined the situs of the sale when goods were in Orissa at the time of the contract.

The Supreme Court concluded that the reference directed by the High Court of Orissa was incompetent as the question formulated did not align with the facts of the case. The Court allowed the appeal, setting aside the judgment of the High Court and affirming the validity of the assessment for sales tax on the transactions in question.