1960 (8) TMI 68 - SC - VAT and Sales Tax

Company challenges the authority of the Commercial Tax Officer, Lyons Range, Calcutta, to demand payment of ₹ 41,14,718-12 nP. to the West Bengal Government as tax leviable under the Central Sales Tax Act, No. 74 of 1956, in respect of certain sales of steel goods Held that - The Commercial Tax Officer had, in our judgment, to ascertain before he could order payment of tax under the Central Sales Tax Act, whether on the materials he was satisfied, (a) that the goods at the time of transfer of documents of title were in movement from the State of Bihar to the State of West Bengal, (b) that the place where the sale was effected was under section 4, clause (2), within the State of West Bengal. The Commercial Tax Officer has, in our view, failed to apply the correct tests and has made assumptions which are not warranted and on a true interpretation of the provisions of the Central Sales Tax Act, the order of assessment discloses an error apparent on its face and a writ of certiorari must issue quashing the assessment. It will be for the Commercial Tax Officer of West Bengal to reassess the company in respect of transactions of sale which are properly taxable within the State of West Bengal by the application of the tests which we have already set out. On this view, the rule is made absolute and it is directed that a writ of certiorari will issue quashing the order of assessment made by the Commercial Tax Officer, Lyons Range, Calcutta, West Bengal. Appeal allowed.

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer, Lyons Range, Calcutta, to demand payment of tax.
2. Maintainability of the petition under Article 32 of the Constitution.
3. Interpretation and application of Sections 3 and 4 of the Central Sales Tax Act, 1956.
4. Determination of the "appropriate State" for the levy and collection of tax under the Central Sales Tax Act, 1956.
5. Validity of the assessment order dated October 21, 1959.

Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer, Lyons Range, Calcutta:
The company challenged the authority of the Commercial Tax Officer, Lyons Range, Calcutta, to demand payment of Rs. 41,14,718-12 nP. as tax under the Central Sales Tax Act, 1956. The company argued that all sales from Jamshedpur fell under Section 3(a) of the Act and some also under Section 3(b). It contended that the appropriate State for assessing such sales was Bihar, where the goods were located either at the time of the contract or appropriation. The Commercial Tax Officer made a "best judgment assessment" on a gross turnover of Rs. 9,00,09,561-71 nP. of inter-State sales and demanded the tax.

2. Maintainability of the Petition under Article 32:
Counsel for the respondents contended that the petition under Article 32 was not maintainable as no fundamental right of the company was infringed. The Court, however, noted that a threat to realize tax without authority of law using coercive machinery infringed the fundamental right under Article 19(1)(g), allowing the aggrieved citizen to seek relief under the Constitution. The Court referred to previous judgments, including Himmatlal Harilal Mehta v. The State of Madhya Pradesh and Others, Bengal Immunity Company Ltd. v. The State of Bihar and Others, and The State of Bombay v. United Motors (India) Ltd. and Others, supporting this view.

3. Interpretation and Application of Sections 3 and 4 of the Central Sales Tax Act, 1956:
The Court examined the legislative history and judicial decisions related to the Central Sales Tax Act. Section 3(a) covers sales that occasion the movement of goods from one State to another, while Section 3(b) pertains to sales effected by the transfer of documents of title during their movement. The Court clarified that a sale falling under Section 3(a) would not fall under Section 3(b) and vice versa. The appropriate State for tax collection was determined based on the location of the dealer's place of business and the place where the sale was effected.

4. Determination of the "Appropriate State" for Levy and Collection of Tax:
The Court analyzed the definition of "appropriate State" under Section 2(a) of the Act. For sales under Section 3(a), the appropriate State is where the goods have been moved by reason of the sale. For sales under Section 3(b), it is the place where the sale is effected. The Court emphasized that the place of business for tax purposes is determined by the movement of goods or the transfer of documents of title.

5. Validity of the Assessment Order Dated October 21, 1959:
The Court found that the Commercial Tax Officer had failed to apply the correct tests and made assumptions not warranted by the provisions of the Central Sales Tax Act. The assessment order disclosed an error apparent on its face. The Court directed the issuance of a writ of certiorari quashing the assessment order and mandated reassessment by the Commercial Tax Officer of West Bengal based on the correct interpretation of the Act.

Separate Judgments:
Judgment by SHAH, J.:
The Court held that the Commercial Tax Officer's order was invalid and directed a reassessment based on the correct interpretation of Sections 3 and 4 of the Central Sales Tax Act, 1956. The rule was made absolute, and a writ of certiorari was issued quashing the assessment order.

Judgment by SARKAR, J.:
Sarkar, J. concurred with the majority judgment, emphasizing that the "appropriate State" for taxing sales under Section 3(b) is where the transfer of documents of title takes place. The assessment order was set aside, and the West Bengal Government was allowed to reassess the tax in accordance with the Court's interpretation.

Order:
The petition was allowed with costs, and a writ of certiorari was issued quashing the order of assessment made by the Commercial Tax Officer, Lyons Range, Calcutta.

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