1960 (9) TMI 48 - SC - VAT and Sales Tax

Whether tobacco was delivered in the State of Bombay for consumption in that State? Held that - On the facts of this case that when tobacco was delivered in the State of Bombay for the purpose of changing it into a commercially different article, viz., bidi patti, the delivery was for the purpose of consumption. The purchases in this case therefore fall within the meaning of Explanation to Article 286(1)(a) and must be held to have taken place inside the State of Bombay. Petition dismissed.

Summary

Issues Involved:
1. Legality of the imposition of purchase tax under the Bombay Sales Tax Act, 1953.
2. Whether the purchases took place outside the State of Bombay.
3. Whether the transactions took place in the course of inter-State trade or commerce under Article 286(2) of the Constitution.

Issue-wise Detailed Analysis:

1. Legality of the Imposition of Purchase Tax:
The petitioner argued that the Bombay Sales Tax Act, 1953, does not authorize the imposition of a purchase tax on bidi tobacco. Section 10(1) of the Act provides for a purchase tax on goods specified in Schedule B. The petitioner contended that bidi tobacco is not specified in column 4 of Schedule B. However, entry 80 of Schedule B, which states "all goods other than those specified from time to time in Schedule A and in the preceding entries," was considered by the court. The court held that this general specification includes bidi tobacco, making it subject to purchase tax under section 10. Thus, the imposition of purchase tax on bidi tobacco was deemed lawful.

2. Whether the Purchases Took Place Outside the State of Bombay:
The petitioner claimed that the purchases should be deemed to have taken place in the State of Madhya Pradesh, where the tobacco was delivered for consumption. However, it was undisputed that the tobacco was delivered to the company's Ranoli branch within the State of Bombay. The court examined whether the delivery in Bombay was for the purpose of consumption. The petitioner argued that the tobacco was intended to be sent to Madhya Pradesh for manufacturing bidis, and the removal of waste material in Bombay did not amount to consumption. The respondents countered that the raw tobacco was converted into bidi patti, a commercially different article, in Bombay. The court agreed with the respondents, stating that converting a commodity into a different commercial commodity amounts to consumption within the meaning of the Explanation to Article 286(1)(a). Therefore, the purchases were held to have taken place inside the State of Bombay.

3. Whether the Transactions Took Place in the Course of Inter-State Trade or Commerce:
The petitioner also contended that the transactions took place in the course of inter-State trade or commerce under Article 286(2) of the Constitution, which prohibits the levy of tax on such transactions. However, the Sales Tax Laws Validation Act removed this bar for the period up to September 6, 1955. The petitioner's counsel chose not to press this objection for the period from September 7, 1955, to September 29, 1955. Therefore, the court did not decide on this issue.

Conclusion:
The court dismissed the petition, holding that the petitioner failed to establish any violation of its fundamental rights. The imposition of purchase tax on bidi tobacco under the Bombay Sales Tax Act, 1953, was lawful, and the purchases were deemed to have taken place within the State of Bombay for the purpose of consumption. The objection regarding inter-State trade was not pressed by the petitioner, making it unnecessary for the court to decide on that issue. The petition was dismissed with costs.