1962 (8) TMI 43 - SC - VAT and Sales Tax

Whether the assessment orders are wholly void and therefore affect their fundamental rights under Article 19(1)(f) and Article 31? Held that - Petitions are allowed and we direct that appropriate writs be issued quashing the orders of assessment mentioned in the petitions and restraining the respondents from levying or collecting the tax in respect of sales mentioned in the petitions in which the goods moved from outside into Mysore.

Summary

Issues:
- Challenge to assessment orders imposing sales tax under Article 32 of the Constitution affecting fundamental rights under Article 19(1)(f) and Article 31.
- Dispute over the taxation of sales made in the course of inter-State trade.
- Challenge against assessment orders under the Mysore Sales Tax Acts of 1948 and 1957.
- Interpretation of constitutional provisions post the Sixth Amendment Act of 1956 regarding inter-State sales taxation.
- Determination of whether sales occasioned the movement of goods from one State to another as per the Central Sales Tax Act.
- Analysis of the contract terms and permits in relation to the movement of goods for tax liability.
- Competency of the petitions in light of jurisdictional errors by the Taxing Officer.

Analysis:

The Supreme Court heard two petitions challenging assessment orders imposing sales tax under Article 32 of the Constitution, alleging violations of fundamental rights under Article 19(1)(f) and Article 31. The core issue revolved around the taxation of sales made in the course of inter-State trade, specifically focusing on disputed sales of cement. The assessment orders were issued under the Mysore Sales Tax Acts of 1948 and 1957, with the petitioners contending that the sales were not liable for taxation as they were inter-State sales beyond the purview of State legislation.

Post the Sixth Amendment Act of 1956, which amended constitutional provisions related to inter-State sales taxation, the Court analyzed the applicability of the Central Sales Tax Act of 1956. The Act defined inter-State sales and set the parameters for determining such transactions, emphasizing the movement of goods from one State to another as a key factor. The Court delved into whether the disputed sales met the criteria for inter-State sales under the Act, focusing on the movement of cement from outside Mysore into the state.

The judgment scrutinized the contract terms and permits governing the sales transactions to ascertain the tax liability. Despite the absence of explicit covenants in the written contracts, the Court inferred that the agreements were subject to the terms of the permits, which mandated supplies from factories outside Mysore. This analysis led to the conclusion that the sales in question qualified as inter-State sales under the Central Sales Tax Act, thereby exempting them from State taxation.

Additionally, the Court addressed the competency of the petitions in light of jurisdictional errors by the Taxing Officer. Drawing a distinction from a prior case, the Court held that errors in determining the nature of sales as inter-State did infringe fundamental rights and rendered the petitions competent. Consequently, the Court allowed the petitions, quashing the assessment orders and restraining tax collection on sales involving the movement of goods from outside into Mysore, without awarding costs due to deficiencies in the petitioners' submissions.