1962 (8) TMI 52 - SC - VAT and Sales Tax

Whether certain sales were inter-State sales so that it was beyond the power of the State Legislature to tax them? Held that - Petition is allowed. The assessment order mentioned in the petition is quashed and we direct the issue of necessary writs restraining the respondents from levying any tax on the sales mentioned in the petition in which the goods moved from outside Mysore into Mysore. In this case also the petitioners had omitted to disclose the permits under which the sales had been made and to state expressly that the sales had been made under the permits and on the terms contained in them with the result that under the contract of sale goods had to be moved from outside Mysore into Mysore. Hence, as in the previous case, here also there will be no order for costs.

Summary

Issues:
Interpretation of inter-State sales under the Mysore Sales Tax Act, 1948 for the assessment year 1956-57.

Analysis:
The judgment delivered by the Supreme Court of India addressed the issue of whether certain sales qualified as inter-State sales under the Mysore Sales Tax Act, 1948. The petitioners, including State Trading Corporation Ltd., Associated Cement Company Ltd., and Cement Marketing Co. Ltd., were involved in sales of cement where goods were moved from outside into Mysore. The assessment year in question was 1956-57, and the tax was imposed under the Mysore Sales Tax Act, 1948. The sales were made under permits issued by the Government, and the procedure of sales was similar in all cases.

During the period between April 1, 1956, and March 31, 1957, the sales were conducted by the Marketing Company as the agent of the Associated Cement Company and later as the agent of the State Trading Corporation. The judgment established that these sales constituted inter-State sales under section 3(a) of the Central Sales Tax Act, which came into force on January 5, 1957. Therefore, sales between that date and the end of the assessment year were considered inter-State sales not subject to taxation by the State Legislature.

The assessment year was divided into two periods for further analysis. The first period, between April 1, 1956, and September 10, 1956, fell under Article 286(2) of the Constitution, which prohibited State Legislatures from taxing inter-State sales. The judgment referenced previous decisions defining inter-State sales as those outlined in section 3(a) of the Central Sales Tax Act. Sales during this period involving goods moving from outside Mysore into the state were deemed inter-State sales not within the jurisdiction of the State Legislature.

The second period, from September 11, 1956, to January 4, 1957, lacked specific provisions defining inter-State sales. However, under Article 269(1)(g) and relevant items in the Constitution, the State Legislature had no authority to tax inter-State sales during this period. The Court interpreted inter-State sales in their ordinary sense, concluding that all sales involving goods moving into Mysore from outside were inter-State sales and not subject to state taxation.

As a result, the petition was allowed, the assessment order was quashed, and writs were issued to prevent the respondents from levying any tax on the mentioned sales. The judgment highlighted the importance of disclosing permits and sales terms to determine the inter-State nature of sales. No costs were awarded in this case, similar to the previous judgment.

In conclusion, the Supreme Court's decision clarified the classification of sales as inter-State under the Mysore Sales Tax Act, 1948, for the assessment year 1956-57, providing a detailed analysis of the legal framework and principles governing such transactions.