1956 (8) TMI 40 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sale of goods valued at Rs. 5,76,70,242-7-5 during specific quarters was complete in Mysore and thus attracted Mysore sales tax.
2. Whether the petitioner was liable to pay sales tax on tobacco and cigarettes sold and exported outside Mysore for consumption outside the state under Article 286 of the Constitution of India.

Detailed Analysis:
Issue 1:
The case involved a company manufacturing cigarettes and tobacco goods in Bangalore, part of which was sold and consumed within Mysore, while the rest was sold and exported. The dispute centered around the tax liability for sales outside Mysore. The Deputy Commissioner levied tax on all sales, including those to outsiders, based on the assessee's accounts. The appellate order upheld the assessment, citing instructions allowing tax on transactions outside the state to continue. The interpretation of Article 286 of the Constitution of India was crucial in determining the tax liability for sales outside Mysore. The Supreme Court's rulings in Bengal Immunity Co. Ltd. v. State of Bihar and Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax were cited to highlight the restrictions imposed by Article 286 on state legislation concerning sales tax.

Issue 2:
The petitioner argued that the goods sold and exported for consumption outside Mysore should be exempt from taxation under Article 286(1) of the Constitution. The contention was based on the fact that the goods were not actually delivered for consumption within Mysore, as intended. The concept of "actual delivery" was debated, with reference to a Madras High Court case, to determine whether the goods were considered delivered within Mysore. The court concluded that the goods sold to persons outside Mysore were not actually delivered within the state, making them exempt from taxation. The court emphasized that the ban under Article 286(1) and its Explanation applied to the case, making the assessees not liable to pay sales tax on goods sold and exported outside Mysore. The Continuance Order of the President under sub-clause (2) was deemed insufficient to lift the ban imposed by clause (1).

In conclusion, the court answered both questions in the negative, ruling that the assessees were not liable to pay sales tax on goods sold and exported outside Mysore. The judgment was influenced by the Supreme Court's decisions subsequent to the reference, leading to each party bearing their own costs.