1970 (11) TMI 73 - SC - VAT and Sales Tax

Interpretation of Bihar Sales Tax Act exemptions: Court ruling favors partial relief to assessee

The court held that sales from specific periods were subject to the Bihar Sales Tax Act, as the exemption under Article 286(1)(a) did not apply. For ... Whether the assessee is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales Tax Act because of the provision of article 286(1)(a) of the Constitution as it stood at the relevant date read with the explanation to that article? With regard to the sales which took place in the period from 7th September, 1955, to 31st March, 1956, whether the assessee is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales Tax Act on the ground that the sales took place in the course of inter-State trade or commerce under article 286(2) of the Constitution as it stood at the the relevant period? Held that:- Appeal dismissed. As under the terms of the contracts of sale, the purchasers were required to remove the goods from the State of Bihar to other States. Hence the sales with which we are concerned in this case must be held to be sales in the course of inter-State trade or commerce. Issues Involved:1. Exemption from liability under the Bihar Sales Tax Act based on Article 286(1)(a) of the Constitution.2. Exemption from liability under the Bihar Sales Tax Act based on Article 286(2) of the Constitution and whether the sales took place in the course of inter-State trade or commerce.Detailed Analysis:Issue 1: Exemption under Article 286(1)(a) of the ConstitutionThe first issue concerns whether the sales that occurred between 23rd October 1954 and 31st March 1955, and from 1st April 1955 to 6th September 1955, qualify for exemption under Article 286(1)(a) of the Constitution. The assessee argued that these sales were outside the State of Bihar and, therefore, not subject to the Bihar Sales Tax Act.The court examined the definition of 'sale' under the Bihar Sales Tax Act and the Indian Sale of Goods Act, concluding that the property in goods is transferred to the buyer when the sale is complete, irrespective of the delivery method. The explanation to Article 286(1)(a) specifies that a sale or purchase is deemed to have taken place in the State where the goods are delivered for consumption, even if the property in the goods has passed in another State.The Board of Revenue found that the property in the vehicles passed in Bihar, and delivery and consumption were in another State, making the sales taxable under the Bihar Act. The court agreed with the Board's findings, stating that the delivery of vehicles took place at Jamshedpur, and the subsequent movement of vehicles outside Bihar did not negate the initial delivery within Bihar. Therefore, the sales were subject to the Bihar Sales Tax Act, and the exemption under Article 286(1)(a) did not apply.Issue 2: Exemption under Article 286(2) of the Constitution - Inter-State TradeThe second issue pertains to whether the sales from 7th September 1955 to 31st March 1956 were in the course of inter-State trade or commerce under Article 286(2) of the Constitution. The assessee contended that these sales involved the movement of goods from Bihar to other States, thus qualifying as inter-State trade.The court referenced several cases, including The Bengal Immunity Co. Ltd. v. The State of Bihar, to establish that a sale in the course of inter-State trade involves a sale of goods and their transport from one State to another under the contract of sale. The court noted that the dealership agreements required the dealers to move the goods from Bihar to other States, making the inter-State movement a necessary incident of the contract of sale.The court also referred to the Cement Marketing Co. of India (P.) Ltd. v. State of Mysore, which held that if the movement of goods from one State to another is required by the contract of sale, it constitutes inter-State trade. Applying this principle, the court concluded that the sales in question were indeed in the course of inter-State trade or commerce.Conclusion:1. First Issue: The court held that the sales from 23rd October 1954 to 31st March 1955, and from 1st April 1955 to 6th September 1955, were subject to the Bihar Sales Tax Act. The exemption under Article 286(1)(a) did not apply as the delivery and consumption were not in a single State outside Bihar.2. Second Issue: The court concluded that the sales from 7th September 1955 to 31st March 1956 were in the course of inter-State trade or commerce and thus exempt from the Bihar Sales Tax Act under Article 286(2). The High Court's decision was upheld, affirming the inter-State nature of these transactions.The appeal by the State of Bihar was dismissed, and the assessee was granted partial relief for the period from 7th September 1955 to 31st March 1956. There was no order for costs due to the partial success of both parties.