1973 (2) TMI 117 - SC - VAT and Sales Tax

Supreme Court affirms High Court's jurisdiction under article 226, clarifies on timber transfer not constituting sale

The Supreme Court upheld the High Court's jurisdiction under article 226 of the Constitution, emphasizing its discretion to intervene in appropriate ... Whether the High Court was not justified in interfering with a proceeding that was pending before the tax department, by exercising its extra- ordinary jurisdiction under article 226 of the Constitution? Whether the High Court erred in holding that the transfer of timber from Madhya Pradesh to Uttar Pradesh did not amount to sale? Whether the High Court further erred in holding that sales effected by the assessee in Madhya Pradesh were not first sales? Held that:- Appeal dismissed.The power of the Government was merely to exempt one or more dealers from paying tax. That power cannot be used directly or indirectly to retrospectively levy tax on someone else. Hence, we see no substance in any of the contentions advanced on behalf of the appellant. Issues:1. High Court's jurisdiction under article 226 of the Constitution2. Classification of timber transfer from Madhya Pradesh to Uttar Pradesh3. Determination of first sales under Madhya Pradesh Sales Tax ActAnalysis:The Supreme Court addressed three main contentions in this appeal. Firstly, it examined the High Court's interference with a pending tax department proceeding under article 226 of the Constitution. The Court upheld the High Court's decision, emphasizing its discretion to intervene in appropriate cases. The second issue involved the classification of timber transfer from Madhya Pradesh to Uttar Pradesh as a sale. The Sales Tax Officer did not find evidence of a sale in Uttar Pradesh, and the Court concurred that a mere transfer does not constitute a sale under the Madhya Pradesh Sales Tax Act. The final issue centered on determining whether sales in Madhya Pradesh were first or second sales. The Court clarified that at the time of the sales, the assessee was not liable for tax as the Madhya Pradesh Forest Department was responsible. Despite a later exemption notification, the Court ruled that retrospective taxation was not permissible, maintaining that the government lacked the authority to levy tax retrospectively. Consequently, the appeal was dismissed, affirming the High Court's decision and rejecting the appellant's contentions.