Bihar sales tax law upheld: inquiry-stage notice, territorial nexus, and constitutional challenges under Articles 286, 254, and 304 rejected.

A Bihar sales tax notice issued at the inquiry stage was treated as within statutory power, and writ relief was refused because assessment machinery, appeal, and revision under the Act provided the proper remedy. The provisions on sales tax were held consistent with Article 286(2), because sales involving delivery in Bihar for consumption there were treated as a constitutionally distinct class and not barred by the general prohibition. Repugnancy under Article 254(1) was rejected, as the Act was characterised in pith and substance as a State taxing law. Objections under Article 304(b) and extra-territorial operation also failed because the levy rested on sufficient territorial nexus.

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Issues: (i) Whether a writ under Article 226 of the Constitution of India could issue to quash a notice issued under Section 13(5) of the Bihar Sales Tax Act when the taxing authority had only commenced inquiry and no assessment had yet been made; (ii) Whether Sections 2(c), 2(g), 4 and 33 of the Bihar Sales Tax Act were invalid for alleged conflict with Article 286(2) of the Constitution of India; (iii) Whether the impugned provisions were repugnant to the Indian Sale of Goods Act so as to attract Article 254(1) of the Constitution of India; and (iv) Whether the impugned provisions offended Article 304(b) of the Constitution of India or were impermissibly extra-territorial in operation.

Issue (i): Whether a writ under Article 226 of the Constitution of India could issue to quash a notice issued under Section 13(5) of the Bihar Sales Tax Act when the taxing authority had only commenced inquiry and no assessment had yet been made.

Analysis: The notice was held to be within the statutory power of the sales tax authority. Section 13(5) empowered the authority to satisfy itself on the basis of information received, to investigate the facts, and then to proceed to assessment after giving an opportunity of being heard. The challenge was treated as an to the authority's determination on liability, which was a matter committed to the statutory machinery and not a ground for prohibition or certiorari at the threshold. The availability of appeal and revision under the Act was also treated as an adequate remedial structure.

Conclusion: No writ was warranted on the facts disclosed; the challenge to the notice failed and was against the assessee.

Issue (ii): Whether Sections 2(c), 2(g), 4 and 33 of the Bihar Sales Tax Act were invalid for alleged conflict with Article 286(2) of the Constitution of India.

Analysis: The relevant constitutional provisions were read harmoniously. The explanation to Article 286(1) was treated as carving out a special class of sales where goods were actually delivered in a State for consumption there, and that class was held not to be absorbed by the general prohibition in Article 286(2). On that construction, the amended definitions and charging provision in the Bihar Sales Tax Act were not regarded as authorising taxation barred by the Constitution. The Act was also viewed as one imposing a tax on sales within Bihar, not as a law directly regulating inter-State commerce.

Conclusion: The impugned provisions were held not to be repugnant to Article 286(2) of the Constitution of India and the objection failed.

Issue (iii): Whether the impugned provisions were repugnant to the Indian Sale of Goods Act so as to attract Article 254(1) of the Constitution of India.

Analysis: The legislation was characterised in pith and substance as a taxing statute falling within the State's competence over taxes on sales of goods. Any overlap with matters in the Concurrent List was treated as incidental and insufficient to create repugnancy. Since the law was found to operate within the State's taxing field, Article 254(1) was held inapplicable.

Conclusion: The argument of repugnancy failed and the Act was not invalid on that ground, against the assessee.

Issue (iv): Whether the impugned provisions offended Article 304(b) of the Constitution of India or were impermissibly extra-territorial in operation.

Analysis: The Act was held not to impose restrictions on freedom of trade and commerce within Part XIII, because it did not discriminate between imported and locally produced goods and was not legislation directed at regulating trade. On territorial competence, the delivery of goods in Bihar for consumption was treated as sufficient territorial nexus to sustain the levy even though the seller was outside the State and the contract may have been concluded elsewhere.

Conclusion: The objections based on Article 304(b) and extra-territorial operation were rejected and the levy was upheld.

Final Conclusion: The petitioner's challenge to the sales tax proceedings failed in limine and on merits, and the Bihar sales tax provisions were upheld as constitutionally valid on the grounds examined.

Ratio Decidendi: A taxing authority acting within the statutory power to investigate and assess cannot be restrained by writ merely because its jurisdictional facts are disputed, and a State sales tax law is valid where it taxes sales having sufficient territorial nexus and is construed consistently with the constitutional allocation of taxing power.

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