Sales tax turnover and retrospective levy rules upheld on territorial nexus, while customer-collected tax was excluded from turnover.

Sales tax collected by a registered dealer from customers was not includible in taxable turnover after section 14A of the Bihar Sales Tax Act, so the inclusion of that amount in gross turnover was impermissible. Fiscal legislation could validly operate retrospectively where the Legislature had competence and no constitutional bar was shown, so the enhanced rate of tax from 1 October 1948 was upheld. An amendment taxing sales of goods manufactured in Bihar, even where the sale occurred elsewhere, was also within legislative competence because manufacture in the State provided sufficient territorial nexus for the levy.

---

---

Issues: (i) whether sales tax collected from customers could be included in the assessee's gross turnover after the introduction of section 14A of the Bihar Sales Tax Act; (ii) whether the enhanced rate of tax could validly be given retrospective effect from 1 October 1948; (iii) whether the amendment authorising levy of sales tax on sales of goods manufactured in Bihar, wherever the sale took place, was within the competence of the Bihar Legislature.

Issue (i): whether sales tax collected from customers could be included in the assessee's gross turnover after the introduction of section 14A of the Bihar Sales Tax Act.

Analysis: The relevant provision had already been construed to mean that, after the introduction of section 14A, the amount realised as sales tax by a registered dealer from customers could not be treated as part of the purchase price or as part of the taxable turnover. Applying that construction, the inclusion of sales tax in the assessee's gross turnover for the period in question was impermissible.

Conclusion: The issue was answered in favour of the assessee and against the State.

Issue (ii): whether the enhanced rate of tax could validly be given retrospective effect from 1 October 1948.

Analysis: Fiscal legislation may be enacted with retrospective operation if the legislature is competent to do so and no constitutional inhibition is shown. The amendment enhancing the tax rate was held to be within legislative power, and the retrospective operation from 1 October 1948 was upheld as constitutionally valid.

Conclusion: The issue was answered in favour of the State and against the assessee.

Issue (iii): whether the amendment authorising levy of sales tax on sales of goods manufactured in Bihar, wherever the sale took place, was within the competence of the Bihar Legislature.

Analysis: Manufacture of the goods in Bihar was treated as providing a sufficient territorial nexus for tax legislation. The situs of the goods was regarded as having a real and pertinent connection with the sale transaction, thereby supporting the legislative competence to tax such sales even when the sale occurred elsewhere.

Conclusion: The issue was answered in favour of the State and against the assessee.

Final Conclusion: The reference succeeded only on the first issue, while the remaining questions were decided against the assessee, leaving the impugned levy substantially upheld.

Ratio Decidendi: Sales tax collected by a registered dealer could not be included in taxable turnover after section 14A, but the legislature was competent to enact retrospective fiscal provisions and to impose sales tax on sales of goods manufactured within the territory on the basis of sufficient territorial nexus.

---