1958 (4) TMI 98 - SC - VAT and Sales Tax

Supreme Court decision: Assessments upheld for post-Constitution period, reversed for pre-Constitution period.

Sales Tax Officer, Cuttack and Another Versus BC. Patel & Co.

The Supreme Court partially allowed the appeal, upholding the invalidation of assessments for the post-Constitution period under Article 286 but reversing ... Whether, in the circumstances of this case, the respondents can be made liable under either sub-section (1) or sub-section (2) of section 4 of Orissa Sales Tax Act? Whether the notification has appointed a date as a result of which liability to pay tax under the sub-section arises? Held that:- Appeal allowed in part. The fact that under sub-section (1) liability is made to arise on the turnover of the year immediately preceding the commencement of the Act, to my mind, shows that it was contemplated that the date under sub-section (1) would be fixed soon after the Act commenced. That would indicate that the intention was that both sub-sections (1) and (2) of section 4 would begin to operate at the same time. It was not contemplated that any question of liability under sub-section (2) would arise before such a question under sub-section (1) arose. I would, therefore, hold that in the present case the appellants are not entitled to levy any tax on the respondents under sub-section (2). The decree, in so far as it sets aside the assessments for the quarters ending on June 30, 1950, September 30, 1950, and December 31, 1950, is upheld, but the decree, in so far as it sets aside the assessments for the quarters ending on September 30, 1949, and December 31, 1949, is reversed and the orders of assessment of the Sales Tax Authorities are restored. Issues Involved:1. Validity of the notification issued under Section 4(1) of the Orissa Sales Tax Act.2. Applicability of Section 4(2) of the Orissa Sales Tax Act.3. Validity of assessment orders for the pre-Constitution period.4. Validity of assessment orders for the post-Constitution period under Article 286 of the Constitution.Issue-wise Detailed Analysis:1. Validity of the Notification Issued Under Section 4(1) of the Orissa Sales Tax Act:The Orissa Sales Tax Act required a notification under Section 4(1) to determine the date from which the tax liability would commence. The notification issued on March 1, 1949, stated that dealers whose gross turnover exceeded Rs. 5,000 during the year ending March 31, 1949, would be liable to pay tax. However, Section 4(1) specified that the relevant year should be the year immediately preceding the commencement of the Act, which was April 1, 1947, to March 31, 1948. The notification was deemed invalid because it contradicted the statutory requirement by specifying the wrong year.2. Applicability of Section 4(2) of the Orissa Sales Tax Act:Section 4(2) applies to dealers whose gross turnover first exceeded Rs. 5,000 in a year following the commencement of the Act. The High Court held that Sections 4(1) and 4(2) were mutually exclusive. However, the Supreme Court clarified that Section 4(2) could apply if Section 4(1) did not apply due to the invalid notification. The relevant period for Section 4(2) was the year immediately following the year when the dealer's turnover first exceeded Rs. 5,000. Therefore, the respondents were liable under Section 4(2) as their turnover exceeded Rs. 5,000 in the year ending March 31, 1949.3. Validity of Assessment Orders for the Pre-Constitution Period:The High Court invalidated the assessment orders for the pre-Constitution period due to the invalid notification under Section 4(1). However, the Supreme Court held that the respondents were liable under Section 4(2) for the pre-Constitution period. The notification's invalidity did not affect the applicability of Section 4(2), which did not require a notification. The concession by the respondents that they would be liable if a valid notification had been issued further supported this conclusion.4. Validity of Assessment Orders for the Post-Constitution Period Under Article 286 of the Constitution:The High Court invalidated the assessment orders for the post-Constitution period based on Article 286, which restricted the power of states to tax sales involving inter-State elements. The Supreme Court agreed, noting that the sales involved delivery for consumption outside Orissa, making them inter-State sales. The assessments were invalid under Article 286(1)(a) and Section 30(1)(a)(i) of the Act, as clarified by the Bengal Immunity decision. The President's Sales Tax Continuance Order, 1950, did not override the prohibition in Article 286(1)(a).Conclusion:The Supreme Court allowed the appeal in part, upholding the High Court's decision to invalidate the assessments for the post-Constitution period but reversing the decision for the pre-Constitution period. The assessments for the two pre-Constitution quarters were deemed valid under Section 4(2). Each party was directed to bear its own costs in both the High Court and the Supreme Court.