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of <h1>Madhya Pradesh High Court: Sales Tax on Interstate Transactions Post Constitution Inauguration</h1> <h3>Mullaji Jamaluddin and Co. Versus State of Madhya Pradesh and Others</h3> The High Court of Madhya Pradesh ruled on sales tax assessment for transactions involving goods delivered outside the state. The court determined that ... - Issues: Assessment of sales tax on transactions involving goods delivered outside the state, interpretation of Article 286 of the Constitution, validity of sales tax collection pre and post the inauguration of the Constitution.Analysis:The judgment by the High Court of Madhya Pradesh involved two petitions filed by a company assessed for sales tax on bidi sales by the Sales Tax Department. The assessment periods differed for each case, but the main issue revolved around the levy of sales tax on transactions where goods were not delivered within the state. The court needed to determine whether sales tax could be imposed on such transactions considering Article 286 of the Constitution and its interpretation by the Supreme Court.The cases were divided into two categories based on the dates of despatches, with the dividing line being the inauguration of the Constitution and the enactment of Article 286. The court referred to previous rulings and the nexus theory accepted by the Supreme Court in determining the validity of sales tax collection for transactions before and after the Constitution's inauguration.For transactions post the Constitution's inauguration, the court analyzed the two clauses of Article 286 that created a bar on the imposition of tax on sales or purchases outside the state and in the course of inter-State trade. The court discussed the curative provisions of the President's Order, an Ordinance, and an Act that validated the recovery of sales tax for inter-State transactions but not for transactions outside the state for consumption elsewhere.The court concluded that taxes collected post the inauguration of the Constitution for transactions where goods were sent outside the state for consumption elsewhere would be immune from tax in the state. However, transactions with a sufficient nexus before the Constitution's inauguration could be subject to valid tax collection. The court allowed the petitions partly, ordering refunds for taxes collected contrary to their decision.In light of the partial success of the petition, the court did not award costs and ordered the refund of the security deposit.
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