1958 (8) TMI 35 - HC - VAT and Sales Tax

Court upholds validity of assessment order under Sales Tax Act, affirms legislative power on exports

Malcolm Angus Tulloch Versus The Revenue Commissioner, Sambalpur and Others

The court upheld the validity of the assessment order by the Board of Revenue, dismissing challenges by the petitioner. It affirmed the applicability of ... - Issues Involved:1. Validity of the assessment order by the Board of Revenue.2. Applicability of the Orissa Sales Tax Act to transactions conducted in 1948-49.3. Definition and interpretation of 'sale' under Section 2(g) of the Orissa Sales Tax Act.4. Jurisdiction and legislative power concerning sales tax on goods meant for export.5. Determination of the correct turnover for sales tax assessment.Issue-Wise Detailed Analysis:1. Validity of the Assessment Order by the Board of Revenue:The petitioner challenged the order of the Member, Board of Revenue, dated 10th July 1952, which declined to revise the sales tax assessment. The petitioner had also filed an application under Article 226 of the Constitution to quash the assessment order. The court noted that the petitioner admitted the facts regarding the sales to the American firm and the role of the Chromite Corporation of India as selling agents. The Sales Tax Officer, on appeal, held that the price paid by the American firm to the Chromite Corporation was the real sale price, a decision upheld by the Collector of Commercial Taxes and the Member, Board of Revenue. The court found no error in the assessment order and dismissed the applications.2. Applicability of the Orissa Sales Tax Act to Transactions Conducted in 1948-49:The transactions in question occurred before the Constitution's commencement, in the district of Keonjhar, a former Native State. The Orissa Sales Tax Act, which came into force in 1947, was applied to the merged States, including Keonjhar, through appropriate notifications. The court referenced Supreme Court decisions that affirmed the applicability of the Act to the merged States, thus validating the Act's application during the relevant period.3. Definition and Interpretation of 'Sale' under Section 2(g) of the Orissa Sales Tax Act:The court examined the definition of 'sale' under Section 2(g) of the Act, which includes any transfer of property in goods for valuable consideration, with a specific proviso deeming sales to have taken place in Orissa if the goods were in Orissa at the time of the contract. Despite the goods being in their natural state in Orissa at the time of the contract, the court held that the sale must be deemed to have taken place in Orissa for tax purposes, citing the Supreme Court's endorsement of the nexus theory in similar cases.4. Jurisdiction and Legislative Power Concerning Sales Tax on Goods Meant for Export:The petitioner argued that the proviso to Section 2(g) was invalid under the Government of India Act, 1935, as it affected exports, a Central subject. The court dismissed this contention, emphasizing the 'pith and substance' doctrine, which considers the primary subject matter of legislation. The Act, being a tax on sales, was within the provincial jurisdiction, and incidental encroachment on Central subjects did not invalidate it. The court referenced the Supreme Court's reasoning in Tata Iron & Steel Company's case, affirming the sufficient nexus for the State to tax the sale.5. Determination of the Correct Turnover for Sales Tax Assessment:The court upheld the assessment of the turnover at Rs. 1,45,070-5-0, the price paid by the American firm, rather than the lower amount shown in the petitioner's accounts. The Chromite Corporation of India acted as selling agents, and there could be no sale between the petitioner and his agents. Hence, the amount paid by the American firm was deemed the correct sale price for tax assessment.Conclusion:The court concluded that the petitioner was rightly assessed to sales tax and dismissed both applications with costs. The judgment affirmed the validity of the assessment order, the applicability of the Orissa Sales Tax Act, the interpretation of 'sale,' the legislative jurisdiction concerning sales tax on exports, and the determination of the correct turnover for assessment.