1958 (5) TMI 40 - HC - VAT and Sales Tax

Court rules on 'sale' concept under Assam Sales Tax Act, finds levy illegal under Constitution

Birendra Nath Guha Versus Commissioner of Taxes, Assam

The court held that the provisions of the Indian Sale of Goods Act were not applicable in determining the concept of 'sale' under the Assam Sales Tax Act. ... - Issues Involved:1. Applicability of Section 23(2) of the Indian Sale of Goods Act, 1930, in relation to Section 2(12) of the Assam Sales Tax Act, 1947.2. Determination of whether the delivery of wooden sleepers at railway stations within Assam for dispatch outside Assam constitutes a 'sale' under the Assam Sales Tax Act, 1947.3. Legality of the assessments and levy of sales tax under the Assam Sales Tax Act, 1947, in light of Article 286(1)(a) and/or Article 286(2) of the Constitution of India.Issue-wise Detailed Analysis:1. Applicability of Section 23(2) of the Indian Sale of Goods Act, 1930:The court examined whether Section 23(2) of the Indian Sale of Goods Act can be considered in applying Section 2(12) of the Assam Sales Tax Act, which defines 'sale.' The argument was that the sale is complete when the title to the property passes, and Section 23(2) can be looked into to ascertain when the title to the goods will pass. However, the court noted that Section 18 of the Indian Sale of Goods Act states that no property in unascertained goods is transferred to the buyer unless and until the goods are ascertained. Sections 20 to 23 apply to contracts relating to the sale of ascertained goods. The court concluded that Section 23(2) is relevant for determining when the appropriation of goods to the contract takes place, but it is not material for the purpose of applying Section 2(12) of the Assam Sales Tax Act to inter-State sales. Thus, the court answered this question in the negative.2. Determination of 'Sale' under the Assam Sales Tax Act:The court analyzed whether the delivery of wooden sleepers at railway stations within Assam for dispatch outside Assam constitutes a 'sale' under the Assam Sales Tax Act. The definition of 'sale' includes any transfer of property in goods for cash or other valuable consideration. The court referred to the Supreme Court's interpretation that actual delivery to the purchaser or his agent is required to complete a sale within the State. Delivery to a common carrier is considered constructive delivery, not actual delivery. The court found that under the agreement, the delivery to the carrier did not constitute actual delivery to the vendee. The delivery contemplated was actual delivery at the destination station outside Assam. Therefore, the court concluded that such sales are of inter-State character and are outside the purview of the Assam Sales Tax Act. The answer to this question was in the negative.3. Legality of Assessments and Levy of Sales Tax under Article 286:The court divided this issue into two parts:- Whether the levy of sales tax under the Assam Sales Tax Act was illegal under Article 286(1)(a) and Section 3(1A)(i) of the Assam Act.- Whether the levy of tax was illegal under Article 286(2) and Section 3(1A)(iii) of the Assam Act.The court observed that Article 286(1)(a) prohibits the taxation of inter-State sales by all States except the State in which the goods are delivered for consumption. The court found that the delivery of goods to the carrier did not constitute actual delivery within Assam, making the sales inter-State in nature. Thus, these sales were not taxable under the Assam Act. The court answered the first part of the question in the affirmative.Regarding the second part, the court noted that sales in the course of inter-State trade or commerce are immune from State taxation unless Parliament provides otherwise. The Sales Tax Laws Validation Act, 1956, validated the levy and collection of taxes on inter-State sales during a specified period but did not apply to outside sales hit by both Article 286(1)(a) and 286(2). Therefore, the court concluded that the levy of tax on these sales was illegal under Article 286(2) and Section 3(1A)(iii) of the Assam Act. The answer to this part of the question was also in the affirmative.Conclusion:The court answered the reference questions as follows:1. In the negative.2. In the negative.3. In the affirmative for both parts.The parties were ordered to bear their own costs.