Sales tax included in taxable turnover and validating legislation upheld as within legislative competence under sales tax law.

The charging section determines the true subject of a sales tax levy, and the Legislature may lawfully treat amounts collected as sales tax as part of taxable turnover without changing the levy's essential character. Applying that principle, the Court held that inclusion of sales tax collections in turnover under the Bihar Sales Tax Act, 1947 was valid and against the assessee. Applying the pith and substance doctrine, it also held that the Bihar Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1958 remained a law on taxation of sales of goods within the State List. The validating provisions were therefore constitutionally valid and within the Bihar Legislature's competence, again against the assessee.

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Issues: (i) Whether sales tax collected by a registered dealer could be included in the taxable turnover under the Bihar Sales Tax Act, 1947. (ii) Whether the Bihar Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1958 was constitutionally valid and within the legislative competence of the Bihar Legislature.

Issue (i): Whether sales tax collected by a registered dealer could be included in the taxable turnover under the Bihar Sales Tax Act, 1947.

Analysis: The taxable subject is identified from the charging section of the sales tax law, and the measure of tax does not alter the nature of the levy. The Act treated turnover as the aggregate of sale-prices, and the Court held that the Legislature could validly provide that amounts collected by way of sales tax formed part of the turnover. The inclusion of such collections did not convert the levy into something other than a tax on the sale of goods.

Conclusion: The inclusion of sales tax in taxable turnover was lawful and was against the assessee.

Issue (ii): Whether the Bihar Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1958 was constitutionally valid and within the legislative competence of the Bihar Legislature.

Analysis: The Court applied the pith and substance doctrine and held that the impugned enactment remained a law with respect to taxation on the sale of goods within the State List. The validating provisions merely declared that collections made before 1 April 1956 formed part of turnover and validated assessments on that basis. This did not change the essential character of the tax into a tax on sales tax; the true subject remained tax on sales of goods.

Conclusion: The validating Act was constitutionally valid and within the legislative competence of the Bihar Legislature, against the assessee.

Final Conclusion: The reference was answered in favour of the revenue, and the assessee's challenge to inclusion of sales tax collections in turnover failed.

Ratio Decidendi: For a sales tax law, the subject of the levy is determined by the charging section, and the Legislature may validly include amounts collected as sales tax in the taxable turnover without altering the essential character of the tax as one on the sale of goods.

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