Sales tax validation and import-sale exemption failed where agency was not proved before the taxing authorities.

Sales of goods delivered in Bihar for consumption in Bihar were held taxable for the period covered by the Sales Tax Continuance Order, 1950 and the Sales Tax Laws Validation Act, 1956, because the constitutional objection under Article 286(2) failed once validating legislation and the later constitutional position were applied. Sales supplied to the Damodar Valley Corporation were also treated as taxable, as the record did not establish that the assessee acted merely as an agent for a foreign seller or that the transactions were import sales. The agency and import-sale pleas, being unsupported before the taxing authorities, could not be raised for the first time on reference.

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Issues: (i) Whether sales of goods delivered in Bihar for consumption in Bihar during 26 January 1950 to 30 September 1951 were liable to Bihar sales tax in view of Article 286(2) of the Constitution of India and the validation legislation. (ii) Whether sales of goods supplied to the Damodar Valley Corporation in Bihar were exempt from sales tax on the ground that the assessee acted only as an agent for a foreign seller and the transactions were import sales.

Issue (i): Whether sales of goods delivered in Bihar for consumption in Bihar during 26 January 1950 to 30 September 1951 were liable to Bihar sales tax in view of Article 286(2) of the Constitution of India and the validation legislation.

Analysis: The assessment for the earlier part of the period was protected by the Sales Tax Continuance Order, 1950, and for the later part by the Sales Tax Laws Validation Act, 1956. The challenge based on Article 286(2) could not succeed in view of the legal position recognised after the Supreme Court decision approving the view that the taxing provision operated as a tax in praesenti, to take effect when the constitutional bar was lifted.

Conclusion: The sales were validly taxed and the issue was decided against the assessee.

Issue (ii): Whether sales of goods supplied to the Damodar Valley Corporation in Bihar were exempt from sales tax on the ground that the assessee acted only as an agent for a foreign seller and the transactions were import sales.

Analysis: No factual foundation had been laid before the sales tax authorities to show that the assessee was merely an agent for the foreign seller or that privity of contract existed between the purchaser and the foreign seller. The agency plea was a question of fact not investigated below and could not be raised for the first time in the reference. On the material available, the import-sale exemption was not established.

Conclusion: The sales to the Damodar Valley Corporation were also validly taxed and the issue was decided against the assessee.

Final Conclusion: The reference was answered in favour of the revenue on both referred questions, and the assessee remained liable to tax on the transactions in dispute.

Ratio Decidendi: Where the legal bar against taxation has been lifted by validating legislation, and a factual exemption such as agency or import-sale character has not been established before the taxing authorities, the sales remain taxable and the issue cannot be raised for the first time on reference.

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