1966 (8) TMI 57 - HC - VAT and Sales Tax

Petitioner Liable for Sales Tax in West Bengal under Bengal Finance Act

The Court concluded that the petitioner was liable to pay sales tax under the Bengal Finance (Sales Tax) Act, 1941, for sales conducted in West Bengal. ... - Issues Involved:1. Jurisdiction and applicability of the Bengal Finance (Sales Tax) Act, 1941.2. Definition and scope of 'dealer' and 'sale' under the Bengal Finance (Sales Tax) Act, 1941.3. Validity of the notice issued under Section 11(2) of the Bengal Finance (Sales Tax) Act, 1941.4. Applicability of Article 286 of the Constitution regarding inter-State sales.5. Impact of the Iron and Steel (Control of Production and Distribution) Order, 1941, on the nature of transactions.6. Confidentiality under Section 25 of the Bengal Finance (Sales Tax) Act, 1941.Issue-wise Detailed Analysis:1. Jurisdiction and Applicability of the Bengal Finance (Sales Tax) Act, 1941:The Court examined whether the petitioner was liable to pay tax under the Bengal Finance (Sales Tax) Act, 1941, for sales conducted in West Bengal. The petitioner argued that its sales were conducted in Bihar and thus outside the jurisdiction of the Bengal Act. However, the Commercial Tax Officer contended that the petitioner managed and controlled its business from its registered office in Calcutta, making it liable under the Act.2. Definition and Scope of 'Dealer' and 'Sale' under the Bengal Finance (Sales Tax) Act, 1941:The petitioner contended that it was not a 'dealer' as defined under Section 2(c) of the Act because its sales were conducted at its workshop in Bihar. The Court analyzed the definitions of 'dealer' and 'sale' under Sections 2(c) and 2(g) of the Act, respectively. It emphasized that the definitions should be interpreted in their legal sense as per the Sale of Goods Act, 1930, which requires an agreement to sell goods for a price and the passing of property pursuant to that agreement.3. Validity of the Notice Issued under Section 11(2) of the Bengal Finance (Sales Tax) Act, 1941:The petitioner challenged the notice dated 9th August 1955, issued by the Assistant Commissioner of Commercial Taxes under Section 11(2) of the Act. The notice required the petitioner to produce accounts and documents for assessment and show cause why a penalty should not be imposed. The Court found that the petitioner had not provided sufficient evidence to prove that the notice was invalid. The Commercial Tax Officer had issued the notice based on information that the petitioner had been selling goods in West Bengal and was liable to pay sales tax.4. Applicability of Article 286 of the Constitution Regarding Inter-State Sales:The petitioner argued that its sales were inter-State and thus exempt from taxation under Article 286(1) of the Constitution. The Court noted that the petitioner failed to provide any evidence to substantiate its claim that the sales were inter-State. The Court held that merely because the Iron and Steel Controller had regulatory powers did not imply that the transactions lacked volition to be considered sales under the Sale of Goods Act, 1930.5. Impact of the Iron and Steel (Control of Production and Distribution) Order, 1941, on the Nature of Transactions:The Court examined whether the transactions conducted under the Iron and Steel (Control of Production and Distribution) Order, 1941, constituted sales. The petitioner argued that the Order deprived it of the capacity to negotiate and conclude sales agreements, thus the transactions were not sales. The Court referred to several Supreme Court judgments, including Gannon Dunkerley's case and New India Sugar Mills Limited v. Commissioner of Sales Tax, Bihar, to conclude that despite the regulatory framework, the transactions still met the essential requirements of a sale-agreement to sell, transfer of property, and payment of price.6. Confidentiality under Section 25 of the Bengal Finance (Sales Tax) Act, 1941:The petitioner argued that the Commercial Tax Officer had violated Section 25 of the Act by disclosing confidential information in the affidavit. The Court held that the State and its officers were entitled to produce documents to show compliance with the Iron and Steel Control Order. It was the petitioner's duty to provide documents to support its claims, which it failed to do.Conclusion:The Court concluded that the petitioner was liable to pay sales tax under the Bengal Finance (Sales Tax) Act, 1941, for sales conducted in West Bengal. The transactions conducted under the Iron and Steel (Control of Production and Distribution) Order, 1941, were considered sales within the meaning of the Sale of Goods Act, 1930. The appeal was allowed, and the rule was discharged. The petitioner was directed to pay the costs of the appellant both at the trial court and the hearing before the High Court.