Jurisdiction and business character under sales tax law determine whether factory supplies are taxable sales.

Assessment under the Central Sales Tax Act was held invalid where the Commercial Tax Officer acted on a prior fixation of liability without proper statutory authority. The article notes that section 4 of the Bengal Finance (Sales Tax) Act, 1941 was only a charging provision and did not authorise a separate liability-determination proceeding, and that rule 71 did not confer such power on the officer. It also states that supplies from the Cossipore Gun and Shell Factory were not taxable sales because they were made to use surplus capacity and meet governmental and defence requirements, not as commercial trading activity carried on in the business sense required under the pre-amendment CST regime.

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Issues: (i) whether the Commercial Tax Officer had authority to fix liability and make the assessment under the Central Sales Tax Act, 1956, in the manner adopted; (ii) whether the transactions from the Cossipore Gun and Shell Factory constituted business or sales exigible to tax under the Central Sales Tax Act, 1956.

Issue (i): Whether the Commercial Tax Officer had authority to fix liability and make the assessment under the Central Sales Tax Act, 1956, in the manner adopted.

Analysis: The assessment was founded on a prior determination of liability under the State Act framework. The Court followed earlier decisions holding that section 4 of the Bengal Finance (Sales Tax) Act, 1941 is only a charging provision and does not itself authorise a separate proceeding for fixation of liability before assessment. The Court also accepted the view that delegation under rule 71 of the Bengal Sales Tax Rules, 1941 did not authorise such a determination by the Commercial Tax Officer. On that basis, the impugned assessment was not sustainable on jurisdictional grounds.

Conclusion: The assessment made by the Commercial Tax Officer was without proper authority and was invalid.

Issue (ii): Whether the transactions from the Cossipore Gun and Shell Factory constituted business or sales exigible to tax under the Central Sales Tax Act, 1956.

Analysis: The Court examined the nature of the factory's dealings and found that the supplies in question were made to utilise surplus production capacity and to meet governmental and defence-related requirements, rather than as regular trading activity carried on with profit-motive. Applying the pre-amendment understanding of business under the Central sales tax law, the Court held that the transactions lacked the essential commercial character required to attract tax at the relevant time. Therefore, even apart from the jurisdictional defect, the transactions were not taxable on the facts of the case.

Conclusion: The disputed transactions did not amount to taxable business sales under the Central Sales Tax Act, 1956.

Final Conclusion: The impugned assessment and consequential demand could not stand, and the writ petition succeeded.

Ratio Decidendi: Under the pre-amendment Central sales tax regime, a transaction is taxable only if it is carried on as business in the commercial sense, and an assessment based on prior fixation of liability without proper statutory authority is invalid.

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