Sales tax burden incidence: restriction on passing tax to purchaser did not make the levy unconstitutional.

Section 8A(3) of the Assam General Sales Tax law was challenged as exceeding State legislative competence because it barred a dealer from recovering the additional levy from the purchaser. The challenge failed because the legal incidence of sales tax remains on the seller, and the inability to pass on the burden does not change the character of the levy into a direct tax on the dealer's income. On that reasoning, the restriction on collection from the purchaser did not alter the nature of the tax or make the provision unconstitutional. The measure was treated as a valid sales tax provision within Entry 54 of List II.

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Issues: Whether sub-section (3) of section 8A of the Assam General Sales Tax law, which barred a dealer from collecting additional tax from the purchaser, was beyond the legislative competence of the State on the ground that it amounted to a direct tax on the income of the dealer.

Analysis: The impugned provision was challenged on the footing that, by preventing collection from the purchaser, the additional levy assumed the character of a direct tax on the dealer's income and therefore fell outside the State's power under Entry 54 of List II of the Seventh Schedule to the Constitution of India. The challenge was rejected by applying the settled principle that the legal incidence of a sales tax is on the seller, and that the ability or inability to pass on the burden to the buyer is not an essential feature of sales tax. On that basis, the restriction on collection from the purchaser did not alter the true nature of the levy or make it constitutionally invalid.

Conclusion: The provision was held to be within legislative competence and the challenge failed.

Final Conclusion: The writ petition was dismissed because the impugned additional tax provision was upheld as a valid sales tax measure and not as an unconstitutional direct tax on the dealer.

Ratio Decidendi: The inability of a dealer to pass on the burden of a sales tax to the purchaser does not change the legal character of the levy or render it a direct tax beyond the State's competence.

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