1. Dispute over the legality of sales tax assessment on agricultural machinery sales under the Bihar Sales Tax Act, 1947. (Para 1 )
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1958 Supreme(SC) 24
SUPREME COURT OF INDIA
11th March, 1958.
S.R. DAS, C.J.I., T.L. VENKATARAMA AYYAR, S.K. DAS, A.K. SARKAR AND VIVIAN BOSE, JJ.
Pashabhai Patel and Co. (Private) Ltd., Appellants
Versus
S. I. H. Razvi, Respondent.
Civil Appeal No. 706 of 1957.
Advocates appeared
M/s. P. N. Bhagwati and I. N. Shroff Advocates, for Appellants; Mr. L. K. Jha, Sr. Advocate (Mr. D. P. Singh, Advocate with him), for Respondent.
Advocates:
D.P.Singh, I.M.SHROFF, L.K.JHA, P.N.BHAGWATI
D.P.Singh, I.M.SHROFF, L.K.JHA, P.N.BHAGWATI
The court held that challenges to the validity of retrospective sales tax validation acts were unsustainable and that factual determinations regarding the location of sales for tax purposes must be decided by the relevant tax authorities, not in writ proceedings.
Headnote:(A) Constitution of India - Article 286(2) - State Sales Tax Act - Section 33 - Sales Tax Laws Validation Act - Inter-State trade - Validity of retrospective validation - Taxability of sales.
(B) Determination of place of sale - Whether sales occurred within a state or were inter-state is a question of fact to be determined by the appropriate sales-tax authorities based on materials placed before them and cannot be raised in writ proceedings. (Para 4)
Facts of the case:
A company dealing in agricultural machinery entered into contracts for the sale and delivery of machinery and spare parts to a state government and local authorities. The tax authorities issued notices for assessment of sales tax. The company challenged the legality of the levy, arguing that the sales were inter-state trade and that the relevant section of the state sales tax act was unconstitutional and could not be validated retrospectively. The high court dismissed the application.
Findings of Court:
The contentions regarding the unconstitutionality of the state sales tax provision and the invalidity of the retrospective validation act were found to be unsustainable. The court also found that factual disputes regarding the location of the sale are for the tax authorities to decide.
Issues: Whether the sales were liable to be taxed under the state sales tax act despite being inter-state trade, whether the retrospective validation act was ultra vires, and whether the court could determine the factual location of the sales.
Ratio Decidendi: The court held that the legal challenges to the validation of the sales tax levy were unsustainable. It further ruled that factual disputes regarding the location of the sale and whether they fall under a specific tax explanation must be decided by the tax authorities during assessment.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Challenge to taxability based on inter-state trade, validity of Section 33 of Bihar Sales Tax Act, and constitutionality of the Sales Tax Laws Validation Act, 1956. (Para 2 )
3. The court found arguments regarding inter-state trade and the Validation Act unsustainable, noting that factual disputes regarding sale location are for tax authorities. (Para 3 , 4 )
4. Contentions challenging the validity of the Sales Tax Laws Validation Act and the taxability of inter-state sales under the specified statutory framework are unsustainable. (Para 3 )
5. Appeal dismissed with costs. (Para 5 )
6. Whether sales in the course of inter-state trade are taxable under the Bihar Sales Tax Act given the provisions of Article 286(2) of the Constitution?
The court held that contentions arguing such sales were not liable to be taxed due to Article 286(2) and the construction of Section 33 of the Bihar Sales Tax Act were unsustainable. (Para 3 )
7. Is a retrospective validation act, such as the Sales Tax Laws Validation Act, 1956, ultra vires if it validates previously unconstitutional levies?
The court held that the contention that the Validation Act was ultra vires because Article 286(2) did not authorize retrospective legislation, or that it could not validate an illegal provision, was unsustainable. (Para 3 )
8. Can the factual location of a sale be determined in a writ proceeding to challenge a tax assessment?
No, questions regarding whether sales fall within a statutory explanation based on the location of contracts, payment, and delivery must be determined by the appropriate sales-tax authorities. (Para 4 )
Judgment
T. L. VENKATARAMA AIYAR, J. : (On behalf of S. R. Das CJI., S. K. Das, Vivian Bose, JJ. and himself). The appellants are a private limited Company having their registered office in the City of Bombay, and they are carrying on business as dealers in agricultural machinery and tools in Bombay. In the course of their business, they entered into several contracts with the Government of Bihar and the local authorities in that State for the sale and delivery of agricultural construction and earth-moving machinery and spare parts. The respondent who is the concerned Commercial Tax Officer of the State of Bihar issued notices to the appellants calling upon them to submit returns of sales effected by them to consumers in the State of Bihar during the periods 1-4-1953 to 31-3-1955 and 1-4-1955 to 6-9-1955, and produce their accounts for the purpose of assessment of the tax payable thereon. The appellants questioned the legality of the proposed levy and after a prolonged correspondence, filed on 10-7-1957, an application in the High Court of Bombay for the issue of an appropriate writ to restrain the respondent from taking proceedings for imposing any tax on the sales. The grounds on which the appellants disputed the validity of the assessment had been already considered by a Bench of the Bombay High Court in a judgment pronounced on 10-8-1956 and reported in Dialdas v. P. S. Talwalkar , AIR 1957 Bom 71 (A). In view of this decision, the application of the appellants was summarily dismissed by Tendolkar and Shelat, JJ., on 10-7-1957, and it is against this order that this appeal has been preferred by special leave of this Court.
2. On behalf of the appellants, their learned Counsel, Mr. Bhagwati urges that the sale proposed to be taxed by the respondent took place in the course of inter-State trade and were therefore not liable to be taxed by reason of Art. 286 (2) of the Constitution; that S. 33 of the BIHAR SALES TAX ACT , 1947, under which the levy is proposed to be made does not, on its true construction, impose a tax on the Explanation sales; that even if it could be regarded as imposing a conditional levy, that would also be bad, as authorisation by Parliament under Art. 286 (2) was condition precedent to enactment of such law and that had not been given; that the Sales Tax Laws Validation Act No. VII of 1956 was ultra vires, as Art. 286 (2) did not authorise the enactment of a legislation retrospective in character; that there could not be any validation of what was unconstitutional and illegal; that the provisions of the BIHAR SALES TAX ACT provide for assessment of sales-tax on the basis of quarterly returns, and that it would result in great hardship if assessment under S. 33 were not to be made retrospectively, as the appellants are not now in a position to pass the tax on to the consumers; that the Validation Act validated only levies actually made up to 6-9-1955, and did not authorise the initiation of fresh proceedings for imposition of tax, and that, in any event, as S. 33 of the BIHAR SALES TAX ACT was unconstitutional when it was enacted, it was void and the Validation Act could not infuse life into what was a dead provision, and that no proceedings could therefore be taken thereunder.
3. This appeal was heard by us along with Petitions Nos. 220, 222, 240 and 380 to 395 of 1955, in which similar contentions were raised, and in the judgment delivered by us in those petitions today, we have held that those contentions are unsustainable. In view of the conclusions stated by us therein, this appeal must fail.
4. We must mention that the learned Counsel for the appellants also contended that on the facts the sales in question did not fall within the Explanation to Sec. 33 of the BIHAR SALES TAX ACT . He stated that the contracts for sale were concluded in Bombay, that the price therefor was paid in Bombay, that the goods were delivered f.o.r., in Bombay, and that the railway receipts were taken in the names of the
