1955 Supreme(Pat) 117

PATNA HIGH COURT
V.Ramaswami and Banerji JJ.
Tata Iron And Steel Company Limited
Versus
State Of Bihar
Miscellaneous Judicial Case No. 577 of 1953 ;
Decided On : OCTOBER 17, 1955

The power of the provincial legislature to levy a tax on the sale of goods extends to sales of every kind, whether first sales by the manufacturer or not, and the provisions of the Madras General Sales Tax Act, 1939, imposing a tax upon the first sales by the manufacturer were not ultra Tires of the provincial legislature.

Headnote:

Bihar Sales Tax Act, 1947 - Constitutionality - Retrospective effect - Inclusion of sales tax in taxable turnover - Extension to Chotanagpur - Effect of Constitution on pending assessments and appeals - Held: (i) The Act is constitutionally valid. (ii) The legislature had the power to make the Act retrospective. (iii) Sales tax collected from customers cannot be included in the taxable turnover. (iv) The Act was legally extended to Chotanagpur. (v) Assessments and appeals pending on the date of commencement of the Constitution were not affected by it.

Fact of the Case:

The assessee, Tata Iron and Steel Company Limited, challenged the constitutional validity of the Bihar Sales Tax Act, 1947, and the inclusion of sales tax collected from customers in the taxable turnover. The assessee also contended that the Act was not legally extended to Chotanagpur and that assessments and appeals pending on the date of commencement of the Constitution were affected by it.

Finding of the Court:

The Court held that: (i) The Act is constitutionally valid. (ii) The legislature had the power to make the Act retrospective. (iii) Sales tax collected from customers cannot be included in the taxable turnover. (iv) The Act was legally extended to Chotanagpur. (v) Assessments and appeals pending on the date of commencement of the Constitution were not affected by it.

Issues: 1. Whether the Bihar Sales Tax Act, 1947 is constitutionally valid? 2. Whether the legislature had the power to make the Act retrospective? 3. Whether sales tax collected from customers can be included in the taxable turnover? 4. Whether the Act was legally extended to Chotanagpur? 5. Whether assessments and appeals pending on the date of commencement of the Constitution were affected by it?

Ratio Decidendi: 1. The Court held that the Act is constitutionally valid because: (i) The tax is not extra-territorial as the manufacture or production of goods by the assessee within the province constitutes a real territorial nexus. (ii) The tax is not in the nature of an excise tax as it is levied on the sale of goods and not on the manufacture or production of goods. (iii) The legislature had the power to make the Act retrospective as there is no constitutional provision against retrospective fiscal legislation. 2. The Court held that the legislature had the power to make the Act retrospective because there is no constitutional provision against retrospective fiscal legislation. 3. The Court held that sales tax collected from customers cannot be included in the taxable turnover because: (i) The amount collected by the registered dealer from the customers as sales tax and paid over to the Government cannot be treated as part of the purchase price under Sec.2 (h) and so does not constitute part of the taxable torn-over of the registered dealer. (ii) Sec.14A of the Act empowers the registered dealer to make collection of sales tax from consumers in accordance with such restrictions and conditions as may be prescribed. 4. The Court held that the Act was legally extended to Chotanagpur because the Attorney General conceded that there is no merit in this question and that he is not in a position to argue that the Amendment Act of 1948 was not legally extended to Chotanagpur. 5. The Court held that assessments and appeals pending on the date of commencement of the Constitution were not affected by it because: (i) The Articles of the Constitution are not retrospective and do not affect transactions which are past and closed or rights which have already vested or liabilities which have already accrued. (ii) The liability to pay sales tax was imposed on the assessee with effect from 1-10-1948 and the assessment orders were made before the Constitution came into force.

Final Decision: The Court answered the questions referred to it as follows: (i) The first two questions are answered against the assessee and in favour of the State of Bihar. (ii) The third question is answered in favour of the assessee and against the State of Bihar. (iv) The fourth question is answered against the assessee and in favour of the State of Bihar. (v) The fifth and sixth questions are answered against the assessee and in favour of the State of Bihar.