BINNY AND COMPANY LIMITED Vs. BOARD OF REVENUE

JUDGEMENT

(1.) THIS matter came before us once but it was sent back to the Board of Revenue for its fresh disposal after a finding whether the goods were delivered outside the State for consumption. The Board has since stated that no proof was forthcoming from the assessee on the aspect of consumption outside the State and, thus, it sustained the imposition of tax. But it did so under explanation (2) section 2(h) of the Madras General Sales Tax Act, 1939. The turnover in dispute is a sum of Rs. 7, 32, 954.37 which relates to the period from 1st April, 1955, to 6th September, 1955. That the transactions constituting the turnover were inter-State in character, is no longer in dispute. The only question is whether the tax on non-explanation sales effected during the period could be the subject of validation under the Sales Tax Laws Validation Act, 1956.

(2.) IN view of the argument presented to us, it is necessary to briefly notice the state of law prior to and after the Constitution in respect of taxation on inter-State sales. Prior to the Constitution, there was no ban on States' powers to tax inter-State sales. That was held in Poppatlal Shah v. State of Madras Explanation (2) to section 2(h) defines a sale as a transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration. The scope of this definition was expanded by inclusions and explanations. The second explanation introduced by Madras Act 25 of 1947 sought to include within the scope of definition of sale an inter-State sale, if the goods were actually in the State at the time when the contract of sale or purchase thereof was made. Explanation (2) states :

(3.) THE contention for the assessee is that, notwithstanding the Sale Tax Laws Validation Act, the tax imposed under the pretext of the words in explanation (2) to section 2(h) read with section 3 was unauthorised. It is said that the whole purpose of the Validation Act was to validate tax which had been imposed by the several States on what may be called consumption sales falling within the ambit of the explanation to article 286(1)(a) and also to validate the law authorising imposition of tax on inter-State sales. We are told that, as a matter of fact, before the Constitution, there was no law made by any State which authorised the imposition of tax on inter-State sales as such, and that explanation (2) to section 2(h) cannot be construed as a law authorising imposition of tax on inter-State sales, for, as may be clear from the language employed in the explanation, it merely deemed a particular type of inter-State sale as inside sale and imposed tax on the said sale. So it is said, the Validation Act will not help the State to retain the tax as having been validly imposed.