Case Note & Summary
The case involved the Bengal Immunity Company Limited, which was registered in Calcutta and engaged in manufacturing and selling biological products. The Bihar Sales Tax authorities issued a notice under the Bihar Sales Tax Act, 1947, demanding registration and tax returns from the company for sales made to Bihar. The company contested its liability, asserting it had no presence in Bihar and that the notice was ultra vires. The High Court dismissed the company's petition under Article 226 of the Constitution, stating it was not maintainable. The Supreme Court, upon appeal, found that the High Court erred in its conclusion. It held that the Bihar Sales Tax Act could not tax inter-State sales as it violated Article 286 of the Constitution, which restricts State taxation on inter-State trade. The court emphasized that the situs of a sale does not determine its inter-State character and that the Act's provisions imposed unreasonable restrictions on the fundamental right to carry on business. The Supreme Court ultimately ruled that the Act was unconstitutional and void, allowing the appeal and quashing the notice issued by the Bihar Sales Tax authorities.
Headnote
A) Constitutional Law - Inter-State Trade - Taxation of Inter-State Sales - Article 286, Constitution of India - The Supreme Court held that the Bihar Sales Tax Act, 1947, could not impose tax on inter-State sales as it was unconstitutional and ultra vires the Constitution. The court reasoned that the situs of a sale is irrelevant to its inter-State character, and until Parliament legislates otherwise, no State can tax inter-State transactions (Paras 1-2).
Issue of Consideration
Whether the Bihar Sales Tax Act, 1947, could impose tax on inter-State sales made by a non-resident dealer.
Final Decision
The Supreme Court allowed the appeal, ruling that the Bihar Sales Tax Act, 1947, was unconstitutional in its application to inter-State sales, as it violated Article 286 of the Constitution. The court quashed the notice issued by the Bihar Sales Tax authorities.
Law Points
- Inter-State trade
- Sales Tax
- Article 286
- Ultra vires
- Fundamental rights
