THE TATA IRON & STEEL CO. LTD. versus THE STATE OF BIHAR

Citation: [1958] 1 S.C.R. 1355 · Decided: 19-02-1958 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Dismissed

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Judgment (excerpt)

S.C.R. 
SUPREME COURT REPORTS 
1355 
THE TATA IRON & STEEL CO., LTD. 
v. 
THE STATE OF BIHAR 
(S. R. DAS C. J., VENKATARAMA AIYAR, S. K. DAS, 
A. K. SARKAR and VIV!AN BOSE J.J.) 
Sales Tax-Provincial legislation imposing tax in certain cir-
cumstances-Validity-Power of Provincial Legislature-Retros-
pective levy, legality of-Theory of territorial nexus, if applicable 
-Bihar Sales Tax Act, 1947 (No. XIX of 1947) as amended by 
Bihar Sales Tax (Amendment) Act, 1948 (VI of 1949), ss .. 4(1), 
2(g). 
The appellant company, carrying on business as manufacturer 
of iron and steel, with its factory and works ·at J amshedpur in 
Bihar, was assessed to sales tax for two periods prior to the Con-
stitution, under the Bihar Sales Tax Act, 1947 (No. XIX of 1947). 
enacted by the Bihar Legislature in exercise of its exclusive 
power under the Government of India-Act, 1935. 
The company 
used to send its goods from J amshedpur to various parts of India. 
In the railway receipt the company itself figured as the consignee, 
it paid the freight and the receipt was sent either to its branch 
offices or bankers to be handed over to the purchaser when he 
paid the price. 
From the amounts shown as gross tum-over in 
the two returns for the two periods, the company claimed deduc-
tion of certain amounts, being the valuable consideration for the 
goods manufactured in Bjhar but sold, delivered and consumed 
outside, on the ground that in none of the transactions in respect of 
the said sums did property in the goods pass to the purchasers in 
Bihar. 
The appellant claimed further deductions on account of 
the railway freight paid by it. 
The Sales Tax Officer disallowed 
both the claims and added the amounts of sales tax realised by 
the ap~Jlant from its purchasers to the taxable turnover. 
The 
company appealed against the orders of assessment, but the Com-
missioner of Sales Tax dismissed its appeals. 
The Board of 
Revenue, in revision. confirmed the orders of the Commissioner 
with certain modifications and remanded the matters ·to the Sales 
Tax Officer. 
On the appellant's application for reference of 
certain questions of law, the Board referred them to the High 
Court. 
One of them related to the legality of adding the Sales 
Tax to the tum-over and was answered in favour of the appellant 
and the respondent did not appeal. 
The other questions decided 
by the High Court against the appellant related to the vires ·of the 
Act and the validity of retrospective levy of sales tax under 
s. 4(1) of the Act. 
The appellant's contentions in the appeals 
were that the tax levied under s. 4(1) read with s. 2(g) second 
.proviso, cl. (II), of the Act, was not,a sales tax within the mean-
ing of Entry 48 in List II of the Seventh Schedule to the Govern-
ment of India Act, 1935, but was in the nature of excise duty 
1958 
February 19. 
1356 
SUPREME COURT REPORTS 
(1958] 
1938 
which a rrovincial legislature had no power to impose, that the 
theory o territorial nexus was inapplicable to sales tax and, in 
Th• Tata Iron & any case, there was no real or sufficient nexus in the present cases 
Steel Co., Ltd. and that retrospective levy of the sales tax under s. 4(1) of the 
v. 
Act destroyed the indirect nature of the tax, thus making it a 
Th• Statt of Bihar direct tax on the dealer which could not be passed on to the 
consumer: 
Held, (per Das, C.J., Venkatarama Aiyar, S. K. Das and 
A. K. Sarkar, JJ., Bose, J. dissenting), that the contentions raised 
on behalf of the appellant must be negatived. 
The provisions of 
s. 4(1) read withs. 2(g), second proviso, of the Bihar Sales Tax 
Act, as amended by the Bihar Sales Tax (Amendment) Act, 1948, 
(VI of 1949), were within the legislative competence of the Legis-
lature of the Province of Bihar. Both before and after the 
amendment, the word 'sale' as used in s. 4( 1) and as defined by 
s. 2(g) of the Act, meant the transfer of property in the goods 
sold. The second proviso added by the amending Act did not 
extend that meaning so as to include a contract of sale. 
What it 
actually did was to lay down certain circumstances in which a 
sale, although completed elsewhere, was to be deemed to have 
taken place in Bihar. Those circumstances did not constitute the 
sale, but only located the situs of the sale. 
Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai 
Prakash, [1955] 1 S.C.k. 243, distinguished. 
Nor was it correct to contend that the tax levied under s. 4 ( 1) 
read with s. 2(g) 

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