Bombay HC upholds Amendment in Bombay Sales Tax Act treating ‘Port Trusts’ as Deemed Dealers [Read Judgment]

The State of Maharashtra on November 7^th got green flag from the High Court of Bombay to treat the Port Trusts as deemed dealers.

A division bench of the Bombay High Court, has upheld the constitutionality of the amendment in Section 2(11) of the Bombay Sales Tax Act, 1954 wherein Port trusts would be deemed as a dealer for the purpose of the Act irrespective of whether it carries on business as defined under Section 2(5A) of the Port Trust Act or not.

The High Court bench consisting Justice A.S. Oka and Justice Riyas I Chagla, were dealing with a writ petition filed by the board of trustees of the Port of Bombay.

The petitioners in their appeal, tried to convince the court by distinguishing between a ‘Trust’ and a ‘Dealer’ but the explanations were not satisfactory enough for the court.

The Bombay Port Trust will now be treated as a deemed dealer and thereafter they have to file sales tax and returns for the following years.

Dismissing the writ petition, the bench observed that the 46th Amendment of the Constitution by which 29(A) has been made a part of Article 266 provides for a tax on the sale or purchase of goods, includes a tax on the transfer, otherwise then in pursuance of the contract of property in any goods for cash, deferred payment or other valuable consideration.

“This would encompass a sale of goods by the Port trust under the Major Port Trust Act. Sections 61 and 62 of the Major Port Trust Act contemplate a sale of goods, either where the rates or rents are not paid or where the goods are not removed from its premises within a particular period. These sales clearly come within Article 366 (29A) of the Constitution. The explanation to Section 2 (11) of the said Act is resultant from the 46th amendment to the Constitution of India by which the Bombay Port Trust has been included in the definition of dealer. We are, therefore, of the view that the definition of dealer in Section 2(11) has been made wider by virtue of the deeming fiction brought about by the explanation and which has resulted in various entities mentioned in the explanation being included in the definition of dealer.”

The bench, while disposing off the writ petition in favor of the state was quoted, “we are therefore of the view that the legislature having greater latitude for classification in taxing statute was competent in amending Section 2(11) of the said Act and thus there is no merit in the challenge to the constitutional validity of Section 2(11) of the said Act.”