All India Bar Examination (AIBE) 2-II Previous Year Question Papers with Answers

Practice Mode:
20.

Company A made sales of bricks, which were supplied from outside a State, to several purchasers within the State. The State levies a tax on these sales. Can the State levy such a tax?

Principle :

A State may not impose, or authorize the imposition of, a tax on the sale or purchase of goods if such sale or purchase takes place outside the State, or in the course of import of the goods into India, or the export of the goods outside India.
A: The State cannot levy such a tax, since the delivery of the bricks within the State was a result of a covenant or an incident of the contract of sale, that the bricks would be supplied in the State from a place outside the State. The sales were, therefore, inter-State sales, and the State cannot levy a sales tax on them.
B: The State cannot levy such a tax, since the delivery of the bricks within the State cannot be considered as a sale occurring within the State; in order that the State can levy such a tax, it is necessary to confirm that the bricks were not imported into India.
C: The State cannot levy such a tax, since there is no provision in the Constitution allowing a State to levy a tax on sales; this power is vested exclusively in the Union Government.
D: The State can levy such a tax, since the sale of the bricks had occurred within the territory of the State; the delivery of the bricks from outside the State would have non- impact on this matter.
E: The State can levy such a tax, since the purchasers were located within the territory of the State; the fact that the seller was outside the State, or that the bricks were being delivered from outside the State, would have no impact on the matter.

The answer is: A

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Explanation

The most correct option in this case is:

A: The State cannot levy such a tax, since the delivery of the bricks within the State was a result of a covenant or an incident of the contract of sale, that the bricks would be supplied in the State from a place outside the State. The sales were, therefore, inter-State sales, and the State cannot levy a sales tax on them.

Explanation:

 As per the provided principle and the context of sales of bricks, if the delivery of goods within a State is a result of a covenant or an incident of the contract of sale that the goods would be supplied in the State from a place outside the State, it is considered an inter-State sale. In such cases, the State cannot levy a sales tax on these sales because the sale takes place outside the State, and the State's taxing authority does not extend beyond its borders.

Options B, C, D, and E are not correct because they do not consider the specific circumstances of the sale, where the bricks were supplied from outside the State but were intended for delivery within the State, making it an inter-State sale subject to different taxation rules.