1968 (8) TMI 165 - SC - VAT and Sales Tax

Whether the turnover of inter-State sales of rubber is taxable under the Central Sales Tax Act 1956? Held that - Appeal dismissed. The only facts found are that the assessee was a public limited company which was engaged in the business of planting and growing rubber trees and converting the latex obtained from the trees into rubber sheets and regularly selling the rubber sheets thus produced by it. It was argued for the appellant that the company was registered as a dealer as defined under section 2(b) of the Act. But this fact in itself is not decisive on the question as to whether the turnover of inter-State sales of rubber is taxable under the Act.

Summary

Issues:
1. Whether the company is liable to pay tax on inter-State sales of rubber.
2. Whether the company qualifies as a "dealer" under the Central Sales Tax Act, 1956.

Analysis:

Civil Appeal No. 2234 of 1966:
The appellant, a public limited company engaged in rubber production and sales, claimed exemption on its turnover for the year 1961-62. The Sales Tax Officer assessed the company on a net turnover, which was challenged in subsequent appeals. The Appellate Tribunal ruled in favor of the company, stating that it was not a dealer and hence not liable for tax on inter-State sales of rubber. The High Court upheld this decision, emphasizing the need for the sales tax department to prove that the company was indeed a dealer. The Supreme Court, referencing a similar case, held that the burden of proof lay with the tax authorities to establish the company's status as a dealer. As the authorities failed to provide sufficient evidence beyond the company's registration status, the appeal was dismissed, and the company was not liable for tax on the sales in question.

Civil Appeals Nos. 2235 and 2236 of 1966:
These appeals were based on similar grounds as Civil Appeal No. 2234 of 1966, with the same legal question and material facts. The Supreme Court, in line with its decision on the previous appeal, dismissed these appeals as well. The Court reiterated that the burden of proof rested on the tax authorities to demonstrate that the company qualified as a dealer under the Act. As there was insufficient evidence to support this claim, the appeals were dismissed, and no costs were awarded.

In summary, the Supreme Court ruled in all three appeals that the company was not liable for tax on its inter-State sales of rubber as the tax authorities failed to establish the company's status as a dealer under the Central Sales Tax Act, 1956. The burden of proof was on the authorities to demonstrate the company's dealer status, which was not adequately proven beyond the company's registration. Consequently, all appeals were dismissed, and no costs were awarded.