1970 (4) TMI 128 - SC - VAT and Sales Tax

The turnover arising out of transactions aggregating to Rs. 21,47,228 is liable to sales tax in so far as it arises out of sales made in pursuance of contracts relating to goods which were at the date of the contract in existence within the Province. The turnover arising out of transactions amounting to Rs. 5,35,404-15-0 is liable to sales tax in so far as it arises out of sales made in pursuance of contracts relating to goods which were at the date of the contract in existence within the Province.

Summary

Issues:
1. Determination of liability for sales tax on transactions involving the despatch of bidis to branch offices outside the State.
2. Interpretation of the definition of "sale" under the C.P. and Berar Sales Tax Act, 1947, in relation to the location of goods at the time of the contract.

Detailed Analysis:

Issue 1: The case involved the liability for sales tax on transactions where bidis were despatched by a firm to their branch offices outside the State. The Sales Tax Officer initially rejected the contention that these transactions were not liable for tax. The Deputy Commissioner and Commissioner of Sales Tax upheld the decision, stating that the bidis were despatched in execution of orders from customers forwarded by the branches. The High Court observed that the sale would be deemed to take place within the Province if the goods were in existence within the Province at the time of the contract. The appellants argued that the liability to tax depended on the existence of the bidis within the Province at the date of the contract, which was not proven during the assessment proceedings.

Issue 2: The interpretation of the definition of "sale" under the C.P. and Berar Sales Tax Act, 1947, was crucial in determining the liability for sales tax. The Act defined "sale" as a transfer of property in goods for valuable consideration. The Second Explanation to the Act provided a fictional situs of the sale, deeming it to take place within the Province if the goods were within the Province at the time of the contract, regardless of where the actual sale occurred. The Supreme Court referred to previous judgments to clarify that the liability to tax arises only if the goods were in existence at the date of the contract of sale. The court emphasized that the condition for liability to tax is the existence of goods within the Province at the time of the contract, irrespective of where the sale is executed.

In conclusion, the Supreme Court held that the turnover from the transactions involving bidis despatched to branch offices was liable for sales tax if the goods were in existence within the Province at the time of the contract. The court reframed the questions posed by the Tribunal and answered both in favor of imposing sales tax on transactions where goods were in existence within the Province at the time of the contract. The judgment clarified the application of the definition of "sale" under the Act and emphasized the importance of the existence of goods within the Province for determining liability for sales tax.