1979 (3) TMI 175 - SC - VAT and Sales Tax

Whether the alleged sales were not sales in the eye of law as the respondent had no volition in the distribution of liquor, which was received from the manufacturing concern at Jammu? Held that - Appeal allowed. Even assuming in favour of the respondent-company that it did not carry on the trade thinking that it would be liable to pay sales tax, the area of consensuality still left in the field for the purpose of agreeing to the final terms of the transactions between the company and its retail dealers was quite sufficient for the application of the ratio of Vishnu Agencies 1977 (12) TMI 118 - SUPREME COURT OF INDIA . Having considered all that was submitted on behalf of the respondent-company, we find that there is no escape from the conclusion in this case that the transactions in question were sales exigible to sales tax.

Summary

Issues:
Imposition of sales tax on liquor sales - Whether the transactions constitute sales in the eye of law?

Detailed Analysis:

The Supreme Court of India heard an appeal involving a respondent-company with a distillery and brewery in Jammu. The company maintained wholesale depots in Punjab and supplied Indian-made foreign liquor to permit-holders under permits issued by Excise and Taxation Officers. The company challenged the imposition of sales tax on these transactions, arguing that the sales were not voluntary as prices were fixed by authorities, leaving no volition in distribution. The State contended that despite regulations, there was still room for agreement between wholesaler and retailer. A Division Bench decision of the Punjab and Haryana High Court had previously quashed a similar assessment order, leading to this appeal.

The Court found the case to be governed by a recent decision in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer, where previous judgments were reviewed and clarified. The Court examined provisions of the Punjab Excise Act and Rules and determined that there was enough room for voluntary agreement between parties in the transactions. While price fixation was assumed to be common in the excise trade, the imposition of sales tax was justified based on legal precedents.

The respondent's argument that they were unaware of the retrospective imposition of sales tax was dismissed by the Court. It was established that sales tax could be imposed retrospectively, and the company would be deemed to have entered the trade with the knowledge of potential tax liability. The Court emphasized that the area of agreement between parties was significant, regardless of the retrospective nature of the tax imposition. Ultimately, the Court concluded that the transactions in question constituted sales subject to sales tax, upholding the imposition of tax.

In conclusion, the appeal was allowed by the Supreme Court, setting aside the judgment and order of the High Court. The Court held that the transactions were indeed sales exigible to sales tax, affirming the imposition of tax on the liquor sales by the respondent-company.