1977 (3) TMI 129 - HC - VAT and Sales Tax

TURNOVER CENTRAL SALES TAX REJECTION AND RETURN OF GOODS DISTINCTION APPLICABILITY OF SECTION 8A(1)(B), CENTRAL ACT, TO REJECTED GOODS SALE PRICE OF REJECTED GOODS WHETHER TO BE TAKEN INTO ACCOUNT IN DETERMINING TURNOVER DEFINITION OF TURNOVER PURPOSE OF CONJUNCTION AND BETWEEN SALE PRICES RECEIVED AND RECEIVABLE CENTRAL SALES TAX (REGISTRATION AND TURNOVER) RULES, 1957, RULE 11(2).

Summary

Issues:
Challenge against assessment order under the State Act and Central Act, challenge against certificate issued under Public Demands Recovery Act.

Analysis:
The petitioner, a registered company, challenged an assessment order made by the Commercial Tax Officer and an appellate order made by the Assistant Commissioner. The company contended that it had paid all tax demands raised. The company had contracts to supply stirrup pumps to government authorities, but the pumps were rejected for not meeting specifications. The rejected pumps' value was added back to the turnover for tax assessment, leading to a dispute. The Assistant Commissioner held that the rejected goods must be included in the taxable turnover, citing section 8A(1)(b) of the Central Act, which allows deductions for returned goods within specified time limits. The company appealed, seeking relief from the tax and penalty imposed.

The company argued that since the goods were rejected and not passed to the purchaser, there was no completed sale, and therefore, no tax or penalty should be levied. The definitions of "sale" and "turnover" were crucial in determining whether the rejected goods should be included in the turnover for taxation purposes. The court analyzed the definitions and highlighted the requirement of a transfer of property in goods for a sale to occur. The court also examined the provisions of section 8A(1)(b) of the Central Act, which allows deductions for returned goods within specific time frames, emphasizing the distinction between return and rejection of goods.

The court concluded that as the rejected goods were not passed to the purchaser, there was no completed sale, and the tax and penalty imposed were improper. The court held that the determination made by the Assistant Commissioner was incorrect, and the demand raised was unjust. The court ruled in favor of the petitioner, stating that no property in the rejected goods was transferred to the purchaser, thus no sale occurred under the Central Act or Sale of Goods Act. The court made the rule absolute, directing the respondents not to act on the impugned orders.

In summary, the judgment addressed the dispute over tax assessment on rejected goods, focusing on the definitions of sale and turnover, as well as the provisions of section 8A(1)(b) of the Central Act. The court ruled in favor of the petitioner, emphasizing that no completed sale occurred due to the rejection of goods, leading to the improper imposition of tax and penalty.