1959 (9) TMI 30 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of the petitioners to be assessed to sales tax on the sales of sugar-cane.
2. Interpretation of "turnover" under section 2(i) of the Madras General Sales Tax Act.
3. Validity of reassessment under rule 17 of the General Sales Tax Rules.
4. Determination of whether the petitioners were "dealers" as defined by the Act.

Detailed Analysis:

1. Liability of the petitioners to be assessed to sales tax on the sales of sugar-cane:
The petitioners contended that they were not liable to be assessed to sales tax on the sales of sugar-cane because such sales did not fall within the scope of "turnover" within the meaning of section 2(i) of the Madras General Sales Tax Act (IX of 1939). The departmental authorities and the Tribunal held that the sales of sugar-cane grown on lands owned by the petitioners and on lands proved to have been leased by the petitioners were exempted under the proviso to section 2(i). However, the sales of sugar-cane grown on lands which the petitioners failed to prove had been leased to them and the benami sales were included in the assessable turnover as the petitioners had no interest in those lands.

2. Interpretation of "turnover" under section 2(i) of the Madras General Sales Tax Act:
Section 2(i) defines "turnover" as the aggregate amount for which goods are either bought or sold by a dealer, with an exemption for the proceeds of the sale of agricultural or horticultural produce grown by the seller. The Tribunal confirmed that the sales of sugar-cane grown on lands owned by the petitioners and leased lands were exempted. However, for the lands which the petitioners failed to prove as leased and the benami sales, the Tribunal held that these did not come within the scope of the proviso to section 2(i) as the petitioners had no interest in those lands.

3. Validity of reassessment under rule 17 of the General Sales Tax Rules:
The reassessment for two of the petitioners was challenged on the ground of limitation. Rule 17(1) allows reassessment within the year or the two years next succeeding the year to which the tax relates. The court held that the reassessment was valid as the notice was issued within two years following the year of assessment. The rule prescribed the latter period as the limit for reassessment proceedings, and the proceedings were validly initiated and completed within this period.

4. Determination of whether the petitioners were "dealers" as defined by the Act:
The petitioners argued that they were not dealers as defined by the Act, and therefore the sales did not fall within the scope of "turnover." The court noted that this question was not considered by the Tribunal and needed to be determined to decide the liability for sales tax. The court emphasized that a sale of agricultural produce alone does not establish that the seller is a dealer. The Tribunal must determine if the petitioners acted as dealers, which could include buying sugar-cane from growers and selling it to the factory or acting as agents for the growers as part of their business. The court remanded the cases to the Tribunal to determine if the petitioners were dealers with reference to the sales of sugar-cane and to allow further evidence on this issue.

Conclusion:
The orders of the Tribunal were set aside, and the appeals were remanded for fresh consideration of the issues, specifically the determination of whether the petitioners were dealers as defined by the Act. The Tribunal was directed to give opportunities to both the petitioners and the State to present further evidence. The petitions were allowed to the extent indicated, with no order as to costs.

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