1959 (7) TMI 38 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the application for reference to the High Court was time-barred.
2. Whether the opponents were "dealers" within the meaning of the Bombay Sales Tax Act, 1953.
3. Whether the transactions in question amounted to "sales" under the Bombay Sales Tax Act, 1953.

Issue-wise Detailed Analysis:

1. Timeliness of the Application:
The Collector of Sales Tax, Bombay, filed an application for reference to the High Court on 13th May 1958, following an order dated 17th January 1958, communicated to the applicant on 13th February 1958. The primary contention was whether the application was time-barred. The tribunal referenced Rule 42 of the Bombay Sales Tax (Procedure) Rules, 1954, which mandates that the order be communicated to the affected party. The tribunal concluded that the limitation period should commence from the date of communication, not the date of the order. Thus, the application was deemed timely.

2. Definition of "Dealers":
The opponents questioned whether they were "dealers" under Section 2(6) of the Bombay Sales Tax Act, 1953. The tribunal examined the opponents' business operations, which involved maintaining separate accounts for gold brought by customers (sonavahi) and job work charges (majuri). The opponents did not purchase gold or stock ready-made ornaments for sale during the relevant year. The tribunal found that the opponents' activities were limited to job work and did not constitute dealing in goods. Therefore, the opponents were not "dealers" as defined by the Act.

3. Nature of Transactions as "Sales":
The core issue was whether the transactions, where the opponents used their own gold to manufacture ornaments and received an equivalent weight of gold from customers later, constituted "sales" under Section 2(13) of the Bombay Sales Tax Act, 1953. The tribunal compared this case with precedents such as P.A. Raju Chettiar and Brothers v. The State of Madras, where similar transactions were not considered sales but rather bailment. The tribunal emphasized that the opponents did not intend to sell gold; they only advanced gold to customers as a temporary measure. The gold returned was always of the same quantity, and no price was agreed upon for the ornaments. Hence, the transactions were not sales but advances made in the opponents' interest.

Conclusion:
The High Court was asked to determine:
1. Whether the transactions amounted to sales under Section 2(13) of the Bombay Sales Tax Act, 1953.
2. If so, whether the opponents were dealers under Section 2(6) of the Act.

The tribunal answered both questions in the negative, concluding that the transactions did not amount to sales and that the opponents were not dealers. The petitioner's arguments that the transactions were disguised sales were not supported by the facts or the modus operandi of the opponents. Consequently, the reference was answered in the negative, and the petitioner was ordered to pay the costs.