1958 (8) TMI 38 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to be assessed for sales tax on certain transactions.
2. Jurisdiction of the Sales Tax Officer.
3. Interpretation of the agreement dated 3rd January 1944.
4. Definition of "sale" under the Cochin Sales Tax Act.
5. Application of Article 286 of the Constitution.

Detailed Analysis:

1. Liability to be assessed for sales tax on certain transactions
The petitioners, Lipton & Company Ltd., disputed their liability to be assessed for sales tax on transactions for the assessment year 1123 (year ended 15th August 1948) and for the year 1952-53. The Sales Tax Officer re-assessed the petitioners for the year 1123, adding previously unassessed exports of tea amounting to Rs. 23,18,044-15-6 to the taxable turnover, resulting in additional sales tax of Rs. 23,180-6-10. The petitioners contended that there was no sale as they acted merely as agents of the buyers, receiving only a commission.

2. Jurisdiction of the Sales Tax Officer
The petitioners challenged the jurisdiction of the Sales Tax Officer to levy sales tax, arguing that the goods were not in Cochin State at the relevant times and that the transactions did not constitute a "sale" under the Cochin Sales Tax Act. The appellate authority confirmed the assessment, stating that the goods were shipped from Cochin Port and that the sales took place within Cochin State. However, the High Court found no legal evidence to support the finding that the ships were in Cochin territorial waters when the tea passed their rails.

3. Interpretation of the agreement dated 3rd January 1944
The agreement stipulated that the petitioners were to purchase tea on behalf of the American-Canadian companies, with title passing to these companies once the tea passed the ship's rail at the port of shipment. The petitioners argued that this clause should be read in the context of the entire agreement, which indicated that they were merely buying agents. The High Court agreed, stating that the petitioners were only buying agents and there was no intention to pass title to the American-Canadian companies at the ship's rail.

4. Definition of "sale" under the Cochin Sales Tax Act
The court examined the definition of "sale" under Section 2(i) of the Cochin Sales Tax Act, which includes any transfer of property in goods for valuable consideration. The petitioners argued that there was no transfer of property as they acted as agents, not sellers. The High Court concluded that the transactions did not amount to a "sale" as defined in the Act, as the petitioners were merely buying agents.

5. Application of Article 286 of the Constitution
In O.P. 133 of 1955, the petitioners contended that the sales took place in the course of export outside the territory of India, invoking Article 286 of the Constitution. The appellate authority was directed to consider this contention along with others raised by the petitioners. The High Court did not interfere at this stage, as the appeal was pending before the appellate authority.

Conclusion
The High Court quashed the orders dated 6th August 1952 and 30th June 1953, assessing the petitioners to sales tax for the year 1123, concluding that the petitioners were only buying agents and the transactions did not constitute a "sale" under the Cochin Sales Tax Act. The court also directed the appellate authority to consider all objections, including those based on Article 286 of the Constitution, in the pending appeal for the year 1952-53. O.P. 133 of 1955 was dismissed with the observation that the appellate authority would consider all the contentions raised by the petitioners.