1958 (8) TMI 46 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of an alleged escaped turnover of Rs. 6,34,033-12-6 in the petitioners' sales tax assessment.
2. Determination of whether there were two sales (one by Madura Mills to the petitioners and another by the petitioners to ultimate purchasers) or a single sale (by Madura Mills directly to ultimate purchasers).
3. Validity of Rule 17 of the Madras General Sales Tax Rules under which the assessment was made.

Detailed Analysis:

1. Inclusion of an Alleged Escaped Turnover:
The petitioners, Haji P.K. Moidoo Bros., were initially assessed on a net turnover of Rs. 11,44,346-15-1 for the financial year 1951-52. The Commercial Tax Officer later included an additional amount of Rs. 6,34,033-12-6, alleged to have escaped assessment, based on transactions with Madura Sugars and Allied Products Limited (Madura Mills). The petitioners objected, but the officer revised their assessable turnover to Rs. 17,08,767-12-9. The Sales Tax Appellate Tribunal upheld this inclusion, leading to the present revision petition.

2. Determination of Sales:
The central issue was whether there were two sales or a single sale. The petitioners argued there was only one sale by Madura Mills directly to the ultimate purchasers, and no intermediate sale by them. The Sales Tax Department contended that there were two sales: one by Madura Mills to the petitioners and another by the petitioners to the ultimate purchasers. This contention was based on the evidence of Madura Mills' accountant and the transactions' nature.

The court analyzed the legal definitions of "sale" and "turnover" under the Madras General Sales Tax Act and the Indian Sale of Goods Act. It emphasized that a sale involves the transfer of property in goods, a mixed question of law and fact. The court found that neither the Commercial Tax Officer nor the Appellate Tribunal had considered whether there was a legal transfer of property in the goods from Madura Mills to the petitioners.

The evidence showed that specific quantities of sugar were set apart by Madura Mills against advances made by the petitioners or their agents, but the goods were sent directly to the ultimate purchasers. The invoices were prepared in the names of these purchasers, and the railway receipts were endorsed to them, indicating that the property in the goods did not vest in the petitioners at any time.

The court concluded that the transactions did not amount to a sale by Madura Mills to the petitioners and another sale by the petitioners to the ultimate purchasers. Instead, there was only one sale by Madura Mills directly to the ultimate purchasers.

3. Validity of Rule 17:
The petitioners also challenged the validity of Rule 17 of the Madras General Sales Tax Rules, under which the assessment was made. However, since the court found the assessment unsustainable on other grounds, it did not address this issue.

Conclusion:
The court held that the petitioners had neither purchased the sugar from Madura Mills nor sold it to the ultimate purchasers. Consequently, they were not liable to pay sales tax on the alleged escaped turnover of Rs. 6,34,033-12-6. The assessment by the Commercial Tax Officer was quashed, and the order of the Sales Tax Appellate Tribunal was set aside. The petitioners were entitled to a refund of any tax realized on this amount. The petition was allowed with costs, and counsel's fee was set at Rs. 200.

Petition allowed.