1987 (1) TMI 451 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of furniture transferred between units of SIDECO.
2. Taxability of excise duty collected from customers.
3. Validity of the Deputy Commissioner's order u/s 35 with respect to the limitation period.

Summary of Judgment:

1. Taxability of Furniture Transferred Between Units of SIDECO:
The court held that the value of the furniture transferred from the petitioner-unit of SIDECO to its other units is not liable to tax. The court emphasized that all units in question are owned by SIDECO, a corporate entity wholly owned by the State of Kerala. Since these units do not have separate legal existence apart from SIDECO, there is no transfer of property in goods from one person to another, and hence, no sale occurs. The court referenced Section 4 of the Sale of Goods Act, 1930, and Section 2(xxi) of the Kerala General Sales Tax Act, 1963, to underline that a sale necessitates a transfer of property between two distinct entities, which is not the case here. The court also cited the Allahabad High Court decision in U.P. State Cement Corporation Ltd. v. Commissioner of Sales Tax, U.P. [1979] 43 STC 476 to support this view.

2. Taxability of Excise Duty Collected from Customers:
The court noted the concession made by the assessee's counsel, acknowledging that the excise duty element collected from customers is taxable in light of the Supreme Court's decision in McDowell & Co. Ltd. v. Commercial Tax Officer [1985] 59 STC 277.

3. Validity of the Deputy Commissioner's Order u/s 35 with Respect to the Limitation Period:
The court examined whether the Deputy Commissioner's order u/s 35 was barred by limitation. The Tribunal had held that the order was passed within the four-year period, although it was communicated beyond this period. The court referred to the decision in Malayil Mills v. State of Kerala (T.R.C. Nos. 15 and 16 of 1981), which emphasized that an order is not effective until it is communicated to the affected party. The court concluded that the Tribunal did not consider whether the order was issued from the Deputy Commissioner's office within the prescribed period. Thus, the matter was remitted back to the Tribunal to ascertain this fact and pass consequential orders.

Directions:
1. The amount of Rs. 1,60,746 representing the value of supplies of furniture by the petitioner to other units of SIDECO is not taxable.
2. The matter is remitted back to the Tribunal to determine whether the Deputy Commissioner's order u/s 35 was issued within the prescribed period and to pass consequential orders regarding the turnover of Rs. 1,60,464.97.

There will be no order as to costs.