1962 (4) TMI 78 - HC - VAT and Sales Tax

Issues Involved
1. Jurisdiction of the Assistant Collector of Sales Tax to issue notice under section 31.
2. Whether the sale in question was part of the applicant's business.
3. Whether the sale took place in the State of Bombay.
4. Whether the sale was in the course of export.
5. Liability of the applicant to pay tax on the sale.

Detailed Analysis

1. Jurisdiction of the Assistant Collector of Sales Tax to Issue Notice Under Section 31
The applicant contended that the Assistant Collector had no jurisdiction to issue the notice under section 31 of the Bombay Sales Tax Act, 1953. The court examined section 31, which allows the Collector to revise any order passed under the Act or the Rules. Section 3(1) empowers the State Government to appoint a Collector and other persons to assist him. The Assistant Collector's jurisdiction was derived from a notification issued by the Collector on 18th May 1953, delegating his powers under section 31. The court concluded that the Assistant Collector had jurisdiction to revise the order of the Sales Tax Officer, as the delegation of powers was valid and unrestricted. Therefore, the first question was answered in the affirmative.

2. Whether the Sale in Question Was Part of the Applicant's Business
The applicant argued that selling ships was not part of its regular business, which was selling separated parts of ship machinery and metals. The court referred to the definitions of "dealer," "goods," and "sale" under the Act, emphasizing that a dealer must carry on the business of selling goods. The court found that the applicant had purchased the ship with the option to either use it for trading or break it up and sell the parts, which aligns with its business activities. The sale to the Costa Rican company, which included an option to break up the ship, was deemed to have a reasonable connection with the applicant's business. Therefore, the second question was answered in the affirmative.

3. Whether the Sale Took Place in the State of Bombay
The applicant contended that the sale took place in London, where the property in the ship allegedly passed to the buyer. The court noted that this issue was not raised before the Tribunal and could not be considered at this stage. The Tribunal had found that the title passed in the Bombay docks. The court also rejected the argument that the sale in Bombay docks was not within the State of Bombay, stating that territorial waters adjoining a state form part of that state. Therefore, the third question was answered in the affirmative.

4. Whether the Sale Was in the Course of Export
The applicant argued that the sale was in the course of export and thus exempt under Article 286(1)(b) of the Constitution. The court referred to various Supreme Court decisions, which established that a sale in the course of export must be inextricably connected with the export. The court found that the sale was completed in Bombay docks, and the ship's subsequent journey to Costa Rica was merely an exercise of the purchaser's option. The sale did not occasion the export, and thus, the sale was not in the course of export. Therefore, the fourth question was answered in the affirmative.

5. Liability of the Applicant to Pay Tax on the Sale
Given the findings on the previous issues, the court concluded that the applicant was liable to pay tax on the sale of the ship. The sale was part of the applicant's business activities, took place within the State of Bombay, and was not in the course of export. Therefore, the fifth question was answered in the affirmative.

Conclusion
The court answered all the questions in the affirmative, confirming the jurisdiction of the Assistant Collector, the inclusion of the sale in the applicant's business activities, the occurrence of the sale within the State of Bombay, the non-exemption of the sale as an export, and the applicant's liability to pay tax. The applicant was ordered to pay the costs of the respondent, quantified at Rs. 500.

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