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1966 (12) TMI 58 - HC - VAT and Sales Tax
Issues:
Whether purchases of hemp jute were exempt under section 50(1)(iii) of the M.P. General Sales Tax Act, 1958, or liable to purchase tax under section 7 of the Act. Analysis: The judgment delivered by the High Court of Madhya Pradesh pertained to a reference made by the Sales Tax Tribunal regarding the taxability of purchases of hemp jute by an assessee firm. The assessee, a registered dealer, had purchased hemp worth a substantial amount from agriculturists and unregistered dealers during a specific assessment period. The hemp purchased was not resold within the State but sent to a branch office in Calcutta. The Sales Tax Officer held the assessee liable to pay purchase tax under section 7 of the Act. The appellate authorities and the Tribunal were approached with various contentions, including the argument that the purchases were exempt under section 50(1)(iii) of the Act as they were in the course of export of goods outside India. The Tribunal rejected this contention, emphasizing that the purchases were not made under any obligation or compulsion to export the goods. The Tribunal held that there was no link between the purchases and the subsequent exportation of the hemp outside India, as required by law. The High Court reiterated that if the transactions did not fall under section 50(1)(iii), purchase tax under section 7 would apply. The Court analyzed the provisions of the Act and the Central Sales Tax Act, emphasizing that for a purchase to be considered in the course of export, it must occasion the export, which was not the case with the assessee's purchases. The Court noted that the agreement with the outside purchaser did not establish a necessary link between the purchases and the subsequent exportation. Ultimately, the High Court concluded that the purchases made by the assessee were not exempt under section 50(1)(iii) of the Act and were liable for purchase tax under section 7. The Court upheld the decision of the Tribunal and answered the reference accordingly, directing the assessee to pay the costs of the reference. The judgment underscores the importance of establishing a direct link between purchases and subsequent exports to claim exemption under relevant provisions of the law.
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