1968 (7) TMI 52 - HC - VAT and Sales Tax

Summary

Issues: Sales tax assessment on transactions with parties residing outside the state as inside sales based on F.O.R. Khandwa and payment against railway receipts.

Analysis:
The judgment of the High Court of Madhya Pradesh pertains to two references under section 44 of the Madhya Pradesh General Sales Tax Act, 1958, involving sales tax assessment proceedings against M/s. Mansingh-ka Oil Mills Ltd. for two periods. The primary question posed before the court was whether the turnover from transactions with parties residing outside Madhya Pradesh, based on F.O.R. Khandwa and payment against railway receipts, is assessable to sales tax within Madhya Pradesh. The assessee claimed exemption under Article 286(1)(a) of the Constitution for these amounts, contending they represented outside sales. However, the taxing authorities and the Board of Revenue held that the sales took place within Madhya Pradesh solely based on the delivery location mentioned as F.O.R. Khandwa in the contracts, without considering other contract terms.

The Court analyzed the F.O.R. condition and its implications on the place of delivery and pricing. Referring to the Supreme Court's decision in Bengal Timber Trading Co. Ltd. v. Commissioner of Sales Tax, the Court highlighted that F.O.R. Khandwa implies delivery occurs when goods are put on rail, and the price includes rail charges. Therefore, if the stipulated price was F.O.R. Khandwa without specifying delivery at Khandwa, it cannot be concluded that the sales were inside sales. The Board's decision based solely on the delivery location was deemed erroneous.

Regarding payments against railway receipts, the Court noted that this aspect was not considered by the Board in determining the sales as inside sales. As the Board's decision was solely based on the delivery location, the question of payments against railway receipts did not arise. Consequently, the Court held that based on the F.O.R. condition and payment method, the turnover in question cannot be subject to sales tax.

The Court directed the Board of Revenue to rehear the revision petitions, examining all contract terms comprehensively to determine the assessability of the turnover to sales tax. Ultimately, the Court answered the question posed in the negative, concluding that the turnover from the specified periods is not assessable to sales tax based on the pricing terms and payment method. The parties were left to bear their own costs, and the references were answered accordingly.