1968 (12) TMI 77 - HC - VAT and Sales Tax

Issues Involved:
1. Exemption from sales tax for the turnover of two brands of beer.
2. Determination of the first sale in the State.
3. Applicability of inter-State sale under Section 3 of the Central Sales Tax Act.
4. Compliance with rule 27(5) of the General Sales Tax Rules, 1125, and rule 32(13) of the Kerala General Sales Tax Rules, 1963.

Issue-wise Detailed Analysis:

1. Exemption from Sales Tax for the Turnover of Two Brands of Beer:
The assessee sought to quash exhibits P3 and P4, which assessed them to sales tax for the years 1962-63 and 1963-64, arguing for exemption from tax on the turnover related to the sales of U.B. Light Lager Beer and U.B. Sun Lager Beer. The court examined the relevant schedules of the General Sales Tax Act, 1125, and the Kerala General Sales Tax Act, 1963, which included wines and liquors other than toddy as taxable items. The court noted that beer is included in the term "liquors" in Schedule I of both Acts.

2. Determination of the First Sale in the State:
The court needed to determine whether the sales by the assessee were the first sales in the State, which would attract tax liability. The court analyzed the agreement (Exhibit P1) between McDowell & Co. Ltd., Shertallai, and the assessee, which appointed the latter as sub-distributors. The terms of Exhibit P1 indicated that the goods were supplied to the assessee by McDowell & Co. Ltd., Shertallai, and that the movement of goods from Bangalore to Ernakulam was facilitated by the assessee paying excise duty on behalf of McDowell & Co. Ltd., Shertallai.

3. Applicability of Inter-State Sale Under Section 3 of the Central Sales Tax Act:
The court discussed Section 3 of the Central Sales Tax Act, which defines an inter-State sale. The principle established by the Supreme Court was that a sale occasions the movement of goods from one State to another if it results from a covenant or incident of the contract of sale. The court referred to the decisions in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar and K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, which clarified the interpretation of inter-State sales. The court concluded that there was no privity of contract between the assessee and the United Breweries Ltd., Bangalore, and that the movement of goods was occasioned by the contract of sale between McDowell & Co. Ltd., Shertallai, and the United Breweries Ltd., Bangalore.

4. Compliance with Rule 27(5) of the General Sales Tax Rules, 1125, and Rule 32(13) of the Kerala General Sales Tax Rules, 1963:
The Government Pleader argued that the assessee did not obtain the declaration forms from McDowell & Co. Ltd., Shertallai, to evidence the payment of tax, and therefore the exemption should not be allowed. The court referred to the decision in State of Orissa v. M.A. Tulloch & Co., Ltd., which held that such rules are directory and not mandatory. Additionally, this point was not raised by the authorities during the initial hearings. Therefore, the court overruled this contention.

Conclusion:
The court found no reason to differ from the conclusion that the turnover in respect of sales of the two brands of beer received by the assessee from the United Breweries Ltd., Bangalore, was not liable to sales tax. The appeal was dismissed without any order as to costs.

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