1969 (9) TMI 101 - HC - VAT and Sales Tax

Summary

Issues:
- Whether sales tax can be imposed on the sales of coal ash and cinders in the year 1961 and of coal ash and empty drums in the year 1962 by M/s. Perfect Pottery Company Ltd., Ratlam.
- Whether the sales of coal ash and cinders and of empty drums were liable to tax based on the volume, frequency, continuity, and regularity of sales.

Analysis:
The High Court of Madhya Pradesh was tasked with determining whether sales tax could be imposed on the sales of coal ash, cinders, and empty drums by M/s. Perfect Pottery Company Ltd., Ratlam in the years 1961 and 1962. The Sales Tax Tribunal had initially held that these sales were not liable to sales tax as they were not part of the company's business activity but were merely to dispose of waste products or unserviceable stocks. However, the High Court analyzed the volume, frequency, continuity, and regularity of these sales to infer the company's intention to earn profits from these transactions. The court emphasized that the sales were not isolated incidents but were made regularly in the course of the company's usual business activity, contributing to its commercial profits.

Moreover, the court referred to a similar case where the Supreme Court had held that when subsidiary products are produced regularly and sold from time to time, an intention to carry on business in those items could be attributed to the company. The court highlighted that sales of coal ash, when regularly and continuously produced as a subsidiary product, were liable to be assessed for sales tax. Based on this precedent and the analysis of the sales activities of M/s. Perfect Pottery Company Ltd., the High Court concluded that the sales of coal ash, cinders, and empty drums were indeed subject to sales tax. The court answered the reference in the affirmative, ruling in favor of the Commissioner of Sales Tax and awarding costs to the Commissioner.