1969 (11) TMI 78 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the sales by the petitioners to Messrs E.I.D. Parry Limited were second sales.
2. Whether the petitioners discharged their burden of proof under section 10 of the Madras General Sales Tax Act.
3. The interpretation of the contract between the petitioners and Messrs E.I.D. Parry Limited.
4. The validity of the first sale of varnish.
5. The coordination and consistency among the assessing authorities and Tribunals.

Issue-wise Detailed Analysis:

1. Whether the sales by the petitioners to Messrs E.I.D. Parry Limited were second sales:
The petitioners claimed a concession over a turnover of Rs. 1,52,999.95, representing their second sales of varnish, which were already subject to tax under the Madras General Sales Tax Act in the hands of Messrs E.I.D. Parry Limited. The assessing authority, however, required proof that these were indeed second sales. The court concluded that the transactions between the petitioners and the company were indeed sales, satisfying the essential requirements of a sale as defined in section 2(h) of the Act. The company sold varnish as a finished product to the petitioners, and the goods were subject to a first sale in the hands of the company.

2. Whether the petitioners discharged their burden of proof under section 10 of the Madras General Sales Tax Act:
The assessing authority and the Tribunal held that the petitioners did not discharge their burden of proof under section 10 of the Act to establish that the sales were second sales. However, the court found that the petitioners provided sufficient evidence, including invoices and statements from the company, proving that the transactions were indeed sales of varnish. The court emphasized that the entire course of conduct between the petitioners and the company should be considered, not just isolated terms from the contract.

3. The interpretation of the contract between the petitioners and Messrs E.I.D. Parry Limited:
The Tribunal interpreted the contract as merely a supply of a finished product with materials provided by the petitioners, not a sale. The court disagreed, stating that the contract and the conduct of the parties indicated a sale. The contract provided for the transfer of property in the goods for valuable consideration, satisfying the definition of a sale. The court noted that the word "purchase" and the terms of payment in the contract should not be taken out of context.

4. The validity of the first sale of varnish:
The revenue argued that the first sale was invalid because the price of shellac and rosin was not included in the invoices, meaning the tax paid was not the total tax payable. The court held that the non-inclusion of certain values in the turnover does not affect the nature of the transaction. The Supreme Court's precedent in Chandra Bhan Gosain v. State of Orissa was cited, where the transfer of property in goods for consideration was deemed a sale, even if the contract did not use the word "sale."

5. The coordination and consistency among the assessing authorities and Tribunals:
The court expressed displeasure at the lack of coordination and consistency among the assessing authorities and Tribunals. Different Tribunals reached conflicting conclusions about whether the sales were first or second sales. The court noted that the assessing authority ignored the findings of the Tribunal, which led to confusion and inconsistency in the assessment process.

Conclusion:
The court set aside the order of the Tribunal, holding that the sales in question were second sales, and the petitioners were entitled to the statutory concession. The tax case was allowed with costs, and the petitioners were granted the relief sought. The judgment emphasized the importance of considering the entire course of conduct and the context of the contract terms in determining the nature of the transactions.

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