1970 (12) TMI 68 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the transaction is a sale of goods and subject to sales tax.
2. Whether sales tax is payable under the terms of the lease deed dated 4th August, 1956.
3. Whether the State Government or the forest department is a dealer under the M.P. General Sales Tax Act, 1958.
4. Whether sales tax is recoverable as arrears of land revenue.

Issue-wise Detailed Analysis:

1. Whether the transaction is a sale of goods and subject to sales tax:
The court examined whether the extraction of bamboos and salai wood constituted a sale of goods. It referenced several Supreme Court cases, including *Firm Chhotabhai Jethabhai Patel and Co. and Others v. The State of Madhya Pradesh* and *Ananda Behera and Another v. State of Orissa and Another*, to determine the nature of the rights granted under the lease. The court noted that the lease allowed the petitioner to enter the land, fell, cut, and extract bamboos and salai wood, and to make periodical payments based on the quantity extracted. The court concluded that the transaction was in essence a sale of goods, as the trees were to be severed before sale or under the contract of sale, thus falling within the definition of "goods" under the Sale of Goods Act, 1930.

2. Whether sales tax is payable under the terms of the lease deed dated 4th August, 1956:
The court acknowledged that the lease deed did not explicitly require the petitioner to pay sales tax. However, it noted that the Madhya Pradesh General Sales Tax Act, 1958, which came into force after the lease was granted, included standing timber agreed to be severed before sale within the definition of "goods". The court also referenced Section 64A of the Sale of Goods Act, 1930, which allows sellers to recover newly imposed taxes from buyers unless a different intention appears from the contract. Therefore, the court held that the sales tax could be justified under Section 64A.

3. Whether the State Government or the forest department is a dealer under the M.P. General Sales Tax Act, 1958:
The court examined whether the State Government or the forest department could be considered a dealer under Section 2(d) of the M.P. General Sales Tax Act, 1958. It referenced several cases, including *Raja Visheshwar v. The Province of Bihar* and *Ramkrishna Deo v. The Collector of Sales Tax, Orissa*, which held that merely selling forest produce grown on its land does not constitute carrying on a business. The court concluded that the State Government or the forest department could not be regarded as a dealer merely by selling forest produce, as there was no element of carrying on a business with a profit motive.

4. Whether sales tax is recoverable as arrears of land revenue:
The court considered whether the sales tax could be recovered as arrears of land revenue, particularly when the revenue recovery certificate was issued by the Divisional Forest Officer. It noted that Section 82 of the Indian Forest Act, 1927, allows forest officers to recover the sale price of forest produce as an arrear of land revenue. However, since the court had already determined that the State Government or the forest department was not a dealer and no sales tax was payable, it held that neither Section 64A of the Sale of Goods Act, 1930, nor Section 82 of the Indian Forest Act, 1927, could be invoked to recover the sales tax.

Conclusion:
The petition was allowed, and the communications dated 2nd September, 1968, and 9th September, 1968, along with the notice of demand dated 19th September, 1968, were quashed. The respondents were directed to desist from recovering the amount as sales tax from the petitioner. The respondents were also ordered to bear their own costs and pay the petitioner's costs, with a hearing fee of Rs. 100.

← Previous Next →