1971 (10) TMI 99 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of sales tax on inter-State sales of tax-paid goods under the Central Sales Tax Act.
2. Exemption from sales tax on pulses, cereals, and rice under a specific notification.
3. Legality of penalty imposition under section 43(1) of the M.P. General Sales Tax Act.

Detailed Analysis:

1. Liability of Sales Tax on Inter-State Sales of Tax-Paid Goods under the Central Sales Tax Act:
The primary issue was whether the assessee's sale of bandana worth Rs. 36,348 in the course of inter-State trade was liable to sales tax under the Central Sales Tax Act, even though State tax had already been paid on these goods under the M.P. General Sales Tax Act, 1958. The assessee contended that since the bandana was already taxed at the first point of sale within the State, it should not be taxed again on inter-State sales. The assessee relied on the Supreme Court's decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons, which held that no Central sales tax was payable if the goods were exempt from State tax.

However, the court noted that the Central Sales Tax Act was amended in 1969, adding section 6(1A), which clarified that a dealer is liable to pay tax on inter-State sales regardless of whether the goods were exempt from State tax if sold within the State. The amendment aimed to nullify the Supreme Court's earlier decision. The court cited the Supreme Court's ruling in State of Kerala v. Joseph and Co., which upheld the amendment and confirmed that tax is leviable under the Central Sales Tax Act even if no tax would be levied under the State law for intra-State sales. Consequently, the court concluded that the bandana sales worth Rs. 36,348 were liable to sales tax under the Central Sales Tax Act.

2. Exemption from Sales Tax on Pulses, Cereals, and Rice under a Specific Notification:
The second issue was whether the sales of pulses, cereals, and rice were exempt from sales tax under Notification No. 1069-VIST dated 22nd April, 1963. The Board of Revenue had held that the notification only exempted the sale of husks of these items, not the items themselves. The court agreed with the Board's interpretation, stating that the notification did not provide a general exemption for pulses, cereals, and rice, but only for their husks. Therefore, the assessee's contention that sales of pulses were exempt from tax was rejected.

3. Legality of Penalty Imposition under Section 43(1) of the M.P. General Sales Tax Act:
The third issue was the legality of the penalty imposed under section 43(1) of the M.P. General Sales Tax Act. The assessee argued that the penalty was unwarranted as the returns were based on the belief that pulses were exempt from tax. However, the Board of Revenue found that the assessee had deliberately avoided paying tax on pulses, indicating mens rea. The court upheld the Board's decision, stating that the penalty was nominal and justified given the assessee's clear avoidance of tax.

Additional Considerations:
The court also addressed a procedural matter regarding the assessee's request to produce 'C' form certificates, which was denied. The court clarified that in its advisory jurisdiction, it could only answer the referred question and not issue directives. The assessee was advised to move the Board of Revenue for such a request.

Conclusion:
The court concluded that:
1. The bandana sales worth Rs. 36,348 were liable to sales tax under the Central Sales Tax Act.
2. The sales of pulses, cereals, and rice were not exempt from tax under the specific notification.
3. The penalty imposed under section 43(1) was legal and justified.

The reference was answered accordingly, with each party bearing its own costs.

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