1971 (8) TMI 219 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner, an incorporated company under the Companies Act, is liable to pay sales tax on alleged sales made to another party as directed by the Import Controller.
2. Whether the transactions between the petitioner and the other party can be characterized as sales attracting the Sales Tax Act.
3. Whether the petitioner can be considered a dealer for the purpose of sales tax liability based on the transactions in question.

Analysis:
The petitioner, an incorporated company, imported raw stock of films under the Export Promotion Scheme and obtained licenses for the same. The Import Controller imposed restrictions, including that the release of imported stock to a third party required authorization. Subsequently, a part of the imported stock was re-allotted to another party on a no-profit-no-loss basis. The respondent issued a notice to the petitioner regarding alleged sales made to the other party, subjecting them to sales tax assessment. The petitioner sought a writ of certiorari to quash the order, contending that the transactions were not sales attracting sales tax liability.

In a similar precedent, the Supreme Court held that transactions made under specific directives, not resulting from a contract of sale, do not constitute sales liable to sales tax. The High Court also previously ruled in a comparable case that such transactions do not make the party a dealer for sales tax purposes. In the present case, the imports were subject to restrictions and surplus stock was released at the Import Controller's direction, indicating a lack of essential elements of a sale. The court opined that the petitioner cannot be deemed a dealer as specific incidents and aspects defining a dealer were not met in this scenario.

The court acknowledged the petitioner's proactive approach in seeking legal remedy due to apprehensions but ruled in favor of the petitioner. It held that since the petitioner was not a dealer and the transactions did not constitute sales, the notice demanding sales tax assessment was unwarranted. Consequently, the court allowed the writ petition, making the rule nisi absolute and granting no costs. The judgment concluded that the relief sought by the petitioner was justified, and no further proceedings based on the challenged notice were legally justified.