1974 (5) TMI 107 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of Central sales tax on turnover in cotton.
2. Interpretation of section 10 of the Central Sales Tax (Amendment) Act, 1969.
3. Requirement to establish collection of sales tax separately in account books.

Analysis:
The petitioner, a dealer in cotton with inter-State trade, was assessed for Central sales tax for the years ending Deepavali 1965 to 1967. Initially exempted under section 9 of the Central Sales Tax Act and a Supreme Court decision, the amendment in 1969 made the turnover in cotton subject to tax. However, section 10 of the amending Act provided an exemption for turnover between 1964 to 1969 if tax was not collected from purchasers. The assessing authority later found the petitioner liable for tax and initiated rectification proceedings.

The petitioner contended, citing Spencer & Co. Ltd. v. State of Mysore, that they had not collected Central sales tax. The Division Bench decision in Spencer & Co. Ltd. case emphasized the need to establish two facts: buyer's agreement to pay sales tax and separate disclosure in account books. Despite bill writings indicating tax inclusion, the absence of separate disclosure in account books favored the petitioner under section 10(1) of the amending Act. As per Spencer & Co. Ltd. case, lack of evidence in account books supported the petitioner's claim for exemption under section 10(1) of the amending Act.

The judgment allowed the petitions, quashing the orders demanding Central sales tax payment for the turnover in cotton for the specified years. The court found in favor of the petitioner due to the absence of evidence showing tax amounts collected separately in their account books, in line with the interpretation of the Division Bench decision. The petitioner's compliance with the requirements set out in the Spencer & Co. Ltd. case led to the orders being set aside, granting relief to the petitioner.