1976 (1) TMI 165 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the order dated 4th May, 1968, under section 17 of the Bengal Finance (Sales Tax) Act, 1941.
2. Validity of the notice of assessment dated 17th June, 1969, under the Bengal Finance (Sales Tax) Act, 1941.

Detailed Analysis:

1. Validity of the Order Dated 4th May, 1968:
The petitioners challenged the order passed under section 17 of the Bengal Finance (Sales Tax) Act, 1941, which was issued on 4th May, 1968. The petitioners argued that an agreement dated 31st October, 1967, transferred their business in Bhagran Colliery to respondents Nos. 3 and 4, making them liable under the Act. Section 17 stipulates that the transferee shall be deemed the owner of the business if the ownership is transferred absolutely by sale, gift, bequest, inheritance, or otherwise.

The court examined whether the agreement constituted an absolute transfer of ownership. The agreement described the petitioners and their predecessors as principals and respondents Nos. 3 and 4 as managing contractors. Clause 39 of the agreement explicitly stated that no interest in coal land or colliery was transferred to the managing contractor, who was merely authorized to manage the colliery on behalf of the principals.

The Commercial Tax Officer concluded that no ownership interest was transferred, a finding the court upheld, stating, "the ownership of the business was not transferred by the aforesaid document." The court found no error of law in the impugned order and dismissed the challenge, noting that even if there had been a transfer, the transferor might still remain liable, referencing the case of Kshitish Chandra Sarbajna v. State of West Bengal.

2. Validity of the Notice of Assessment Dated 17th June, 1969:
The petitioners also contested a notice dated 17th June, 1969, which required them to produce evidence for assessment under the Bengal Finance (Sales Tax) Act, 1941. They argued that under the Colliery Control Order, 1945, there was no contract of sale, and thus, section 2(g) of the Act could not apply to their transactions. Clause 12E of the Colliery Control Order, 1945, mandates that coal can only be acquired or dispatched under the authority of the Central Government.

The court examined whether transactions under such Control Orders could be considered sales liable to sales tax. The definition of a sale under section 2(g) involves a transfer of property in goods for valuable consideration. The court referenced several cases, including North Adjai Coal Co. (P.) Ltd. v. Commercial Tax Officer and New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar, which dealt with similar issues under different Control Orders. These cases established that transactions under statutory directions might not constitute sales if they lacked mutual assent and volition.

However, the court also noted that not all transactions under Control Orders are excluded from being sales. The Supreme Court in State of Rajasthan v. Karam Chand Thappar and Brothers (Coal Sales) Ltd. and Salar Jung Sugar Mills Ltd. v. State of Mysore observed that regulated transactions could still be sales if mutual consent and contractual elements were present.

In this case, the court found that the nature of the directions from the Coal Commissioner and the specific transactions needed to be examined to determine if they constituted sales under section 2(g). Thus, it was premature to conclude that the petitioners' transactions were not sales and not liable to sales tax. The court dismissed the challenge to the notice, stating that the assessing authority must evaluate each transaction in light of the directions issued under the Colliery Control Order.

Conclusion:
The application was dismissed, and the rule nisi was discharged. The court found no error in the impugned order dated 4th May, 1968, and deemed the challenge to the notice dated 17th June, 1969, premature, requiring further examination of the transactions in question. There was no order as to costs.

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