1979 (1) TMI 215 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the contract: Whether it was a sale of bamboos.
2. Classification of sales: Whether the sales were inter-State or intra-State.
3. Status of the State as a dealer under the Central Sales Tax Act.
4. Liability to pay sales tax under the Madhya Pradesh General Sales Tax Act and the Central Sales Tax Act.

Detailed Analysis:

1. Nature of the Contract:
The primary issue was whether the contract dated 8th May, 1968, constituted a sale of bamboos by the appellant-State to the respondent. The Supreme Court's decision in State of M.P. v. Orient Paper Mills [1977] 40 S.T.C. 603 (S.C.) concluded that a similar contract resulted in the sale of bamboos. The court found no substantial difference between the contracts in the present case and the Orient Paper Mills case, thus affirming the trial court's finding that the contract was indeed a sale of bamboos.

2. Classification of Sales:
The next issue was whether the sales of bamboos were inter-State sales or intra-State sales. The contract stipulated that the bamboos extracted were to be used exclusively at the respondent's paper mills in Raniganj, West Bengal. This requirement created a direct nexus between the movement of goods from Madhya Pradesh to West Bengal and the sale, making the sales inter-State under Section 3(a) of the Central Sales Tax Act. The court cited several Supreme Court cases, including Tata Iron and Steel Company Limited v. Sarkar [1960] 11 S.T.C. 655 (S.C.) and State of Bihar v. Tata Engineering and Locomotive Company [1971] 27 S.T.C. 127 (S.C.), to support this conclusion.

3. Status of the State as a Dealer:
The court then considered whether the appellant-State was a "dealer" under Section 2(b) of the Central Sales Tax Act. At the relevant time, the definition of "dealer" did not include the State Government unless it carried on the business of buying or selling goods. The court referenced Orient Paper Mills Ltd. v. State of M.P. [1971] 28 S.T.C. 532 and Board of Revenue v. Ansari [1976] 38 S.T.C. 577 (S.C.), which held that the government did not carry on business by selling forest produce annually. Consequently, the State of Madhya Pradesh was not considered a dealer under the Central Sales Tax Act at that time.

4. Liability to Pay Sales Tax:
Given that the appellant-State was not a dealer under the Central Sales Tax Act and the sales were inter-State, no sales tax was payable under this Act. Although the State was a dealer under the Madhya Pradesh General Sales Tax Act, inter-State sales could not be taxed under this Act. Therefore, no sales tax was payable on the sales arising under the contract. The respondent had paid the sales tax under a mistaken belief that it was lawfully payable, leading to the conclusion that the appeal must fail.

Conclusion:
The appeal was dismissed with costs, affirming that the contract resulted in the sale of bamboos, the sales were inter-State, the appellant-State was not a dealer under the Central Sales Tax Act, and no sales tax was payable under either the Central or Madhya Pradesh General Sales Tax Acts.