1979 (5) TMI 139 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the consignment valued at Rs. 3,98,933 to other States constituted sales effected by the applicant to dealers in other States.
2. Whether the relationship between the Union Carbide (India) Ltd. and the applicant was one of vendor and vendee or the relationship was one of principal and agent.
3. Whether the applicant was entitled to deduct from the aggregate of the sale prices certain amounts as provided for under the new amended section 8A of the Central Sales Tax Act, 1956, which came into force in August 1969, with retrospective effect.

Detailed Analysis:

Issue 1: Whether the consignment valued at Rs. 3,98,933 to other States constituted sales effected by the applicant to dealers in other States.

The Commercial Tax Officer initially found that the transactions represented inter-State sales within the meaning of section 3(b) of the Central Sales Tax Act, 1956, and were thus exigible to sales tax. The Assistant Commissioner of Commercial Taxes upheld this view, noting that the bills drawn by the dealer on the purchasers outside the State were ordinary sale bills, not bills for reimbursement, and thus constituted evidence of sales effected by the dealer. The Additional Commissioner of Commercial Taxes, upon further enquiry, found that the dealer made payments against railway receipts endorsed by Union Carbide (India) Ltd., and saw no reason to differ from the Assistant Commissioner's decision.

However, the High Court concluded that the dealer did not enter into any contract for the sale of goods with the customers outside the State, either expressly or by implication. The transactions were finalised by Union Carbide (India) Ltd., which consigned the goods and issued invoices directly to the customers. The dealer acted merely as a guarantor and/or del credere agent, advancing the price of the goods to Union Carbide (India) Ltd. and obtaining reimbursement from the customers. Therefore, the dealer did not effect sales to the customers outside the State.

Issue 2: Whether the relationship between the Union Carbide (India) Ltd. and the applicant was one of vendor and vendee or the relationship was one of principal and agent.

The dealer contended that it acted only as a guarantor for payment of goods sold by Union Carbide (India) Ltd. The Commercial Tax Officer and the Assistant Commissioner of Commercial Taxes rejected this contention, concluding that the dealer was not a mere guarantor but a party to inter-State sales.

The High Court, however, found that there was no sale by Union Carbide (India) Ltd. to the dealer, nor by the dealer to the customers outside the State. The dealer functioned as a distributor and guarantor for Union Carbide (India) Ltd., advancing payments and securing reimbursement. The court concluded that the relationship between Union Carbide (India) Ltd. and the dealer was not one of vendor and vendee.

Issue 3: Whether the applicant was entitled to deduct from the aggregate of the sale prices certain amounts as provided for under the new amended section 8A of the Central Sales Tax Act, 1956, which came into force in August 1969, with retrospective effect.

The dealer claimed relief under section 8A of the Central Sales Tax Act, 1956, which was given retrospective effect. The Additional Member, Board of Revenue, held that the assessment had been finalised long before the amendment, and the taxing authority was not bound to allow such deduction.

The High Court, however, held that the dealer was entitled to claim relief under section 8A of the Central Sales Tax Act, 1956, as the assessment could not be considered final while a revision was pending. Therefore, the dealer was entitled to such relief as of right in law.

Conclusion:
The High Court answered the referred questions as follows:
1. The consignment valued at Rs. 3,98,933 did not constitute sales effected by the applicant to dealers in other States.
2. The relationship between Union Carbide (India) Ltd. and the applicant was not one of vendor and vendee.
3. The applicant was entitled to deductions as provided for under the new amended section 8A of the Central Sales Tax Act, 1956.

The reference was disposed of accordingly, with no order as to costs.

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