1980 (12) TMI 160 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability for sales tax on the estimated value of gunny bags used for packing sugar.
2. Liability for sales tax on the sale of one truck, one jeep, and one car during the accounting period 1964-65 and one truck during the accounting period 1966-67.

Detailed Analysis:

1. Liability for Sales Tax on Gunny Bags:

The court examined whether the assessee was liable for sales tax on the estimated value of gunny bags used for packing sugar. The key points considered were:

- Absence of Express or Implied Contract: The Tribunal noted that there was no evidence of an express or implied contract to sell the gunny bags along with the sugar. The assessing authority's observation that the assessee did not object to the inclusion of gunny bags in taxable goods was disputed by the assessee.

- Control Order Compliance: The price of sugar was controlled under the Sugar Control Order, 1955, which mandated that sugar be sold in specific jute bags. The assessee charged the price fixed by the Control Order, which included the cost of packing material but did not separately charge for the gunny bags.

- Supreme Court Precedents: The court referenced the Supreme Court's ruling in Hyderabad Deccan Cigarette Factory v. State of A.P. and Commissioner of Taxes v. Prabhat Marketing Co. Ltd., which emphasized that the burden of proof for implied sale lies on the department. The court concluded that the facts did not support an implied sale of gunny bags, as the packing material was used as a convenient mode of transporting the sugar.

- Comparative Case Law: The court also considered decisions from other cases, such as Burhwal Sugar Mills Co. Ltd. v. Sales Tax Officer, where it was held that there was no implied sale of gunny bags when sugar was sold in them.

Based on these considerations, the court held that the assessee was not liable for sales tax on the estimated value of gunny bags used for packing sugar.

2. Liability for Sales Tax on Sale of Vehicles:

The second issue was whether the sales of one truck, one jeep, and one car during the accounting period 1964-65 and one truck during the accounting period 1966-67 were liable for sales tax. The key points considered were:

- Connection to Main Business: The Tribunal differentiated between the sales of trucks and the sales of the car and jeep. It was held that the trucks were used for the transportation of raw materials and products, making their sale ancillary to the main business of manufacturing and selling sugar. In contrast, the sales of the car and jeep were not connected to the main business.

- Expanded Definition of Business: The court referred to the amended definition of "business" under section 2(bb) of the Madhya Pradesh General Sales Tax Act, 1958, which includes activities incidental or ancillary to the main business. Citing the Supreme Court rulings in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India and District Controller of Stores v. Assistant Commercial Taxation Officer, the court concluded that the sales of vehicles purchased for business purposes were incidental to the business and thus taxable.

Based on these considerations, the court held that the assessee was liable to pay sales tax on the sales of the trucks, jeep, and car.

Conclusion:

The court answered the questions as follows:
1. The assessee was not liable for sales tax in respect of the estimated value of gunny bags used as packing material of sugar sold by it.
2. The assessee was liable to pay sales tax on the sales of trucks, jeep, and car.

There was no order as to costs, and the reference was answered accordingly.