1981 (1) TMI 238 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sale of oilcakes to dealers outside Madhya Pradesh were sales of unascertained or future goods under section 4(2)(b) of the Central Act.
2. Whether the subsequent sales of oilcakes fall under section 3(b) of the Central Act and if the State of Madhya Pradesh was competent to levy tax despite no C form being obtained.
3. Whether the penalty imposed on the applicant under section 43(1) of the State Act read with section 9(2) of the Central Act was proper and legal.

Issue-wise Detailed Analysis:

Issue 1:
The first issue concerns whether the sale of oilcakes to dealers in Maharashtra and Madras were sales of unascertained or future goods under section 4(2)(b) of the Central Act. The assessee argued that the sales were conditional, finalized only after the goods were analyzed at the destination, thus making the sale complete outside Madhya Pradesh. However, the Court found that the sales were effected by transfer of documents of title during the movement of goods from Rajasthan and Uttar Pradesh to Maharashtra and Madras, making them inter-State sales under section 3(b) of the Central Act. The goods were not unascertained, and the sale was conditional, but the property in the goods passed to the buyer at once. Therefore, the sale was deemed to take place in the course of inter-State trade and commerce, and section 4 was not applicable. The Court answered this question in the negative and against the assessee.

Issue 2:
The second issue examined whether the subsequent sales of oilcakes fell under section 3(b) of the Central Act and whether the State of Madhya Pradesh could levy tax despite no C form being obtained. The Court noted that the sales were covered by section 3(b) as they were effected by transfer of documents of title during movement. Under section 9(1), tax on such sales should be collected by the State from which the movement commenced (Rajasthan or Uttar Pradesh). The proviso to section 9(1) allows for tax collection by the State where the dealer effecting the subsequent sale could have obtained the prescribed form (C form). The assessee argued that since no tax was leviable on oilcakes in Rajasthan and Uttar Pradesh, obtaining a C form was unnecessary. The Court agreed, stating that the purpose of obtaining a C form is to have sales taxed at a concessional rate, which was irrelevant here. Therefore, the proviso to section 9(1) was not attracted, and Madhya Pradesh was not competent to levy tax. The Court answered this question in the negative and against the department.

Issue 3:
The third issue addressed the legality of the penalty imposed on the assessee under section 43(1) of the State Act read with section 9(2) of the Central Act. The assessee did not include the sales in question in the return, believing Madhya Pradesh was not competent to tax them. The Court referenced the Supreme Court's decision in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, which held that filing an inaccurate return without a guilty mind does not justify penalty imposition. Thus, the penalty was not justified. The Court answered this question in the negative and against the department.

Conclusion:
The reference was answered accordingly, with each issue resolved against the department. The parties were ordered to bear their own costs.