1983 (3) TMI 239 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax laws regarding the nature of transaction involving stone metal (gitti) between the assessee and a registered dealer, Govindram Hanuman Prasad.

Analysis:
The case involved a dispute regarding the nature of a transaction between the assessee, M/s. Radhakishan Agrawal, and a registered dealer, Govindram Hanuman Prasad, concerning the supply of stone metal (gitti). The Sales Tax Officer assessed the turnover of the assessee, which led to a contention that the stone metal was purchased from Govindram Hanuman Prasad. However, the assessing authority disallowed the deduction claimed by the assessee, asserting that the transaction was not a purchase but a grant of the right to quarry the stone metal on payment of royalty. The appellate authority and the Board of Revenue upheld this decision, prompting the assessee to seek a reference under section 44 of the Madhya Pradesh General Sales Tax Act. The question referred to the High Court was whether the transaction constituted a sale of stone metal or a payment of royalty.

Upon hearing arguments from both parties, the High Court concluded in favor of the assessee. The Court noted that the assessee had obtained the stone metal from Govindram Hanuman Prasad by paying a specific amount. The Tribunal's reasoning, which suggested that the payment was royalty and not a sale, was deemed legally untenable. The Court highlighted that the property in the goods passed from the dealer to the assessee for consideration, indicating a transaction of sale. Additionally, the Court emphasized that if the assessee had indeed purchased the stone metal from the registered dealer, the price paid should be excluded from the taxable turnover as per the relevant section of the Act.

In light of the facts and circumstances of the case, the High Court held that the Tribunal's decision was unjustified. The Court determined that the transaction between Govindram Hanuman Prasad and the assessee constituted a sale of stone metal (gitti), and the amount paid was the price of the goods, not a royalty. Consequently, the Court answered the referred question in the negative, favoring the assessee. The parties were directed to bear their respective costs related to the reference.