1983 (12) TMI 265 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of sales tax on the turnover of a used car sold by a textile manufacturer.
2. Whether the sale of a used car can be considered a second sale and exempt from taxation.
3. Determining if the first sale of the car was a taxable sale by a dealer.

Analysis:
1. The petitioner, a textile manufacturer, was assessed for sales tax on the turnover from the sale of a Benz Car. The assessing authority held that even though the petitioner is not a car dealer, the sale was incidental to his business and thus taxable. The petitioner contended that being a second sale in the state, it should not be taxed. The Appellate Assistant Commissioner and the Tribunal both upheld the tax assessment. The petitioner appealed to the High Court challenging the decision.

2. The petitioner argued that based on precedents like State of Tamil Nadu v. Chamundeswari Enterprises, the sale should be exempt as a second sale. However, the Government Pleader contended that the earlier sale was not taxable, citing Govindan & Co. v. State of Tamil Nadu. The Court noted that the first sale must be a taxable one for subsequent sales to be exempt. In this case, the petitioner failed to establish whether the first sale by Hukami Chand was taxable or not. The Court emphasized the need to determine if Hukami Chand was a dealer as defined in the Act to ascertain the tax liability.

3. The Court highlighted that the purpose of exempting second sales is to tax the first sale in a series of transactions. Without confirming the taxability of the initial sale by Hukami Chand, granting an exemption to the petitioner's sale would defeat the Act's objective. As none of the authorities investigated Hukami Chand's dealer status, the Court remitted the matter to the Tribunal for a detailed inquiry. The Court emphasized the importance of establishing whether the first sale was taxable to determine the petitioner's tax liability accurately.