1987 (6) TMI 379 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on goods returned by purchasers without taking delivery, interpretation of the Kerala General Sales Tax Act, applicability of rule 9(b)(ii) of the Kerala General Sales Tax Rules, determination of point of sale under the Act, appropriation of goods, definition of "sale" under section 2(xxi) of the Act, impact of invoice conditions on sale transaction, justification of levy of sales tax.

Analysis:
The petitioner, an assessee under the Kerala General Sales Tax Act, was assessed for the assessment year 1977-78 concerning the value of goods returned by purchasers without taking delivery. The assessing authority added this turnover to the petitioner's assessment, deeming it as sales subject to sales tax under the Act. However, the Deputy Commissioner (Appeals) overturned this decision, stating that the sales were not complete for the returned goods. The Revenue then appealed to the Sales Tax Appellate Tribunal, which held that rule 9(b)(ii) of the Kerala General Sales Tax Rules did not apply and rejected the assessee's argument that the sales were unfulfilled. The Tribunal determined that the point of sale occurred when the goods were dispatched, implying acceptance of contract and sale by the assessee, despite conditions in the invoice allowing the assessee to recall goods or retain property rights until payment. The Tribunal's decision was based on the belief that the conditions in the invoice conflicted with the Act's provisions on the point of sale.

During the hearing, the Revenue's counsel emphasized section 2(xxi) of the Act, stating that the sale of goods is deemed to occur at the time of the sale contract, which, in this case, happened when the goods were dispatched to purchasers. The assessee's counsel, however, highlighted the invoice condition retaining property rights until payment, arguing that no sale took place due to lack of appropriation. The Court examined the definitions in section 2(xxi) and its explanation (4), finding that the invoice condition contradicted any immediate appropriation of goods. The Court agreed with the assessee, noting that the unfulfilled condition meant no sale occurred for tax purposes, contrary to the Tribunal's ruling. The Deputy Commissioner's decision was upheld, and the Tribunal's reasoning on the appropriation of goods for sales tax levy was deemed incorrect.

In conclusion, the Court reversed the Appellate Tribunal's decision, allowing the tax revision case in favor of the assessee. The Court held that the unfulfilled sale condition precluded the imposition of sales tax on the returned goods, as there was no valid sale under the Act.