1987 (8) TMI 430 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability to pay sales tax on the turnover of forest produce sold by the petitioner.
2. Interpretation of the nature of the contract and tax liability on forest produce.
3. Application of the exemption under section 2(r)(ii) of the Act.
4. Comparison with previous judgments regarding tax liability on forest produce.

Analysis:
The petitioner, a registered dealer under the M.P. General Sales Tax Act, entered into a contract with the forest department for the sale of minor forest produce, specifically shikakai and baibidang. The Sales Tax Officer assessed the petitioner for sales tax on the turnover from the sale of these goods, despite the petitioner's claim that sales tax had already been paid to the Divisional Forest Officer at the time of purchase. The key issue was whether the forest produce constituted tax-paid goods in the hands of the petitioner, thus exempting him from further sales tax liability.

The Court analyzed the terms of the contract and the payment of sales tax by the Divisional Forest Officer, establishing that sales tax had indeed been paid on the sale price of shikakai and baibidang when sold to the petitioner. The Court referred to the contract conditions, which included provisions for the payment of sales tax by the forest department, supporting the petitioner's argument that the goods were tax-paid at the time of purchase. This interpretation was crucial in determining the petitioner's liability for sales tax on the subsequent sale of the forest produce.

Furthermore, the Court distinguished the present case from a previous judgment involving the collection of gum from forest trees, emphasizing that shikakai and baibidang were minor forest produce by themselves and did not require any additional operation for their collection. The Court also cited a similar case involving the purchase of chironji from the forest department, where it was held that goods sold under such contracts were tax-paid in the hands of the contractor. This comparison strengthened the petitioner's position regarding the tax liability on the forest produce sold by him.

Ultimately, the Court held that the Sales Tax Officer erred in assessing sales tax on the turnover of shikakai and baibidang, as they were tax-paid goods in the hands of the petitioner at the time of sale. The Court allowed the writ petition, quashed the assessment order, and directed the refund of the outstanding security amount to the petitioner. This judgment clarified the tax liability on forest produce sold under specific contracts and reaffirmed the principle of single point taxation at the time of the first sale.