1990 (8) TMI 351 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sale of machinery by the assessee, under attachment by the court for debt satisfaction, is subject to sales tax?
2. Whether the sale of machinery was in the course of business or a casual sale?
3. Whether the sale was taxable even if it was compulsory and not exempt from tax?

Analysis:

1. The assessee, engaged in the business of manufacturing exercise-books, faced losses and took a loan from the Maharashtra State Financial Corporation. The creditor filed a suit for loan recovery, leading to the attachment of machinery. The assessee sought permission to sell the attached property privately to settle the debt. The Tribunal upheld the levy of sales tax on the sale, prompting the assessee to apply for reference to the High Court under the Bombay Sales Tax Act, 1959.

2. The Tribunal deemed the sale as a clear-cut "sale" under the Act, not a distress sale, despite court permission being required. The court emphasized that the lack of choice in selling and court involvement did not alter the legal position. The Tribunal's decision was based on the definition of "business" under the Act, which includes transactions incidental to trade or commerce. The sale was considered part of the business, as confirmed by the Tribunal's detailed order.

3. The crucial issue was whether the sale was casual and not part of the business. The Act's definition of "business" encompassed transactions related to trade or manufacture. The Tribunal's detailed order and rejection of the reference application affirmed that the sale, even if compulsory, fell within the course of business and was taxable. Consequently, the High Court dismissed the application, finding no grounds for interference and no costs were awarded.

In conclusion, the High Court upheld the Tribunal's decision that the sale of machinery by the assessee, attached by the court for debt recovery, was subject to sales tax as it constituted a sale in the course of business. The court clarified that the compulsory nature of the sale did not exempt it from taxation, emphasizing the broad definition of business transactions under the Act.