1990 (4) TMI 265 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of the disputed turnover as "sales returns" or "unfructified sales."
2. Compliance with the time-limit for claiming tax refunds under Section 13(5) of the Tamil Nadu General Sales Tax Act, 1959, read with Rule 5-B.
3. Applicability of previous judgments and legal principles to the disputed transactions.
4. Double taxation on the same goods due to unfructified sales.

Issue-wise Detailed Analysis:

1. Classification of the Disputed Turnover:
The primary issue was whether the disputed turnover should be classified as "sales returns" or "unfructified sales." The appellant argued that the transactions in question were "unfructified sales" because the goods were returned by customers who did not retire the invoices from the bank, resulting in no completed sale or transfer of property in goods. This argument was supported by the modus operandi of the transactions, where invoices were raised, but the goods were returned if the customer failed to retire the documents. The Board of Revenue, however, considered these as "sales returns," relying on the judgment in State of Tamil Nadu v. Bombay Metal Depot, which held that once goods were consigned and invoices raised, the transaction amounted to a completed sale, even if the goods were later rejected.

2. Compliance with the Time-limit for Claiming Tax Refunds:
The Board of Revenue set aside the revised assessment order on the ground that the claim for deduction on account of sales returns was not made within the six-month period stipulated under Section 13(5) of the Act read with Rule 5-B. The appellant contended that the six-month time-limit did not apply to "unfructified sales," as these did not constitute completed sales. The court agreed with the appellant, noting that the transactions did not result in a transfer of property in goods and thus did not fall under the category of "sales returns."

3. Applicability of Previous Judgments and Legal Principles:
The court examined various judgments to determine the correct classification of the disputed transactions. In Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash, the Supreme Court held that sales tax liability arises only from a completed sale, not from an agreement to sell. In Kuppuswami Mudaliar & Sons v. State of Madras, it was held that the property in goods does not pass until actual delivery. The court also referred to Metal Alloy Co. P. Ltd. v. Commercial Tax Officer, which distinguished between "return of goods" and "rejection of goods." The court found that the observations in State of Tamil Nadu v. Bombay Metal Depot were made in the context of determining the situs of the sale, not the time of sale, and thus did not support the Revenue's case.

4. Double Taxation on the Same Goods:
The court noted that the goods returned as a result of unfructified sales were sold again, and the Revenue had collected tax on these subsequent sales. This fact was brought to the Board of Revenue's notice but was not adequately addressed. The court emphasized that the Revenue is not entitled to collect tax twice on the same goods, which are taxable at a single point. This further supported the appellant's contention that the disputed transactions were "unfructified sales."

Conclusion:
The court concluded that the disputed turnover represented "unfructified sales" and not "sales returns." Consequently, the tax paid on these unfructified sales was liable to be refunded. The rejection of the claim on the ground of non-compliance with the time-limit for sales returns was not sustainable. The appeal was allowed, the order of the Board of Revenue was set aside, and the order of the assessing officer dated November 15, 1978, was restored, subject to any factual mistakes as pointed out in paragraph 7 of the Board's order. The court also noted that there would be no order as to costs.

Appeal allowed.