1990 (1) TMI 277 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of implied sale of packing materials to a foreign buyer for export under the Bombay Sales Tax Act, 1959.

Analysis:

1. The case involved a dispute regarding the implied sale of packing materials purchased on declaration in form 14 to a foreign buyer for export. The assessee, an exporter of footwear, had given an undertaking in form 14 for its purchases, including packing materials used for export. The department contended that the packing material was not resold in the course of export, making the assessee liable to pay full purchase tax under section 14 of the Bombay Sales Tax Act, 1959.

2. The Sales Tax Tribunal considered Supreme Court decisions and its own precedents to determine whether the packing materials were impliedly sold during export. It was noted that the nature and cost of the packing materials played a crucial role in deciding if there was an implied sale. The Tribunal found that in this case, the packing instructions were routine, and the cost of packing was less than 10%, leading to the conclusion that there was no resale of the packing materials by the assessee during export.

3. The department argued that the question of implied sale of packing materials was a finding of fact and should not be answered by the Court. However, the Court disagreed, citing precedents and principles applied by the Tribunal. It was acknowledged that there was no formal agreement of sale between the assessee and the foreign buyers regarding the packing material. Still, specific packing instructions provided by the buyers indicated an implied contract of sale. The cost of packing material being significant further supported the inference of an implied sale.

4. The Court referred to various decisions, including the Supreme Court's stance on implied sales of packing materials. The key criterion for determining an implied contract of sale was whether the packing material was routine or of significant value. In this case, the specific packing instructions and the substantial cost of packing materials indicated an implied sale. The Court disagreed with the Tribunal's finding that there was no implied sale of packing materials.

5. Ultimately, the Court answered the first question in favor of the assessee, stating that there was an implied sale of the packing materials to the foreign buyer for export. Consequently, the second question regarding the levy of purchase tax was also answered in favor of the assessee. The Court directed the refund of the amount deposited by the assessee and concluded the reference in the negative.