1991 (6) TMI 218 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sale transactions as local or inter-State sales under the Central Sales Tax Act, 1956.

Analysis:
The case involved a reference under section 69 of the Gujarat Sales Tax Act, 1969, regarding sale transactions of a partnership firm dealing with chemicals and instruments. The dispute arose when the Sales Tax Officer alleged suppression of sales and treated certain transactions as inter-State sales under the Central Sales Tax Act, 1956, instead of local sales under the Bombay Sales Tax Act, 1959 or Gujarat Sales Tax Act, 1969.

The modus operandi of the transactions included purchasing goods from Bombay, despatching them to Rajkot, and handing over railway receipts to purchasers for inspection and payment. The Sales Tax Officer held that property in goods passed upon delivery of railway receipts, attracting the Central Sales Tax Act, 1956. Consequently, penalties were imposed, and amounts credited by the assessee were forfeited. Appeals were made, leading to the Tribunal's decision.

The Tribunal ruled in favor of the assessee, citing the Supreme Court's decision in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, emphasizing that no complete sale occurred upon transfer of railway receipts. The Tribunal found that the sales were local, not inter-State, as claimed by the Revenue. The Tribunal set aside previous orders, including penalties and forfeitures.

The Tribunal's decision was based on the fact that the sales were subject to approval by purchasers upon delivery at the destination. The Tribunal concluded that no sale took place until goods were inspected and approved, rejecting the application of section 3(b) of the Central Sales Tax Act, 1956.

The judgment highlighted the definition of "sale" under the Central Sales Tax Act, 1956, emphasizing the need for both the sale and transfer of documents of title to goods during their movement for a transaction to be considered inter-State. The Tribunal's decision aligned with Supreme Court precedents, distinguishing various High Court decisions cited during the proceedings.

In conclusion, the Tribunal's decision was upheld, emphasizing that the property in goods passed only upon inspection and approval by purchasers at the destination. The judgment answered the reference in favor of the assessee, ruling that the disputed sales were subject to local taxes, not inter-State taxes under the Central Sales Tax Act, 1956.