1990 (7) TMI 344 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of article 286(1)(a) of the C.P. and Berar Sales Tax Act, 1947 regarding inter-State sales exclusion from taxable turnover.

Analysis:
The judgment by the Bombay High Court, delivered by V.A. Mohta, J., pertains to a reference under section 23 of the C.P. and Berar Sales Tax Act, 1947, regarding the exclusion of certain transactions from the taxable turnover of sales. The question referred to the Court was whether transactions totaling Rs. 2,07,769-10-3 were correctly deemed as sales in the course of inter-State trade and commerce and thus should be excluded from the taxable turnover. The period of assessment was between October 31, 1951, and October 18, 1952, governed by article 286(1)(a) of the Act. The basic facts involved the Cotton Textile (Control) Order, 1948, where certain license holders were permitted to deal with specified cloth as nominees of the Commissioner, facilitating delivery to other license holders in a different state. The Sales Tax Officer and Assistant Commissioner initially treated these transactions as intra-State sales, but the Tribunal reversed this decision, holding them as inter-State sales under article 286(1)(a) explanation.

The Court analyzed the statutory framework and factual circumstances to determine the nature of the transactions. It was noted that the transactions were controlled by the Cotton Textile (Control) Order, 1948, and permits issued thereunder, which effectively regulated the sales and delivery of cloth between different states. The Court emphasized that the absence of a written contract between the license holders did not negate the statutory control imposed by the Order, which dictated the terms of the transactions. The Court concluded that the sales were essentially for consumption in the recipient state, Orissa, as per the terms of the permits and the regulatory framework.

Furthermore, the Court clarified that the "D" class licensees, who facilitated the delivery of goods, were not the agents of the buyers but were appointed by the Commissioner to ensure compliance with the permits. The Court highlighted that the factual position, including the nature of the transactions and the roles of the license holders, was not in dispute between the parties. The Court also considered relevant precedents, including the cases of State Trading Corporation of India Limited v. State of Mysore and Singareni Collieries Co. Ltd. v. Commissioner of Commercial Taxes, to support its interpretation of the transactions as inter-State sales.

In the final analysis, the Court affirmed the Tribunal's decision, stating that the transactions were indeed inter-State sales, as the movement of goods from one state to another was occasioned by the permits under which the sales took place. The Court emphasized that the intended consumption in Orissa State and the actual transportation of goods outside the state were crucial factors in determining the nature of the sales. As a result, the Court answered the reference question in the affirmative, confirming the exclusion of the transactions from the taxable turnover.