1995 (2) TMI 382 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of section 2(36) of the Bombay Sales Tax Act, 1959, read with rule 4 of the Bombay Sales Tax Rules, 1959.
2. Interpretation of section 8A(1)(b) of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Interpretation of section 2(36) of the Bombay Sales Tax Act, 1959, read with rule 4 of the Bombay Sales Tax Rules, 1959.

The first question pertains to the rejection of the claim of the assessee for deduction under section 2(36) of the Bombay Sales Tax Act, 1959 ("the Bombay Act" or "the Act") read with rule 4 of the Bombay Sales Tax Rules ("the Bombay Rules" or "the Rules") of the amount of the purchase price refunded by the assessee-dealer to the purchasers in respect of goods purchased and returned by them. The Tribunal concluded that the transaction was a resale by the buyer to the seller and not a return of goods, thus denying the deduction claim. However, the High Court observed that the relevant provisions allow for deduction of the sale price refunded by the dealer to the purchaser for goods returned within twelve months from the date of purchase. The Court emphasized that the nomenclature given by the parties to such transactions, whether "return of goods" or "repurchase of goods," is irrelevant. The return of goods presupposes a prior sale and effectively constitutes a repurchase by the dealer. Therefore, the assessee is entitled to the deduction of the sale price refunded to the purchaser for goods returned within the prescribed period.

Issue 2: Interpretation of section 8A(1)(b) of the Central Sales Tax Act, 1956.

The second question involves a similar controversy under the Central Sales Tax Act ("the Central Act"), specifically section 8A(1)(b). The relevant provisions of the Central Act allow for the deduction of the sale price of goods returned to the dealer by the purchaser within six months from the date of delivery. The Court noted that there is no material difference between the provisions of the Central Act and the Bombay Act regarding the allowability of such deductions. Thus, the Court concluded that the assessee is also entitled to the deduction under the Central Act for goods returned within the specified period.

Additional Considerations:

The Court also addressed the applicability of section 14 of the Bombay Act, which deals with the liability of a dealer to purchase tax for contravention of the terms of the declaration. The Court clarified that the return of goods by the purchaser does not amount to a violation of the terms of the declaration, provided the goods are still intended for sale. The return of goods by itself cannot attract section 14 of the Act unless there is a finding that the goods were used for purposes other than those declared.

Conclusion:

In conclusion, the High Court answered both questions in the negative and in favor of the assessee, allowing the deduction of the sale price refunded for returned goods under both the Bombay Act and the Central Act. The Court also clarified that the return of goods does not attract section 14 of the Bombay Act in the absence of a finding of contravention of the declaration terms.