2006 (11) TMI 604 - AT - VAT and Sales Tax

Issues Involved:
1. Exemption from tax under Article 285(1) of the Constitution of India.
2. Definition and qualification as a "dealer" under the West Bengal Sales Tax Act, 1954.
3. Nature of transactions and whether they constitute "sale" under the Sale of Goods Act, 1930.
4. Validity of the demand notice and penalty imposed.
5. Applicability of the West Bengal Public Demands Recovery Act, 1913 for tax recovery.

Issue-wise Detailed Analysis:

1. Exemption from Tax under Article 285(1) of the Constitution of India:
The petitioner contended that the goods distributed or supplied were properties of the Union of India and thus exempt from any kind of tax under Article 285(1) of the Constitution. However, the Tribunal noted that this issue had already been settled by the Supreme Court, which clarified that sales tax is imposed on the act of sale and not directly on the goods. Consequently, the petitioner's contention regarding exemption under Article 285(1) was dismissed as it lacked merit.

2. Definition and Qualification as a "Dealer" under the West Bengal Sales Tax Act, 1954:
The Tribunal examined whether the petitioner qualified as a "dealer" under Section 2(b) of the 1954 Act. The petitioner argued that there was no commercial motive behind the distribution and supply of goods, and thus it should not be considered a dealer. However, the Tribunal referred to its previous judgment in Union of India v. State of West Bengal [1992] 84 STC 553, which held that the petitioner would be a dealer if it brought notified commodities into West Bengal from outside the state for sale. The Tribunal reiterated that the term "sale" must be understood as defined in the Sale of Goods Act, 1930.

3. Nature of Transactions and Whether They Constitute "Sale" under the Sale of Goods Act, 1930:
The Tribunal analyzed whether the transactions conducted by the petitioner constituted a "sale." It was established that a sale involves the transfer of property in goods from the seller to the buyer, requiring at least two different legal entities. The Tribunal concluded that when the petitioner supplied goods to other departments of the Central Government, it did not constitute a sale since both the supplier and recipient were parts of the Central Government. However, supplies to other State Governments or statutory organizations were considered sales as they involved the transfer of property from the Central Government to separate legal entities.

4. Validity of the Demand Notice and Penalty Imposed:
The petitioner challenged the demand notice issued under Section 10 of the 1954 Act, which assessed sales tax and imposed a penalty. The Tribunal found that the petitioner had previously contested similar assessments and lost in higher courts. However, the Tribunal directed the assessing authority to reassess the petitioner's liability in light of the Tribunal's judgment and issue fresh demands based on such reassessment. Consequently, the impugned demand and the certificate proceeding were set aside and quashed.

5. Applicability of the West Bengal Public Demands Recovery Act, 1913 for Tax Recovery:
The petitioner also contested the initiation of certificate proceedings under the West Bengal Public Demands Recovery Act, 1913 for the recovery of the assessed tax and penalty. The Tribunal's direction to reassess the petitioner's liability and issue fresh demands implicitly addressed the applicability of the recovery proceedings. The impugned certificate proceeding was quashed, pending the reassessment of tax liability.

Conclusion:
The Tribunal directed the assessing authority to reassess the petitioner's tax liability under the 1954 Act, considering the Tribunal's previous judgment and the current judgment. The impugned demand and certificate proceedings were set aside and quashed. The Tribunal clarified that supplies to other Central Government departments did not constitute sales, while supplies to other State Governments or statutory organizations did. The contention regarding exemption under Article 285(1) was dismissed based on prior Supreme Court rulings.

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