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1971 (1) TMI 97 - SC - VAT and Sales TaxWhether the last purchase liable to tax within the State contemplated by section 5(3) of the Act was the purchase by the appellant from the mine-owners or the purchase by the STC from the appellant? Whether the property passed to the State Trading Corporation pursuant to contracts entered into between the parties within the State of Mysore? Held that - Appeal dismissed except with regard to the tax which was levied on the sale of tyres and tubes which will not now be payable by the assessee. The High Court has enumerated with care all the material conditions which were to be found in the contracts as also the manner in which the transportation of the goods took place apart from the payment of price and the arrangement about obtaining of advances by the assessee by hypothecation of goods. We are unable to find any infirmity in the approach and reasoning of the High Court on the question of passing of property in the goods in the light of the presumption which arises in the case of f.o.b. contracts. We would accordingly affirm the conclusion of the High Court that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax in accordance with the provisions of the Act.
Issues Involved:
1. Liability to sales tax on purchases of iron ore by the assessee and subsequent sales to the State Trading Corporation (STC). 2. Liability to sales tax on sales of tyres and tubes to National Transports, Hubli. Issue-wise Detailed Analysis: 1. Liability to Sales Tax on Purchases of Iron Ore: Facts: The assessee, a dealer in iron ore, purchased iron ore from mine-owners in Hospet and sold it to the STC for export. Both the assessee and the STC were registered dealers under the Mysore Sales Tax Act, 1957. The ore was transported from Hospet to Karwar port, with all transportation expenses borne by the assessee. The STC handled all export documents, and the payment was made in two installments: 95% against shipping documents and 5% against the certificate of weight and analysis at the foreign port of discharge. Legal Framework: Under Section 5(3) of the Mysore Sales Tax Act, 1957, iron ore is taxed at the point of the last purchase liable to tax within the State. The key question was whether the purchase by the STC from the appellant was the last purchase liable to tax within the State or a purchase in the course of export, which is not liable to tax. Judgment Analysis: - The assessing authority held that the last purchase liable to tax within the State was the purchase made by the appellant from the mine-owners. - The Deputy Commissioner of Commercial Taxes reversed this decision, holding that the last purchase liable to tax was made by the STC. - The Commissioner of Commercial Taxes, exercising suo motu revision powers, restored the original order of the assessing authority. The Supreme Court's decision in B. K. Wadeyar v. M/s. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 (S.C.) was pivotal. In that case, it was held that in f.o.b. contracts, the property in the goods passes when they are put on board the ship unless special circumstances indicate otherwise. The High Court applied this principle, noting that all shipping documents were in the name of the STC and the export license was taken out by the STC. The normal presumption in f.o.b. contracts was applied, leading to the conclusion that the transaction between the appellant and the STC was in the course of export and therefore immune from sales tax. The Supreme Court affirmed the High Court's conclusion that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax. 2. Liability to Sales Tax on Sales of Tyres and Tubes: Facts: The assessee sold tyres and tubes to National Transports, Hubli. The contention was that the assessee was not a regular dealer in these items and did not have a profit motive in selling them. The sales were made to ensure compliance with the terms of the assessee's contracts with the STC. Judgment Analysis: The High Court held that these sales were rightly subjected to tax, as the connection with the assessee's dealings in ore with the STC established a profit motive. Supreme Court's Conclusion: The Supreme Court agreed with the High Court's reasoning but noted that the learned counsel for the State conceded that the assessee would not be called upon to pay the tax on the sale of tyres and tubes due to the comparatively small amount involved. Final Judgment: The appeals were dismissed except for the tax levied on the sale of tyres and tubes, which the assessee was not required to pay. The respondent was entitled to costs in the Supreme Court.
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