1971 (10) TMI 92 - SC - VAT and Sales Tax

Court affirms sales tax liability for first dealer in matches. Appellant's appeal dismissed.

The court dismissed the appeal, affirming the assessment of the appellant as the first dealer in matches in the State of Mysore and held them liable to ... Whether on the facts and circumstances of the case the assessee's turnover in respect of safety matches is not liable to tax on the ground that the sales effected by the assessee are not the first sales in the State? Held that:- Appeal dismissed. As it would appear that the sale by the assessee was effected in U.P., which if applied to the facts in this case, would indicate that the first sale by the Sivakasi firms was in Mysore. In that view, the question of inter-State sale not being urged as necessary for consideration, it was rightly held by the High Court that the sales in question fell within clause (a) of explanation (3) of section 2(t) of the Act; as such this appeal is dismissed but in the circumstances, without costs. Issues:1. Whether the turnover in respect of safety matches is liable to tax as the first sales in the StateRs.2. Whether the appellant's purchase of matches from sales depots constitutes the first sale in the State for tax purposesRs.3. Whether the transactions between the appellant and sales depots constitute inter-State salesRs.4. Whether the definition of 'sale' under the Act applies to the transactions in questionRs.5. Whether the decision in Ram Narain & Sons v. Assistant Commissioner of Sales Tax is applicable to the present caseRs.Analysis:1. The primary issue in this case was whether the turnover in respect of safety matches was liable to tax as the first sales in the State. The appellant claimed exemption on the entire turnover, arguing that the sales were subsequent sales from dealers in the State of Mysore. However, the sales tax authorities assessed the appellant as the first dealer in matches in Mysore State, making them liable to pay sales tax.2. The appellant's contention was based on the modus operandi of purchasing matches from sales depots of registered dealers in Mysore. The orders were placed with the sales depots, and the matches were directly dispatched to the appellant. Despite the orders being routed through the sales depot, the court held that the transactions were direct sales from the factories to the appellant, making the appellant the first purchaser in Mysore State.3. The appellant argued that the transactions constituted inter-State sales, relying on despatch advice, delivery notes, and invoices showing sales tax charged by the sales depots. However, the court found that the sales were made by the factories directly to the appellant, and there was no sale between the manufacturer and its sales depot. Therefore, the transactions were not considered inter-State sales.4. The court analyzed the definition of 'sale' under the Act, which includes every transfer of property in goods from one person to another in the course of trade or business. The explanation provided in the Act clarified that the first sale in the State is exigible to tax, and in this case, the transactions constituted the first sales in favor of the appellant within the State of Mysore.5. The appellant cited the decision in Ram Narain & Sons v. Assistant Commissioner of Sales Tax to support their argument that the sale was effected to the depots and the appellant's purchase was the second sale not assessable to tax. However, the court distinguished the facts of that case and concluded that the present case fell within the provisions of the Act, making the appellant liable to pay sales tax as the first purchaser in Mysore State.In conclusion, the appeal was dismissed, affirming the assessment of the appellant as the first dealer in matches in Mysore State and liable to pay sales tax on the turnover.