1972 (10) TMI 95 - SC - VAT and Sales Tax

Supreme Court ruling on sales tax: scrap, ads taxable; canteen sales remanded for evidence. Penalties dismissed.

State of Tamil Nadu Versus Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Another

The Supreme Court partly allowed and partly dismissed the appeals in a case involving sales tax issues. It held that sales tax was applicable on the sale ... Whether the turnover relating to the supplies of food and drink to the workers at the canteen could be charged to sales tax under the Andhra Pradesh General Sales Tax Act, 1957? Held that:- As the assessee had sufficiently brought to the notice of the Sales Tax Officer its claim and was willing to produce accounts it should be permitted to do so. The Sales Tax Tribunal will give an opportunity to the assessee to produce evidence to show under the terms of G. O. 2238 it is entitled to exemption from the turnover in respect of the canteen sales. Both the appeals are dismissed in respect of levy of penalty. They are partly allowed so far as they are related to scrap in respect of the second period, 1st September, 1964, to 31st March, 1965, and dismissed in respect of the 1st period, 1st April, 1964, to 31st August, 1964. In so far as Appeal No. 2119 of 1969 is concerned it is also partly allowed in respect of the advertisement materials for the period 1st September, 1964, to 31st March, 1965, and dismissed in respect of the 1st period, 1st April, 1964, to 31st August, 1964, and with respect to canteen sales the appeal is dismissed in respect of the 1st period, 1st April, 1964, to 31st August, 1964, and allowed in respect of the second period, 1st September, 1964, to 31st March, 1965, and the matter remanded. Issues Involved:1. Chargeability to sales tax on advertisement materials.2. Chargeability to sales tax on canteen sales.3. Chargeability to sales tax on the sale of scrap.4. Imposition of penalty.Detailed Analysis:1. Chargeability to Sales Tax on Advertisement Materials:The respondents, oil companies, supplied advertisement materials such as calendars, purses, and key chains to their agents at cost price or less. The High Court held that these sales were not chargeable to sales tax as the respondents were not engaged in the trade or commerce of publicity materials. The Supreme Court, however, found that the supply of these materials was connected with the business of the respondents, as they facilitated the dealers to acquire uniform advertising materials approved by the company. Consequently, the turnover of these materials was liable to be included in the assessee's turnover and subject to sales tax for the period from 1st September 1964 to 31st March 1965.2. Chargeability to Sales Tax on Canteen Sales:The respondents provided tea and edibles to their workmen in compliance with the Factories Act. The High Court ruled that canteen sales were not liable to tax. However, the Supreme Court examined G.O. 2238, which exempts canteen sales from tax if the employer subsidizes at least 25% of the total expenses. The Sales Tax Officer had disallowed this exemption due to lack of accounts. The Supreme Court directed the Sales Tax Tribunal to allow the assessee to produce evidence to claim exemption under G.O. 2238 for the period from 1st September 1964 to 31st March 1965.3. Chargeability to Sales Tax on Sale of Scrap:Both respondents periodically sold unserviceable items such as oil drums, rubber hoses, and old furniture as scrap. The High Court held that these sales were not liable to tax. The Supreme Court, however, found that the sale of these items was connected with the business of the respondents, as they were part of the trading activity. The turnover from these sales was therefore liable to tax for the period from 1st September 1964 to 31st March 1965.4. Imposition of Penalty:The appellant did not press the contention regarding the penalty, citing the decision in State of Madras v. Jayaraj Nadar & Sons [1971] 28 S.T.C. 700 (S.C.). Consequently, the Supreme Court dismissed the appeals concerning the imposition of penalties.Conclusion:The appeals were partly allowed and partly dismissed. The Supreme Court held that the sales tax was applicable on the sale of scrap and advertisement materials for the period from 1st September 1964 to 31st March 1965. The case regarding canteen sales was remanded to the Sales Tax Tribunal to allow the assessee to produce evidence for exemption under G.O. 2238. The imposition of penalties was dismissed. There was no order as to costs in both appeals.