1976 (3) TMI 189 - SC - VAT and Sales Tax

Court affirms tax liability on disputed turnover as second inter-State sales. Rectification order invalidated, exemptions denied. Appeal dismissed.

GA Galiakotwala & Co. (P.) Ltd. Versus The State of Madras

GA Galiakotwala & Co. (P.) Ltd. Versus The State of Madras - [1976] 37 STC 536 (SC) Issues Involved:1. Whether the assessee is liable to be taxed for the turnover of Rs. 7,41,393.62 as inter-State sales.2. Whether the Tribunal's order under section 55 of the Madras General Sales Tax Act was a valid rectification of an error apparent on the face of the record.3. Whether the sales of cotton by the assessee to the mills were inter-State sales under section 3(a) or second inter-State sales under section 3(b) of the Central Sales Tax Act.4. Whether the assessee is entitled to the benefit of Government Order No. 3602.5. Whether the assessee is entitled to exemption under section 6(2) of the Central Sales Tax Act.Issue-wise Detailed Analysis:1. Tax Liability for Turnover of Rs. 7,41,393.62:The Tribunal initially held that the sales were second inter-State sales under section 3(b) of the Central Sales Tax Act, and the assessee did not furnish the required declarations in form C, hence not entitled to exemption under section 6(2). The Tribunal rejected the assessee's contention that the sales could not be taxed under the local Sales Tax Act, referencing the Supreme Court decision in Yaddalam Lakshminarasimhiah Setty and Sons' case. The Tribunal later accepted the assessee's application under section 55, citing the Supreme Court decision in State of Kerala v. Pothan Joseph, and directed the deletion of the disputed turnover. However, this rectification was contested by the State.2. Validity of Tribunal's Order under Section 55:The Tribunal's order was challenged on two grounds: (1) it was a review of its earlier decision rather than a rectification of an error apparent on the face of the record, and (2) it could not be supported on merits due to the retrospective amendment of section 9 of the Central Sales Tax Act by Central Act 28 of 1969. The Court agreed with both contentions, stating that the Tribunal had no jurisdiction to review its decision under section 55 and that the revised decision was nullified by the retrospective amendment. Consequently, the Tribunal's order was set aside, and the State's revision was allowed.3. Nature of Sales (Section 3(a) vs. Section 3(b)):The Court analyzed the transaction details and concluded that the sales by the assessee to the mills were not direct inter-State sales under section 3(a). The property in the goods passed only when the buyer-mills took delivery of the railway receipts endorsed by the assessee. The sale by the Bombay seller to the assessee was an inter-State sale under section 3(a), but the subsequent sale by the assessee to the buyer-mills was a second inter-State sale under section 3(b). Thus, the jurisdiction of the Madras State to assess the transactions could not be challenged.4. Benefit of Government Order No. 3602:The assessee claimed exemption under G.O. No. 3602, which exempts declared goods sold in inter-State trade if tax has been levied under section 4 of the Madras General Sales Tax Act. The Court held that the exemption applies only if the claimant himself has paid the tax under section 4 for local sales preceding the inter-State transactions. Since the assessee did not pay the tax under section 4, he was not entitled to the exemption. The mills' payment of tax under the Madras Act did not exonerate the assessee from liability under the Central Sales Tax Act.5. Exemption under Section 6(2):Section 6(2) of the Central Sales Tax Act provides exemption for subsequent inter-State sales if the dealer furnishes the required certificates. The assessee produced E-1 forms from the Bombay seller but failed to prove that his buyer was a registered dealer in cotton. Therefore, the Tribunal rightly denied the exemption under section 6(2). The Court upheld this decision, affirming that the assessee did not meet the conditions for exemption.Conclusion:The Court dismissed the assessee's contentions and upheld the tax liability for the disputed turnover. The Tribunal's rectification order was invalidated, and the sales were classified as second inter-State sales under section 3(b). The assessee was not entitled to exemptions under G.O. No. 3602 or section 6(2) of the Central Sales Tax Act. The appeal was dismissed with costs.