Rejected goods and taxable turnover: no completed sale exists where property never passed to the buyer.

Rejected goods under a contract are not includible in taxable turnover where no property in the goods has passed and no completed sale exists. Under the Central Sales Tax Act, turnover is computed by reference to sale prices received or receivable, and the deduction for returned goods in section 8A(1)(b) applies to a consensual return, not to a unilateral rejection for non-conformity with specifications. On that basis, the assessment, demand, and penalty founded on inclusion of such rejected goods were unsustainable.

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Issues: Whether rejected goods supplied under contract could be included in the taxable turnover under the Central Sales Tax Act, and whether tax and penalty could be sustained when the goods had not resulted in a completed sale.

Analysis: The definition of sale under section 2(g) of the Central Sales Tax Act, 1956 requires a transfer of property in goods from one person to another, and turnover under section 2(j) is computed only with reference to sale prices received and receivable in respect of sales. Section 8A(1)(b) deals with deductions for goods returned by purchasers within the prescribed time and on proof of return and refund or adjustment. The Court distinguished a consensual return of goods from rejection of goods, holding that rejection is a unilateral act of the purchaser governed by the law of contract and sale of goods, and not governed by the time-limit in section 8A(1)(b). Since the goods were rejected for not conforming to specifications and no property in them had passed to the purchaser, there was no completed sale.

Conclusion: The rejected goods could not be included in the taxable turnover, and the assessment, demand, and penalty founded on that inclusion were unsustainable.

Final Conclusion: The writ application succeeded and the impugned tax and recovery orders were set aside, with no order as to costs.

Ratio Decidendi: Where goods supplied under contract are rejected for failure to conform to specifications and property in the goods has not passed to the purchaser, there is no completed sale and the amount cannot form part of taxable turnover under the Central Sales Tax Act.

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