1983 (3) TMI 244 - HC - VAT and Sales Tax

Court upholds tax assessment under Kerala Sales Tax Act for 1972-73. Seller's taxable turnover exempts petitioner. Waste sale taxable.

The court ruled in favor of the tax authorities, upholding the assessment under the Kerala General Sales Tax Act for the year 1972-73. The petitioner was ... Tax under section 5A - liability where seller liable to pay tax - purchase taxable when goods do not return to commercial stream - sale in the course of business - bye-product/waste taxable as saleTax under section 5A - liability where seller liable to pay tax - Assessee not liable under section 5A for purchases of river sand where the seller had turnover in excess of the minimum and was therefore liable to pay tax. - HELD THAT: - Section 5A is aimed at taxing purchases where the seller's transaction is not liable to tax and the goods do not return to the commercial stream. The determinative question is whether the seller's supplies to the assessee were supplies in respect of which tax was payable. The Court found that the seller who supplied river sand had turnover exceeding the minimum and was thus liable to pay tax under the General Sales Tax Act irrespective of registration. Consequently the purchases were not transactions 'under circumstances in which no tax is payable' and could not be subjected to tax in the hands of the purchaser under section 5A. The assessment imposing tax on the river sand purchases therefore cannot be sustained. [Paras 2, 3]Tax levied under section 5A upon purchase of river sand set aside; assessee not liable for that tax for 1972-73.Sale in the course of business - bye-product/waste taxable as sale - Turnover represented by supply of bye-product/waste material to a contractor is taxable as a sale in the course of business. - HELD THAT: - The extended definition of 'business' introduced after the assessment year was not applied. The statutory definition of 'sale' requires the sale to be 'in the course of business.' The Court held that a dealer's sale of subsidiary or bye-products arising from his manufacturing process, where such material has commercial value and is regularly sold (even if described as 'waste'), constitutes a sale in the course of business rather than an incidental or non-business transaction. The material supplied to the contractor for conversion into hollow bricks was a commercial bye-product of the manufacture of concrete pipes; its valuation for turnover was appropriately included and taxable. There being no dispute as to quantum, the assessment in this respect was sustained. [Paras 4]Taxation of the turnover attributed to sale of bye-product/waste upheld; assessee liable to tax on that turnover for 1972-73.Final Conclusion: Revision partly allowed: tax imposed under section 5A on purchases of river sand set aside; tax on turnover from sale/supply of bye-product/waste to the contractor upheld. No order as to costs. Issues:1. Assessment under Kerala General Sales Tax Act for the year 1972-73.2. Taxability of river sand and charcoal under section 5A.3. Liability for tax on the turnover of sale deemed to be involved in the supply of waste material.Analysis:1. The revision petitioner, an assessee under the Kerala General Sales Tax Act, challenged the assessment for the year 1972-73. The Sales Tax Officer levied tax under section 5A on the value of river sand and charcoal used in manufacturing concrete pipes. Additionally, there was a dispute regarding the turnover of sale deemed to be involved in supplying waste material to a contractor for making hollow bricks.2. The petitioner contested the taxability of river sand under section 5A, arguing that the purchases were made from a contractor whose turnover exceeded the minimum taxable limit, making the petitioner not liable for tax under section 5A. The court clarified that section 5A aims to tax transactions where goods purchased are not liable to tax in the hands of the seller and do not return to the commercial stream for taxation. Since the seller of river sand had a taxable turnover, the petitioner was not liable to pay tax under section 5A for the purchase of river sand.3. Regarding the liability for tax on the turnover of sale involving waste material supplied to a contractor, the court examined the definition of 'business' and 'sale' under the General Sales Tax Act. The court determined that if the by-products of the manufacturing process, termed as waste material, have commercial value and are sold by the dealer, such sales are considered part of the dealer's business and subject to tax. Therefore, the petitioner's contention that they were not liable to tax on the sale of waste material was dismissed, and the tax on the value of the waste material sold was upheld. The revision petition was disposed of with no costs.