Returned goods treated as sale in law; later fertilizer sale held outside tax net as third sale.

Under the West Bengal Sales Tax Act, a transfer of notified goods back to the original seller in adjustment of unpaid consideration was treated as a sale, because non-payment did not negate the completed transfer of property and deferred payment remained part of the statutory definition. On that footing, the returned fertilizer quantity was the second sale in West Bengal for that stock. As fertilizer was taxable only at the first sale after manufacture or import, the later sale of 550 M.Ts. from that returned stock fell outside the tax net as a third sale. The assessment was therefore required to be modified only to exclude tax on that turnover.

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Issues: (i) Whether the return of notified goods by the purchaser could be treated as repurchase by the seller so as to characterise the subsequent sale as the third sale in West Bengal and outside the tax net; (ii) whether tax could be levied again on the subsequent sale of 550 M.Ts. of fertilizer and the assessment required modification accordingly.

Issue (i): Whether the return of notified goods by the purchaser could be treated as repurchase by the seller so as to characterise the subsequent sale as the third sale in West Bengal and outside the tax net.

Analysis: Under section 2(1d) of the West Bengal Sales Tax Act, 1954, a sale includes transfer of property in notified commodities for cash, deferred payment, or other valuable consideration. Non-payment of the whole price does not invalidate the sale, because the seller may still sue for the unpaid consideration and deferred payment remains within the statutory definition. On the facts, the purchaser had acquired title in the goods and later transferred back 2600.629 M.Ts. in adjustment of the unpaid price. That transfer was itself a sale in law, with the unpaid price functioning as consideration.

Conclusion: The return was rightly treated as a sale in favour of the seller, and the subsequent transaction was the second sale in West Bengal for that quantity.

Issue (ii): Whether tax could be levied again on the subsequent sale of 550 M.Ts. of fertilizer and the assessment required modification accordingly.

Analysis: Fertilizer was a notified commodity taxable only at the first sale in West Bengal after manufacture or import. Since the returned quantity had already undergone one taxable sale and the return itself amounted to a second sale, the later sale of 550 M.Ts. out of that returned stock became the third sale for that quantity. Such third sale was not exigible to tax. The assessing authority therefore erred in levying tax on that turnover, while the remaining assessment was not shown to be unsustainable.

Conclusion: Tax on the sale of 550 M.Ts. was not leviable, and the assessment had to be modified to that extent only.

Final Conclusion: The challenge succeeded only in part, the levy on the 550 M.Ts. turnover was set aside, and the matter was remitted for fresh modification of the assessment limited to that item.

Ratio Decidendi: For goods taxable only at the first sale, a transfer of the goods back to the original seller in adjustment of unpaid consideration is itself a sale, and a later sale out of that returned stock is not taxable if it is beyond the first taxable sale contemplated by the statute.

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