1968 (8) TMI 173 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Escapement of assessment under the Central Sales Tax Act, 1956.
2. Nature of sales: Inter-State or Intra-State.
3. Appropriation of unascertained goods.
4. Jurisdiction to tax.
5. Timing of the assessment order.

Detailed Analysis:

1. Escapement of Assessment under the Central Sales Tax Act, 1956:
The petitioner, a company registered under both the Madras General Sales Tax Act, 1939, and the Central Sales Tax Act, 1956, received a notice from the Deputy Commercial Tax Officer, Lalgudi, claiming escapement of assessment for the year 1961-62. The officer proposed to determine an escaped turnover of Rs. 30,00,000 under inter-State sales and levy a 10% tax due to the absence of Form 'C' declarations. The petitioner objected, asserting that the sales were intra-State sales in Calcutta, already taxed under the West Bengal Sales Tax Act.

2. Nature of Sales: Inter-State or Intra-State:
The petitioner argued that the sales in question were intra-State sales in Calcutta. The Cement Control Order, 1958, required the State Trading Corporation of India Limited (STC) to acquire all cement production, including from the Dalmiapuram factory. The petitioner acted as STC's agent, with the cement's property always vested in STC. The cement was dispatched based on STC's authorizations, which directed the petitioner to send cement to Calcutta. The sales were considered direct deals between the petitioner and the purchaser, but the actual consumer was not identified in the authorizations.

3. Appropriation of Unascertained Goods:
The court analyzed whether the goods were ascertained or unascertained at the time of the contract. The goods were unascertained until they were appropriated to the contract by the seller or buyer. The appropriation occurred when the goods were delivered to the purchaser at Calcutta Docks, following STC's authorizations. The court emphasized that until goods are appropriated to the contract, there is no completed sale.

4. Jurisdiction to Tax:
The court referred to Section 3(a) of the Central Sales Tax Act, 1956, which defines inter-State sales based on the movement of goods from one State to another. However, Section 4(2) determines the situs of sale for unascertained goods based on their appropriation to the contract. The court concluded that the sales were out-of-State sales concerning Madras and inside sales concerning West Bengal. The Madras State had no jurisdiction to impose Central sales tax on these transactions.

5. Timing of the Assessment Order:
The petitioner contended that the assessment order was passed beyond the prescribed period of five years, as required by Section 16(1) of the Madras General Sales Tax Act. The court found that the order was signed on 5th April 1967, not 31st March 1967, as claimed by the Deputy Commercial Tax Officer. This made the order unenforceable and beyond the prescribed period, rendering it without jurisdiction.

Conclusion:
The court ruled in favor of the petitioner, stating that the sales in question were out-of-State sales for Madras and inside sales for West Bengal. The Madras State had no jurisdiction to tax these sales. Additionally, the assessment order was passed beyond the prescribed period, making it unenforceable. The rule nisi was made absolute, and the impugned order was struck down as illegal and without jurisdiction. The writ petition was allowed with costs.