1977 (2) TMI 110 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the return of goods valued at Rs. 86,715 by the applicants to George Salter India Limited amounted to sales in the course of inter-State trade.
2. Applicability of rule 4 of the Bombay Sales Tax Rules, 1959, and clause (36) of section 2 of the Bombay Sales Tax Act, 1959.
3. Interpretation of sections 41 and 42 of the Sale of Goods Act, 1930.

Detailed Analysis:

1. Whether the return of goods valued at Rs. 86,715 by the applicants to George Salter India Limited amounted to sales in the course of inter-State trade:

The core issue revolves around whether the return of defective goods by the applicants to George Salter India Limited constituted sales in the course of inter-State trade. The applicants were registered dealers under both the Central Sales Tax Act, 1956, and the Bombay Sales Tax Act, 1959, and acted as distributors for George Salter India Limited. The defective machines were returned between 21st September 1966 and 30th December 1966. The Sales Tax Officer treated the return of these machines as sales made by the applicants to George Salter India Limited, thus categorizing them as inter-State sales. However, the court found that the reliance on rule 4 of the Bombay Sales Tax Rules, 1959, and clause (36) of section 2 of the Bombay Sales Tax Act, 1959, was misplaced. The court emphasized that the definition of "sale" should be referred to in the Central Sales Tax Act, 1956, not the Bombay Sales Tax Act, 1959.

2. Applicability of rule 4 of the Bombay Sales Tax Rules, 1959, and clause (36) of section 2 of the Bombay Sales Tax Act, 1959:

The revenue authorities and the Tribunal relied on rule 4 and clause (36) of section 2, which defined "turnover of sales" and prescribed a twelve-month period for the return of goods. The court clarified that these provisions applied to the original seller's sales and not to the purchasers from them, i.e., the applicants. The court also pointed out that the assessment should consider the statutory provisions relevant to the Central Sales Tax Act, 1956. The court noted that the reliance on the case of Rhythm House Private Limited was also misplaced as it was decided on a wrong application of rule 4. The court found that the return of goods should have been considered under the terms of the original contract of sale and not as a resale by the applicants.

3. Interpretation of sections 41 and 42 of the Sale of Goods Act, 1930:

Mr. Andhyarujina, the learned counsel for the respondents, argued that under sections 41 and 42 of the Sale of Goods Act, 1930, the property in the goods had passed to the applicants, and the return of goods amounted to a resale. Section 41(1) states that the buyer is not deemed to have accepted goods unless he has had a reasonable opportunity to examine them. Section 42 provides that the buyer is deemed to have accepted the goods if he retains them without intimating rejection after a reasonable time. The court found that the applicants had returned the goods because their customers found them defective, and the return was within the guarantee period provided by George Salter India Limited. The court concluded that the applicants had not accepted the goods and had returned them under the terms of the original contract.

Conclusion:

The court answered the question in the negative, indicating that the return of goods did not amount to sales in the course of inter-State trade. The court directed the respondents to pay the applicants' costs fixed at Rs. 300 and refunded the fee of Rs. 100 paid by the applicants in each reference. The judgment emphasized the correct interpretation of statutory provisions and the terms of the original contract between the parties.

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