1984 (12) TMI 279 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether purchase tax is leviable under Section 14 of the Bombay Sales Tax Act, 1959, when goods purchased under a certificate in Form 16 are destroyed by fire and cannot be resold.
2. Whether purchase tax is leviable under Section 14 of the Bombay Sales Tax Act, 1959, when a small percentage of goods purchased under a certificate in Form 16 is lost during the process of resale or export.

Issue-Wise Detailed Analysis:

1. Destruction of Goods by Fire:

The respondent, a licensed dealer under the Bombay Sales Tax Act, 1959, purchased 1478 bales of cotton for resale against Form 16. These bales were destroyed by fire on 13th May 1974. The Sales Tax Officer levied purchase tax under Section 14, arguing that the respondent contravened the certificate by not reselling the cotton. The Tribunal held that there was no contravention. The question referred was whether the Tribunal was justified in holding that no purchase tax was leviable when the cotton was destroyed by fire.

The court examined the scheme of the Bombay Sales Tax Act, 1959, and the provisions of Section 14, which levies purchase tax when goods are not resold or despatched as certified. The court noted that the phrase "contrary to such certificates" covers various contraventions, including not reselling goods. The court rejected the argument that a contravention requires a voluntary change of intention by the dealer. The court held that once the goods are destroyed, the intention to resell comes to an end, and there is a contravention of the certificate. Thus, purchase tax is leviable.

2. Loss of Goods During Resale or Export:

The respondent, a licensed dealer in castor oil, purchased castor oil for resale or export against Form 16. During handling, a small percentage of the oil was lost due to spillage or sticking to containers. The Sales Tax Officer levied purchase tax on the lost quantity, arguing that the respondent contravened the certificate by not reselling this quantity. The Tribunal held that there was no contravention. The question referred was whether the Tribunal was justified in holding that no purchase tax was leviable on the lost quantity.

The court noted that the loss occurred while the respondent was carrying out the terms of the certificate. The loss was inevitable and less than 0.5% of the purchased quantity. The court held that the respondent substantially complied with the certificate and could not be held accountable for every drop of oil. Therefore, there was no contravention, and purchase tax was not leviable.

Conclusion:

- Reference No. 63 of 1979: The court answered the question in the negative and against the assessee, holding that purchase tax is leviable when goods are destroyed by fire.
- Sales Tax References Nos. 20 and 21 of 1980: The court answered the questions in the affirmative and in favor of the assessee, holding that purchase tax is not leviable on the small percentage of goods lost during resale or export.

In both cases, the court emphasized the interpretation of Section 14 and the nature of the contraventions of certificates under the Bombay Sales Tax Act, 1959.