1998 (4) TMI 505 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the return of gold with labor charges in exchange for gold ornaments amounts to a sale under section 2(xxi) of the Kerala General Sales Tax Act, 1963.
2. Whether the transaction in question constitutes an inter-State sale assessable under the Central Sales Tax Act.

Issue-Wise Detailed Analysis:

1. Definition of Sale under Kerala General Sales Tax Act:

The primary issue was whether the return of gold with labor charges in exchange for gold ornaments constitutes a sale under section 2(xxi) of the Kerala General Sales Tax Act, 1963. The assessee argued that the transaction was not a sale but an exchange or barter, contending that the term "valuable consideration" under section 2(xxi) should be confined to monetary payments like cheques or promissory notes. The Tribunal, however, relied on the Madras High Court's decision in V.P. Vadivel Achari v. Madras Sales Tax Appellate Tribunal and concluded that the transaction amounted to a sale. The court examined various precedents, including the Supreme Court's rulings in State of Madras v. Gannon Dunkerley & Co. and Devi Dass Gopal Krishnan v. State of Punjab, which emphasized that a sale requires a money consideration. The court concluded that the words "other valuable consideration" in section 2(xxi) should be interpreted to mean monetary payments, and thus, the transaction in question did not constitute a sale under the Kerala General Sales Tax Act. The court disagreed with the Madras High Court's broader interpretation of "valuable consideration" and held that the transaction was not a sale but an exchange.

2. Inter-State Sale under the Central Sales Tax Act:

The second issue was whether the transaction constituted an inter-State sale assessable under the Central Sales Tax Act. The assessing authority initially treated the transaction as an inter-State sale. However, the Tribunal found no evidence of a prior contract for sale or movement of goods from Kerala to another state as a result of such a contract. The court upheld the Tribunal's decision, stating that the Revenue had not established the necessary conditions for an inter-State sale. The court referred to the Supreme Court's decision in Bengal Immunity Company Limited v. State of Bihar, which required both a sale and the transportation of goods from one state to another for an inter-State sale to occur. Since the Revenue failed to prove these elements, the court affirmed that the transaction was not an inter-State sale and thus not taxable under the Central Sales Tax Act.

Conclusion:

The court held that the exchange of old gold with labor charges in return for gold ornaments does not constitute a sale under section 2(xxi) of the Kerala General Sales Tax Act. Consequently, the assessee's petition was allowed, and the Revenue's petition was dismissed. The assessment order against the assessee for the year 1980-81 was set aside.

Judgment:

Assessee's petition allowed. Revenue's petition dismissed.