1999 (4) TMI 592 - AT - VAT and Sales Tax

Summary

Issues:
1. Challenge to the legality of assessment order and appellate order regarding exemption of turnover from sales tax.
2. Whether the return of fertilizer by a purchaser can be considered as a repurchase by the seller.
3. Entertaining the alternative prayer for a refund of tax paid on the quantity of fertilizer returned by the purchaser.

Analysis:
1. The applicant, a Government undertaking, challenged the assessment order and appellate order denying exemption of turnover from sales tax on the sale of fertilizer to another Government undertaking. The dispute arose when the purchaser returned a portion of the fertilizer due to unsold stock, which the company resold but did not collect tax on. The assessing authority disallowed the exemption claim, leading to an appeal and subsequent application before the Tribunal. The Tribunal found that the sale of the returned fertilizer by the company was not the first sale in West Bengal, hence not liable for tax, and directed the appellate authority to modify the assessment order accordingly.

2. The key issue was whether the return of fertilizer by the purchaser constituted a repurchase by the company. The respondents argued that since the initial sale was incomplete due to non-payment by the purchaser, subsequent sales were taxable. However, the Tribunal held that non-payment alone does not invalidate a sale, and the transfer of property in the fertilizer to the purchaser was valid. The transfer back to the company by the purchaser was considered a sale, making the subsequent sale by the company the third sale in West Bengal, not liable for tax. The assessing officer's error in treating it as the first sale led to the order being set aside.

3. Regarding the alternative prayer for a refund of tax paid on the returned fertilizer, the Tribunal did not entertain this request as the main issue was the tax liability on subsequent sales. The Tribunal directed the appellate authority to modify the assessment order only concerning the tax on the specific quantity of fertilizer resold by the company. The rest of the assessment was deemed valid and not interfered with. The application was allowed, and the matter was remanded to the appellate authority for necessary modifications within a specified timeframe.

In conclusion, the Tribunal's decision clarified the tax liability on subsequent sales of returned fertilizer, emphasizing the validity of the sales transactions and directing the modification of the assessment order accordingly.