Commissioner of Sales Tax, M.P. vs Shyam Enterprises, Rajnandgaon

Dhirendra Mishra, J.

The Commissioner of Sales Tax, M.P. (now Chhattisgarh) has filed this application u/s 44(2) of the M.P. General Sales Tax Act, 1958 (in short "the State Act") and prayed for direction to the Board of Revenue to refer the following questions of law for our opinion:

(1) Whether under the facts and circumstances of the case, the Tribunal was right in holding that set off u/s 8(1) (a) of the M.P.G.S.T Act, 1958 will be allowable while the set off is allowable only on tax paid goods specified in part II schedule II.

(2) Whether in view of the fact that iron and Steel are not tax paid and the fact that the dealer has purchased the same without furnishing declaration from the dealer is entitled to exemption from payment of tax as has been held by the Board of Revenue.

Shri Vinay Harit, learned Dy. Advocate General for the State/ revenue. Relying upon the decisions in the matters of CST, M.P. vs. Bansal Brothers, Bhilai, (1981) VKN (14) 231 and Birendra Singh and Co. New Delhi Vs. Regional Asstt, Commer. of Sales Tax, MP and others, [1990] 23 VKN-7.0, argued that the issue raised by the applicant has already been decided by the jurisdictional High Court, wherein it has been held that the effect of deduction allowed in the definition of "taxable turnover" u/s 2(r) of the State Act is that the tax is payable in case of iron scrap at the last point, when the sale is made to a consumer or an unregistered dealer or to a registered dealer. Who uses the goods for manufacture or for resale outside the State. He further argued that the iron and steal find place in Schedule-II of Part-I of the State act, whereas the definition of taxable goods u/s 2(rr) is confined to the items included in Part-II to VI of Schedule-II.

Heard learned counsel for the petitioner. Perused the order dated 17th December, 1990 (Annexure-C) as also the order dated 2nd November, 1998 (Annexure-D) of the Tribunal.

Indisputably. The respondent is a dealer, engaged in purchase and sale of TV, TV parts, refrigerators and electrical goods. He purchased G.I. pipes and wire during 1984-85 after paying tax at full rate and claimed tax paid deduction.

In Bansal Brothers (supra) also, the assessee carried on business of sale of iron scrap and bricks. He purchased iron scrap from a registered dealer after payment of tax to him without furnishing a declaration in the prescribed form and sold the same to the consumers. In that case also, the question was - whether the sales made by the assessee were liable to sales tax? Rejecting the contention of the assessee that u/s 15 of the Central Sales tax Act (in short "the Central Act") iron scrap being declared goods, tax payable under the State Act could not be levied at more than one stage, it was held thus:

Iron scraps are goods specified at item No. 6 of Part I of Schedule II. The effect of the deduction allowed u/s 2(r) is that the tax is payable in case of iron scrap at the last point, when the sale is made to a consumer or an unregistered dealer or to a registered dealer who uses the goods for manufacture or for resale outside the State. Law does not take into account the actions of persons who are negligent or mistaken but only of persons who act correctly. If the assessee acted diligently, it could have avoided the payment of tax to the selling dealer from whom it purchased the goods. The sales made by the dealer to the consumers are taxable under the scheme of the State Act and are not hit by the bar contained in section 15 of the Central Act.

Learned Tribunal, in its original order (Annexure-C), referring to Sections 2 (rr), 2(t), 2(r)(iii) of the State act and Rule 20(2) of the Rules, held that the point of taxation in respect of goods falling under Part I of Schedule II are not absolutely fixed at the point of last sale, but the incidents of taxation can be in the hands of the selling registered dealer or the purchasing registered dealer or the last selling registered dealer, and it is incorrect to say that the goods falling under Part I of schedule II are taxable only at last point of sale by a registered dealer. It can be fixed at any point of sale by a registered dealer if he is willing to pay the tax. Where a registered dealer sells iron and steel goods to another registered dealer without obtaining declaration in Form XII-J, the sale price has to be taxed at his hand and the goods have become subjected to tax, that will prohibit further taxation in the hands of the purchasing registered dealer.

The application for reference u/s 44 of the State act preferred by the revenue has been further dismissed with an objection that in the matters of Ballabhdas Paddar, Jabalpur Vs. CST, M.P., [1988] 21 VKN-9 and the Indian Mill Stores, Gunjapara Vs. CST, M.P., [1988] 21 VKN-108, the issue raised by the applicant has already been decided by the High Court and no question of law arises for reference.

In Ballabhdas Paddar (supra) the registered dealer, who dealt in iron scrap. Purchased old railway coaches at an auction after payment of full tax. He was assessed on the sale of the said iron scrape. The appellate authority upheld the order of the assessing authority. On reference. Division Bench of the M.P. High Court held that in view of the restriction placed by Section 15(a) of the Central act, sales tax was not leviable on the sale of iron scrap by the assessee-applicant because the iron scrap constituted declared goods u/s 14 of the Central act and the assessee had already paid tax at the stage of purchasing the iron scrap, which was, subsequently, sold by him. Similar view was taken in the Indian Mill Stores (supra) by the Division Bench. However, in both these judgments, the law laid down by the High Court in Bansal Brothers'' case (supra) was not cited.

In the matter of Birendra Singh & Co. (supra), the petitioner was a registered dealer under the State Sales Tax Act as well as the Central Sales Tax Act. He purchased iron scrap from BHEL, Bhopal and paid over and above price of the goods sales tax @ 4% to the vendor. The scrap was further sold by the petitioner outside the state of M.P. in the course of inter-State trade. He furnished return under the State Act and claimed exemption under the State act as per notification dated 11.10.1977. The Division Bench of the M.P. High Court, after referring to the judgments in the matters of Bensal Brothers as also Ballabhdas Padder (supra), held:

(i) That the goods in the hands of the petitioner on his purchase were subjected to no sales tax under the Sate act and what the petitioner paid was the price of the goods, it is clear that the petitioner has not complied with the terms of that second condition of the Notification and, therefore, he is not entitled to any benefit under that notification and cannot claim exemption from payment of tax.

(ii) that what the petitioner paid was the price of the iron scrap purchased by him and even if. By any mistakes, also included an amount equal to the sales tax, he had to blame himself, for at that stage.

(iii) that the petitioner was unregistered when he entered into inter-State sale and imposition of penalty was upheld.

Thus, in view of the above referred decisions of the M.P. High Court this Court is of the opinion that the Tribunal was not justified in rejecting the application for reference filed by the State by observing that the issue has been finally resolved by the High court of M.P. Accordingly, we allow the instant application and direct the Tribunal to refer the questions of law, as proposed and mentioned in Para 1 of this order, for our opinion.