STATE OF GUJARAT Vs. PATEL OIL MILLS

JUDGEMENT

(1.) THE Gujarat Sales Tax Tribunal has referred the following question, under section 69 of the Gujarat Sales Tax Act, 1969, for our decision : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the value of groundnut seeds of Rs. 96,460 cannot be treated as purchases made by the opponent-firm from the partners and hence purchase tax levied thereon should be removed ?

(2.) THE aforesaid question arises in the context of the following facts : The opponent, M/s. Patel Oil Mills, a registered partnership firm, is doing the business of running an oil mill. In Samvat Year 2032 (for the period from November 4, 1975 to October 23, 1976), the opponent-firm was assessed by the Sales Tax Officer on March 31, 1978. The Sales Tax Officer had not assessed the purchase tax on the purchase of groundnut seeds of the value of Rs. 96,460 on the ground that some of the partners had brought it as their capital contribution. Groundnut seeds were their agricultural produce. On scrutiny, the Assistant Commissioner of Sales Tax exercised the suo motu power of revision under section 67 of the Gujarat Sales Tax Act, 1969 and issued notice to the opponent-firm on December 14, 1978, calling upon it to show cause as to why on the said amount of Rs. 96,460 purchase tax should not be levied. After hearing the opponent-firm and considering the contentions raised by the opponent-firm, he levied purchase tax on the groundnut seeds purchased by the opponent-firm from its four partners. It was held that the said produce was purchased from the unregistered dealers. He considered the fact that, out of five partners, four partners have brought groundnut seeds of different value; there was nothing on record to show that when they brought groundnut seeds the opponent-firm was in need of any capital amount, the opponent-firm was doing the business at the relevant time; the opponent-firm has purchased groundnut seeds from the four partners as if it was purchasing from other persons by paying its market price; in the accounts the amount was debited for the purchase of groundnut seeds and thereafter it was credited in the personal accounts of the concerned partners. The Assistant Commissioner of Sales Tax also observed that in a case where a new partnership firm comes into existence or a new partner enters into the running partnership firm and if the partner brings in amount, goods or machinery towards contribution as capital, it may not be a sale transaction. But, in the present case the transaction was a purchase made by the opponent-firm from the unregistered dealers. He, therefore, by his order dated March 31, 1981, held that the opponent-firm was liable to pay purchase tax as provided under section 15 of the Gujarat Sales Tax Act, 1969. Against that order, the opponent-firm preferred Revision Application No. 57 of 1981 before the Gujarat Sales Tax Tribunal. Before the Tribunal, it was contended on behalf of the opponent-firm that the opponent-firm cannot be said to have purchased groundnut seeds in question because as per the mutual understanding arrived at amongst the partners, instead of bringing capital contribution by each partner, the partnership deed provided that from time to time looking to the nature and requirements of the business of the partnership the partners will invest the capital to the extent necessary for doing the business. It was, therefore, contended that groundnut seeds purchased by the opponent-firm would not be a transaction of sale or purchase under the Sales of Goods Act. Reliance was placed on the decision of this Court in the case of State of Gujarat v. Ramanlal Sankalchand and Co. [1965] 16 STC 329 and it was contended that whenever the partnership firm was dissolved and the surplus stock of the partnership firm was distributed, it cannot be regarded as transaction of sale. Reliance was also placed on the decision of the Supreme Court in the case of Commissioner of Income-tax v. Hind Construction Ltd. [1972] 83 ITR 211 contending that whenever a partner delivered the goods to the firm towards share capital such transaction could not be regarded as transaction of sale of goods. As against this, on behalf of the applicant-revenue, it was contended that the opponent-firm had purchased groundnut seeds from its partners; the amount of value of groundnut seeds was given credit in the capital (personal ?) account of the partners and it was debited in the purchase account in the books of accounts of the opponent-firm; therefore, the transaction should be regarded as one of the purchases of groundnuts. The Tribunal, after considering the contentions raised by the parties held that, in accordance with the condition in the partnership deed, groundnut seeds were delivered to the opponent-firm and hence the transaction cannot be regarded as transaction of purchase made by the opponent-firm. The Tribunal came to the conclusion that the transaction of groundnut seeds of the value of Rs. 96,460 could not be regarded as purchase of groundnut seeds made by the opponent-firm and for this purpose the Tribunal relied upon the decision of the Supreme Court in the case of Hind Construction Ltd. [1972] 83 ITR 211. Being aggrieved by the judgment and order passed by the Tribunal, the State Government has preferred an application for reference and the Tribunal has referred the aforesaid question for our decision.

(3.) FOR deciding the question under reference, we would first refer to the definitions of the words "dealer", "goods", "person" and "sale" given in section 2 of the Gujarat Sales Tax Act, 1969, which are as under :