RICHARDSON HINDUSTAN LIMITED Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) THESE two references arise out of the common order of the Tribunal passed under section 55 of the Bombay Sales Tax Act, 1959 ("the Act" ). The following two questions have been referred at the instance of the assessee :

(2.) WHETHER, on the facts and circumstances of the case and on a proper interpretation of section 8a (1) (b) of the Central Sales Tax Act, 1956, the Tribunal was right in concluding that as in pursuance of clause 4 of Part C of the distributorship agreement executed by the applicants with muller and Phillips (India) Pvt. Ltd. in which parties have consciously provided for repurchase of the goods and not return of goods, the applicants have repurchased the goods, it was a case of resale by the buyer to the seller the sale price being the very same amount which the buyer had paid to the seller and, therefore, the claim of return of goods made by the applicants before the sales Tax Officer was not sustainable ? 2. The first question which arises out Reference Application No. 346 of 1985 filed by the assessee pertains to the rejection of the claim of the assessee for deduction under section 2 (36) of the Bombay Sales Tax Act, 1959 ("the Bombay Act" or "the Act") read with rule 4 of the bombay Sales Tax Rules ("the Bombay Rules" or "the Rules") of the amount of the purchase price refunded by the assessee-dealer to the purchasers in respect of goods purchased and returned by them. The second question pertains to similar controversy arising in connection with the assessment for the very same period under the Central Sales Tax Act ("the Central Act"), the corresponding provisions of the Central Sales Tax Act being section 8a (1) (b ). The language of the relevant provisions of the two Acts, is substantially similar except for the difference that under the Bombay Sales Tax Act, the deduction is available in respect of the goods returned within a period of 12 months, under the Central Act it is confined to goods returned within a period of six months. The above difference in the provisions of the two enactments is of no relevance to us for the purpose of deciding the controversy raised in the above question in view of the uncontroverted factual position that the goods were returned to the assessee within the specified period under both the Acts and the purchase prices thereof were refunded by the assessee-dealer to the purchasers within the period under consideration. We have, therefore, taken up both these references together for hearing and final disposal.

(3.) BEFORE adverting to the relevant provisions of the Bombay Act and the Central Act, it may be expedient to briefly set out the material facts of the case, having a bearing on the questions referred to us, which are as follows : the assessee-company is a dealer engaged in the business of manufacturing pharmaceutical goods and selling and supplying the same. For selling its products, it had entered into a distributorship agreement on June 17, 1966, with one M/s. Muller and Phillips (India) Pvt. Ltd. (hereinafter referred to as "the distributors" ). Clause (1) of Part C of the said agreement provided that the property in all stocks of the assessee's products sold to the distributors would pass to the distributor on delivery of the same at the destination. In terms of the said agreement, sales were effected by the assessee to the said distributors during the period from July 1, 1968 to June 30, 1969 and July 1, 1969 to September 30, 1969. The assessee had included the value of the said goods sold, supplied and delivered to the above distributor in its turnover for the purpose of assessment both under the Bombay Act and the Central Act for the above two periods and paid tax thereon. The said agreement, however, came to an end with effect from October 1, 1969. At the time of termination of the said agreement, the distributors had in their possession some unsold stock of the products of the assessee which had been sold to them by the assessee during the above periods. In terms of clause 4 of part C of the distributorship agreement, the assessee-company was required to repurchase from the distributors the stock of its products remaining unsold with them at the price at which it had been purchased by them from the assessee. In terms of the above clause the assessee took back the unsold stocks of its products lying with the distributors at the time of the termination of the distributorship agreement in the state of Maharashtra as well as at their places of business situated outside Maharashtra. The assessee claimed deduction for the amount of sale price refunded by it to the distributors on termination of the agreement. The claim of the assessee both under the Bombay Act as well as the Central Act was rejected by the Sales Tax Officer on the ground that the assessee had repurchased the goods from the distributors which did not amount to return of the goods within the meaning of section 2 (36) of the Bombay Act and section 8a (1) (b) of the Central Act. The assessee appealed to the Assistant Commissioner of Sales Tax against the above order of the sales Tax Officer. The Assistant Commissioner accepted the contention of the assessee that the return of the goods by the distributors to the assessee on termination of the distributorship agreement was nothing but return of unsold goods lying with them for the purchase price of which the assessee was entitled to deduction both under the Bombay Act and the Central Act. The Assistant Commissioner, however held that by taking back the goods sold by it the assessee had violated the terms of the declaration on the strength of which it had purchased the goods without payment of tax for use in manufacture of the goods in question for sale and hence it was liable to purchase tax under section 14 of the Act. Against the above order of the Assistant commissioner, both the assessee and the Revenue went in appeal to the Maharashtra Sales Tax tribunal ("the Tribunal" ). The assessee was aggrieved by the order of the Assistant commissioner in so far as it had held that the assessee was liable to purchase tax under section 14 of the Act. The Revenue was aggrieved by the above order in so far as the entitlement of the assessee for deduction of the value of the goods returned by the distributors from its turnover is concerned. The Tribunal rejected the appeals of both the assessee as well as the Revenue and held that the assessee was not entitled to deduction of the value of the goods returned by the distributors because it was not a return but repurchase of the goods after the same have been sold by the assessee to the distributors and in that view of the matter set aside the order of the assistant Commissioner and restored that of the Sales Tax Office. The Tribunal also held that in view of the above conclusion, the question of application of section 14 did not arise. The assessee sought for reference arising out of the order of the Tribunal and the Tribunal on the said application of the assessee has referred the questions set out above to this Court for opinion.