PARMALI WALLACE LTD Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) AT the instance of the dealer, Parmali Wallace Ltd. , Bhopal, the Board of Revenue has referred the following question to this Court for answer :

(2.) RELEVANT facts are that the applicant, Parmali Wallace Ltd. , is a registered dealer and deals in the manufacture of wooden parts of certain electrical machines. These are made to orders according to specifications desired by the purchasers. One of the terms of the deal between the applicant-dealer and the purchasers of those parts is that if the parts manufactured and sold by the applicant to those purchasers do not conform to the specifications, they shall be returned to the applicant. The applicant's contention is that the value of such returned goods is Rs. 21,699. The contention is that this should not have been included in the applicant's turnover as according to it the sale did not materialise, the goods having been rejected by the purchasers. The assessing authority did not accept the dealer's contention. The first appellate court also rejected this contention holding that since the goods sold to the purchasers were not returned for about a period of one year, the sales must be deemed to be complete. The second appellate court also rejected the dealer's contention. It held that it was well for the applicants to have contested the return of goods and should not have taken back the same from the purchasers. Since the applicant failed to do so he was not entitled to any relief in view of the provision of Section 8a (1) (b) (ii) of the Central Sales Tax Act. It is then that this reference has been made at the instance of the dealer.

(3.) SHRI S. C. Chaturvedi, learned counsel for the applicant-dealer, reiterated the contention raised before the first and second appellate courts and submitted that the reference must be answered in favour of the dealer. "sale" under Section 2 (g) of the Central Sales Tax Act is defined to mean any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments but does not include a mortgage or hypothecation of or a charge or pledge on goods. Obviously, the definition is wide enough to include the nature of transaction involved in the present case. It is clear that the property in goods was entitled to be transferred as soon as the goods were delivered to the purchasers against price or even against deferred payment. The agreement between the dealer and the purchaser for return of goods in future if they did not conform to the specifications would not take the transactions out of the ambit of the term "sale" as used in the Central Sales Tax Act. The real question, however, is whether on the return/rejection of the goods on the ground that there is no conformity to the specifications, the dealer is entitled to deduct the value of the goods so returned or rejected in determining the turnover. Section 8a of the Central Sales Tax Act contains the permissible deductions from the aggregate of sale price while determining a dealer's turnover. Clause (b) of Sub-section (1) of Section 8a permits deductions of sale price of all goods returned to the purchasers,