1954 Supreme(Bom) 64

IN THE NAGPUR HIGH COURT
P.P. Deo, Sen, JJ.
NEMKUMAR KESRIMAL
Versus
COMMISSIONER OF SALES TAX, MADHYA PRADESH
.
Decided On: Decided On : 17-04-1954

The court held that the packing charges and dharmada charged by the assessee were not includible in the sale price.

Headnote:

SALES TAX - Turnover - Packing charges and dharmada - Whether can be included in sale price - Central Provinces and Berar Sales Tax Act (XXI of 1947), Secs. 2(g), 2(h)(i), 4, 22(1), 23(1) - Constitution of India, Art. 286(1)(a).

Fact of the Case:

The assessee, a manufacturer of bidis, was assessed to sales tax on the total turnover of bidis and tobacco for the quarter from 1st June, 1947, to 12th November, 1947, including a sum of Rs. 1,890-11-6 recovered by the firm from its labourers on account of tobacco and other materials either retained or not accounted by them. The assessee contended that he was not liable to sales tax in view of the proviso to section 4 of the Central Provinces and Berar Sales Tax Act, 1947, which exempted from tax sales made in the course of the execution of a contract entered into before the commencement of the Act. The assessee also contended that the packing charges and dharmada charged by him were not includible in the sale price.

Finding of the Court:

The court held that the proviso to section 4 was inapplicable to the instant case as the sales in question were not made in pursuance of any contract as defined in section 2(b) of the Act. The court also held that the Explanation II to section 2(g) of the Act, as it originally stood, was intra vires and that the sales in question, which were made against stocks in hand in Madhya Pradesh and accepted by customers outside the State either at the head office at Kamptee or the branch shop at Mandsaur in Madhya Bharat, would be regarded as sales within section 2(g) of the Act read with the Explanation. The court further held that the packing charges, hamali and cartage in the instant case were rightly included in the sale price as they were charges for things to be done by the dealer in respect of the goods at the time of or before delivery thereof. However, the court held that dharmada could not be included in the sale price as it was not a charge for anything done by the dealer in respect of the goods at the time of or before delivery thereof.

Issues: (1) Whether despatches of goods after the Act came into force against orders received prior to Act are in law sales within section 2(g) of the Act; (2) Whether on the facts and circumstances of the case, the goods despatched outside the State can in law be regarded as sales within section 2(g) of the Act read with Explanation II; (3) Whether these provisions are ultra vires the State Legislature; (4) Whether (a) the packing expenses and (b) dharmada charges in this case could be held to form part of "sale price" as defined in section 2(g) of the Act, and be included in the taxable turnover; (5)(a) Whether assessment of sales tax violates the provisions of Article 286 of the Constitution of India; (b) Whether the proviso to section 22(1) of the Act is ultra vires of the State Legislature; and (6) Whether the reference under section 23(1) of the Act could be made by a single Member when the order under sub-section (5) of section 22 of the Act is passed by a Division Bench of the Board of Revenue.

Ratio Decidendi: The court held that the proviso to section 4 of the Central Provinces and Berar Sales Tax Act, 1947, was inapplicable to the instant case as the sales in question were not made in pursuance of any contract as defined in section 2(b) of the Act. The court also held that the Explanation II to section 2(g) of the Act, as it originally stood, was intra vires and that the sales in question, which were made against stocks in hand in Madhya Pradesh and accepted by customers outside the State either at the head office at Kamptee or the branch shop at Mandsaur in Madhya Bharat, would be regarded as sales within section 2(g) of the Act read with the Explanation. The court further held that the packing charges, hamali and cartage in the instant case were rightly included in the sale price as they were charges for things to be done by the dealer in respect of the goods at the time of or before delivery thereof. However, the court held that dharmada could not be included in the sale price as it was not a charge for anything done by the dealer in respect of the goods at the time of or before delivery thereof.

Final Decision: The court answered questions (1), (2) and (4)(a) in the affirmative and questions (3), (4)(b), (5)(a) and (b), and (6) in the negative. The assessee was directed to pay the costs of the reference.