The main legal point established in the judgment is the interpretation of the term 'sale' under the VAT Act, specifically in relation to transactions involving the supply of goods to the agent and subsequent sales to buyers.

Shri Pawan Dwivedi, Advocate for the petitioner. Shri Raghvendra Dixit, Govt. Advocate for the respondents/State. Heard.

2. The present petition requires interpretation of Explanation (c) of section 2(u) of Madhya Pradesh VAT Act, 2002 (hereinafter shall be referred to as the 'VAT Act').

3. The petitioner is a Private Limited Company incorporated under the provisions of Indian Companies Act. It is also registered under the provisions of VAT Act. The company is in the business of purchase and sale of allopathic medicines particularly life saving drugs within the State of M.P. and out side the State.

4. Petitioner entered into an agreement with M/s Rahul Pharma and appointed the aforesaid Firm as Carry and Forward Agent. In accordance with the terms of the agreement, the agent has to supply the goods to the authorized distributors or dealers appointed by the company. The petitioner was assessed for tax under the provisions of VAT Act for the assessment year 2006-07. In view of Explanation (c) of section 2(u) of the VAT Act, the authorities have held that when the petitioner supplied the goods to its agent M/s Rahul Pharma, this transaction is first sale and tax is chargeable on this sale under VAT Act and thereafter when the selling agent further sales or transfers the goods to the buyers, then also it comes under the definition of 'sale' and it is also taxable under the provisions of VAT Act. The petitioner pleaded that it amounts double taxation.

5. Definition of section 2(u) of the VAT Act defines 'sale', which is as under : -

"(u) "Sale" with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable consideration and includes, -

(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods whether as goods or in some other form, involved in the execution of works contract; (iii) a delivery of goods on hire purchase or any system of payment by instalments;

(iv) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

(v) a supply, by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration;

(vi) a transfer of the right to use any goods including leasing thereof for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and purchase of those goods by the person to whom such transfer, delivery or supply is made, but does not include a mortgage, hypothecation, charge or pledge;"

There is Explanation of this section and clause (c) of the aforesaid Explanation is important, which is as under :-

"(c) Notwithstanding anything to the contrary" contained in this Act or any other law for the time being in force, two independent sales or purchases shall, for the purpose of this Act, be deemed to have taken place,-

(i) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser; or

(ii) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal."

6. As per the definition of 'sale' given under section 2(u) of the VAT Act, it means any transfer of property in goods for cash or deferred payment or for other valuable consideration. In accordance with the aforesaid provisions, for the purpose of sell, there must be transfer of property under any circumstances. However, Explanation (c) of section 2 (u) of VAT Act prescribes that there would be tw