STATE OF MADRAS versus T. NARAYANASWAMI NAIDU AND ANR.

Citation: [1967] 3 S.C.R. 622 · Decided: 12-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

STATE OF MADRAS 
v. 
T. NARAYANASWAMI' NAIDU AND ANR. 
April 12, 1967 
[J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ,J 
8 
Madras General Sf.'/e.r Tax Act, (9 of 1939) S.r. 3 and 4-Goodr in 
stock-Liabi/l'tv tn tax as lasl purchase-
The assessee, a dealer in cotton, claimed deduction of Sales~tax an 
the ground that cotton worth that value were in stock on the last day 
of the assessing year. The Commercial Tax Officer disallowed the claim 
holding that as subsequent disposal had not been proved, it was liable 
to be taxed as a last purchase. The Assistant Commissioner upheld the 
order, but the Sales Tax Appellate 
Tribunal 
accepted 
the 
assessee's 
claim. The Department's revision to the High Court was dismissed. Io 
;;ppeal. to this Court, 
HELD : The assessee was not liable 
till the 
purchase of declared 
good• acquired the character of a last purchase within the Second Sche-
d11l· .. " nf the Ace 
It i:; truP that S •. 3 and 4 of the Madras General Sales 
Tax Act, speak of "a year", i.e., the financial year, and it is only the turn-
over during that year that is liable 
to taxation in the hands of the 
assessee. but s. 4 has to b' read w;th the Second Schedule, and reading 
s. 4. with the Second Schedule, it is clear that a dealer is not liable to pay 
a t:.x on the purchases unti] the purchases acquire :the quality of being 
last purchases inside the State. 
Jn, other words. when he files a return 
and declares the. stock in hand, the; stock in hand cannot be said to 
have been acquired by last purchas~ because he may still during the next 
assessment year, sel1 it or he may conSume it himself or the goods may 
be destroyed, etc. 
He would be entitled to claim before the assessing 
authorities that the character of acquisition of the stock in hand was un· 
dctcrmiried; in the light of subsequent events it may or may not become 
the last purchase inside the State. 
This construction 
is in consoninc.: 
l'ilh s. 15 of the Central Sales Tax Act, 1956. 
[625E-G] 
Abdu/sa/a11 Rowtlzer v. State of Kera/a, 12 S.T.C. 98, and Harnu.rji 
Hirj;blioy v. Con1111ercfal Tax Officer, 13 S.T.C. 773, referred to. 
CIVIL APPELLATE JuRrsmcTION: Civil Appeals Nos. 633 & 
634 of 1966. 
Appeals by special leave from the judgment and order dated 
August 11. 1964 of the Madras High Court in Tax Cases Nos. 
105 and 125 of 1963 (Revision Nos. 64 and 81). 
G. Ramanujam and A. V. Rangam, for the appellant (in both 
the appeals. 
S. T. Desai and G. L. Sanghi, for the respondents (in both 
the appeals). 
The Judgment of the Court was delivered by 
Sikri, J. These appeals by special leave are directed against 
the judgment of the Madras High Court in Tax Cases Nos. 105 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
' 
G 
H 
MADRAS V. NARAYANASWAMI (Sikri, ./.) 
623' 
and 125 of 1963. The High Court by its common judgment dated 
August 11, 1964, confirmed the orders of the Sales Tax Appellate 
Tribunal. 
A common point of law is involved in both the cases and it 
will suffice if we give facts in Tax Case No. 105 of 1963 (Civil 
Appeal Nos. 633 of 1966) in which the respondent was one 
T. Narayanaswami Naidu, hereinafter referred to as the assCSiee. 
The assessee is a dealer in cotton and cotton seeds. 
Before the 
Additional Commercial Tax Officer, Coimbatore, he claimed to 
deduct the sum of Rs. 12,32,756.45 as the value of purchase> 
other than the last purchases of cotton. 
The Commercial Tax 
Officer exempted Rs. 10,11,534.40 but disallowed the remaininr; 
amount on the ground that cotton worth Rs. 2,27,250.00 was in 
stock on March 31, 1961. He found that subsequent disposal in 
the next year had not been proved and, therefore, it was liable 
to be taxed as a )ast purchase. 
In holding this he followed the 
decision of the Kerala High Court in Abdulsalam Rowther v. 
State of Kera/a('). 
The Appellate Assistant Commissioner 
(Commercial Taxes) upheld the order, but the Sales Tax Appel-
late Tribunal, dissenting from the decision of the Kerala High 
Court in A bdulsalam Rowther v. State of Kera/a('), accepted the 
appeal of the assessee and demanded the case to the Appellate 
Assistant Commissioner for disposal afresh in the light of obser-
vations made by it. 
The Department filed a revision under s. 38 
of the Madras General Sales Tax Act, hereinafter referred to as 
the Madras Act, and the High Court dismissed the revision. 
The 
State of Madras having obtained special leave, the appeal is now 
before us. 
The learned counsel for the appellant, Mr. R

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