1. This reference No. 3 under the Sales Tax Act arises out of an appeal No. 9 of 1976 filed by appellant No. 2, M/s. Anand Agencies, before the Sales Tax Tribunal against the order of the Sales Tax Officer.
2. The questions referred to us for determination are : (1) whether under section 7(3)(III) of the Goa, Daman and Diu Sales Tax Act, 1964, a dealer who is not the first seller in a series of sales of successive dealers, liable to adduce proof of payment of tax at the first point of sale when the sale of goods at the first point is exempted from payment of tax under section 10 of the said Act, in order to claim deduction from his gross turnover and (2) whether on the true interpretation of the provisions of the Goa, Daman and Diu Sales Tax Act, 1964, and Government Notification No. F8/F.III/2-36/64 dated 23rd October, 1964, and on the facts and in the circumstances of the case the sales of Indian-made foreign liquor effected by the applicant are exigible to tax.
3. The said appellant No. 2, M/s, Anand Agencies are the wholesalers of the Indian-made foreign liquor manufactured by appellant No. 1, M/s. Anand Distilleries. They are registered as wholesale dealers under the Sales Tax Act. A demand for payment of sales tax of Rs. 12,185.45 for the period of 13th October, 1971, to 31st March, 1972, for a turnover of Rs. 1,20,409.00 was made on them by the Sales Tax Officer. They claimed that under section 7(3)(III) of the Sales Tax Act they were entitled to a deduction in respect of the entire turnover during the said period. The Sales Tax Officer rejected the said claim.
4. In an appeal to the Tribunal, the Tribunal confirmed the order of the Sales Tax Officer. The Tribunal while accepting that appellants were wholesale dealers registered under the Act and had purchased the products from appellant No. 1 who as a small-scale industry were protected during certain period from payment of tax, refused deduction to appellant No. 2 on the ground that they had not produced proof of payment for the purpose of deduction as required under section 7(3)(III) of the Act.
5. Section 7(3)(III) on which the answer to the question No. 1 referred to us should turn provided as under :
'7. (3) In this Act, the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom his turnover during that period on -
(III) sales of goods which are specified by the Government under section 8 as goods taxable at the first point, provided that in the case of such sales proof of payment of tax at the first point is adduced by the dealer to the satisfaction of the Commissioner.'
This section provides for exclusion of certain turnover of the registered dealer. Clause (III) quoted above provides for one of such circumstances for exclusion, such exclusion being in respect of that turnover where the goods specified under section 8 - in this case Indian-made foreign liquor - were taxable at the first point. However, such exclusion was allowed to the assessee-dealer adducing proof of payment in case of such sales. The object being to avoid double taxation in case of sales by one registered dealer of goods, which were liable to be taxed or taxed at first point only under section 8 of the Act, purchased from another registered dealer who had already paid sales tax thereon.
6. However, on the reading of the said provision it is clear that it seeks to dealer with the case of sale of goods which were taxable under section 8 at first point only. It was not disputed that the goods concerned in this case, namely, Indian-made foreign liquor, under section 8 of the Act, were taxable at first point only in the hands of appellant No. 1 and therefore the turnover of appellant No. 2 of such goods was excluded from tax. However, it was admitted by the Tribunal that by reason of section 10 read with item 68 of the Second Schedule to the Act appellant No. 1 were exempted from paying the tax on goods sold by them, which was, under section 8 of the Sales Tax Act, payable by them otherwise at first point only. The said appellant No. 2 had also claimed exclusion of the turnover only for the period during which appellant No. 1 had claimed exemption by reason of item 68 of the Second Schedule. However, if the sales by the appellant which attracted sales tax at first point only were otherwise exempted from sales tax, then a demand on the second appellant to produce proof of such tax being paid by appellant No. 1 was not justified and could not be sustained. The Sales Tax Officer and the Tribunal were, therefore, not right in demanding such a proof from appellant No. 2.
7. It also cannot be said that by reason of exemption from sales tax granted to appellant No. 1 for sales of Indian-made foreign liquor effected by them under item 68 of the Second Schedule to the Act, being a small-scale industry, the point of tax fixed for such sales, under section 8 of the Act at first point only, could not be shifted to the other subsequent point, that is, to the sale by appellant No. 2.
8. We, therefore, answer the questions referred to us as under :
Question No. (1) : In the negative.
Question No. (2) : In the negative.
Respondent to pay the costs of the reference.