Scope and Applicability of Section 64A of the Sale of Goods Act 1930


a scale with coins and garlic on top of it
a scale with coins and garlic on top of it
Scope and applicability of section 64A of the Sale of Goods Act, 1930?

Even on a bare perusal section 64A applies only in relation to three types of taxes: central excise duty, customs duty and sales tax. These are taxes normally classified as indirect taxes. The section makes no mention of income tax, which is normally classified as a direct tax. The finding to the extent of advance income tax since section 64A did not apply to income tax was upheld. With regard to the sales tax aspect, it was observed that the learned Court by alluding to the spirit of section 64A, found it attracted to the claim for reimbursement of sales tax paid at import stage in disregard to clause 26 of the general conditions of the contract which stipulated that the contract was on DDP basis, i.e., Delivery Duty Paid.

Significance of “Incoterms”?

The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. Incoterms define the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved at various stages of the transaction. They are widely used in international commercial transactions or procurement processes and their use is encouraged by trade councils, courts and international lawyers. The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. A contract on DDP basis is most favorable for the buyer in that almost all the risks, costs and tasks are to the account of the seller. Now as the contract was on DPP basis hence the application of section 64A was ousted.

Basic principles applicable to payment of sales tax in VAT mode?

It is important to keep in mind that the supply chain, which is such a basic feature of sales tax in VAT mode, was not found in the present case since the contract was directly between the seller/importer (i.e., Multiline) and the buyer/final consumer (i.e., the Province). Furthermore, the distinction between the legal liability to pay a tax on the one hand and (if it be an indirect one) the “liability” to bear its economic incidence or financial burden on the other must be kept in mind. Section 3(3) of the Sales Tax Act 1990 clearly places the legal liability for the tax on the seller.

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