A sale concluded via auction before July 1, 2017, remains taxable under the old regime (Sales Tax), even if payments continue post-GST.
The Dispute: Old Tax vs. New GST
The Conflict: The petitioner bought timber in e-auctions held in April and May 2017 (pre-GST). The contract allowed for staged payments extending past July 1, 2017 (the GST “appointed day”). The petitioner argued that since the balance 3/4th payment and the actual release of timber occurred after July 1, they should be allowed to pay GST (likely at a lower rate or to claim ITC) instead of the old Sales Tax and Forest Development Tax.
The Revenue’s Stance: The sale was “complete” the moment the hammer fell in April/May 2017. The tax liability “crystallized” under the old laws (Bombay Sales Tax Act and Forest Development Tax Act) at that moment.
The Judicial Verdict
The High Court dismissed the petition and ruled in favour of the Revenue based on several key legal pillars:
1. Completion of Sale (Sale of Goods Act, 1930)
Under Section 64 of the Sale of Goods Act, a sale in an auction is complete when the auctioneer announces its completion by the “fall of the hammer.” Since the auctions occurred before July 2017, the legal transfer of property in the goods had already taken place under the old regime.
2. Nature of Supply and Delivery
The Court found that the timber was “ready for delivery” at the time of the auction. The fact that the petitioner took extensions to pay the balance amount was a matter of contractual convenience, not a shift in the “Time of Supply.”
3. Misconceived Reliance on Section 64A
The petitioner tried to use Section 64A of the Sale of Goods Act, which allows for price adjustments when taxes change. However, the Court noted:
Section 64A only applies if there is no “different intention” in the contract.
Here, the contract explicitly determined the taxes and included a 18% interest clause for payment extensions. Allowing GST would have allowed the petitioner to escape these specifically agreed-upon contractual penalties and tax rates.
4. Limitations of Transitional Section 142
While Section 142 of the CGST Act handles various transitional scenarios, it does not allow a taxpayer to “re-characterize” a completed sale. If the tax was “leviable” under the old law because the taxable event (the sale) occurred before July 1, the old law continues to govern that transaction.
Key Takeaways for Auction Buyers
Hammer Fall is Final: In auction contracts, the tax rate is usually locked on the date of the auction. Subsequent changes in tax law (like the introduction of GST) do not apply to already concluded auctions.
Staged Payments New Supply: Merely paying in installments after the GST rollout does not convert an old Sales Tax transaction into a GST transaction if the sale itself was finalized earlier.
Contractual Supremacy: Courts will not interfere with specific interest or penalty clauses in a contract (like the 18% p.a. interest for late payment) just because a new tax regime has started.
Forest Produce Specifics: For timber and forest produce, the Forest Development Tax and Sales Tax remain recoverable if the auction confirmation happened before July 1, 2017.
HIGH COURT OF BOMBAY
Purushottam Jairam & company
v.
State of Maharashtra*
ANIL L. PANSARE and NIVEDITA P. MEHTA, JJ.
Writ Petition No. 5133 of 2017
MARCH 25, 2026
R.S. Parsodkar, Adv. for the Petitioner. S. S. Hulke, AGP for the Respondent.
JUDGMENT
Anil L. Pansare, J. – Heard.
2. The petitioner has purchased timber logs in the e-auction held on 17-4-2017 and 17-5-2017. The terms and conditions for sale of timber, firewood, charcoal etc. (in depots and in-situ) by e-auction method were notified through circular dated 28-7-2016 by the Office of respondent no. 2 the Principal Chief Conservator of Forests, Maharashtra State, Nagpur. Clause 8 deals with mode of payment. Subclause (v) thereof is relevant, which reads thus :-
“v) The Purchaser shall pay the amount of this bid which has been accepted (hereinafter referred to as “the sale price”) as follows:
| (a) | 1/4th of the sale price along with the proportionate amount of the Forest Development tax as per Maharashtra Forest Development (Tax on sale of forest produce by Government or Forest Development Corporation) (Continuance) Act, 1983 within seven (7) days from the date of publication of sale result. Provided, however, that if the Purchaser makes payment of the said 1/4″ sale price along with the proportionate amount of the Forest Development Tax at any time thereafter but before the expiry of further twenty three days then he shall have to pay therewith interest thereon at the rate of eighteen (18) percent per annum. The e-auction purchaser shall pay the above amount of his bid along with taxes in the accounts of Government through Payment Gateway (Net Banking/ Debit Card) or NEFT/ RTGS. No Payment through Credit Card will be allowed. This condition shall be binding to the Purchaser. |
| (b) | Balance 3/4th of the sale price along with the proportionate amount of the Forest Development Tax plus the entire amount of Sales Tax in accordance with the provisions of Bombay Sales Tax Act 1959 (1.1 of 1959) as amended and in force for the time being, and all other taxes, rates and duties as are leviable thereon within sixty (60) days from the date of publication of sale result. Provided, however, that if the Purchaser makes payment of the said 3/4th the sale price plus Sales Tax, Forest Development Tax and all other taxes, rates and duties at any time thereafter but before the expiry of further thirty days then he shall have to pay interest thereon for late payment at the rate of 18 per cent for annum till payment is released. The e-auction purchaser shall pay the above amount along with taxes in the account of Government through either Payment Gateway (Net Banking/Debit Card) or NEFT/ RTGS. No Payment through Credit Card will be allowed. This condition shall be binding to the Purchaser. In such a manner amount deposited in Government the Maharashtra Government Treasury by the Bank electronically under Revenue Heads provided by Depot Admin.” |
As could be seen, 1/4th sale price along with proportionate amount of the Forest Development Tax under the provisions of the Maharashtra Forest Development (Tax on Sale of Forest-Produce by Government or Forest Development Corporation) (Continuance) Act, 1983 (for short ‘Forest Tax Act, 1983’) was to be paid within seven days from the date of publication of the sale result. The extension provided for payment of 1/4th sale price is 23 days but with interest at the rate of 18 % per annum.
Thus, Clause (a) provides that the e-auction purchaser shall pay the above amount of bid along with taxes. The balance 3/4th price was to be paid along with proportionate amount of Forest Development Tax and entire amount of Sales Tax in accordance with the provisions of Bombay Sales Tax Act, 1959 (for short, ‘the Act of 1959’) as amended and in force for the time being and all other taxes, rates and duties as leviable thereon within sixty days from the date of publication of sale result. The period is extendable by 30 days, but subject to payment of interest at the rate of 18% per annum.
3. Undisputedly, the first auction was held on 17-4-2017 and second on 17-5-2017. The argument is that since the outer limit for payment of tax was 90 days, which for first auction will be 17-7-2017 and for second auction will be 17-8-2017 and since with effect from 1-7-2017, the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act of 2017’) and Maharashtra Goods and Services Tax Act, 2017 (for short ‘MGST Act of 2017’) came into force and since the Act of 1959 and the Maharashtra Forest Development Act were repealed, the petitioner requested respondents to permit him to pay as per the GST. The request, however, was turned down. Hence, the present petition seeking direction to respondent no. 2 to implement MGST Act of 2017 and to direct respondent nos. 2 and 3 to accept 3/4th balance amount with GST and to release the timber logs without interest, penalty and ground rent.
4. The petitioner has admittedly deposited 1/4th amount along with the taxes in terms of the Forest Tax Act, 1983. He failed to pay the remaining 3/4th amount along with the taxes then prevailing within the period of 60 days and, therefore, respondent nos. 2 and 3 called upon the petitioner to deposit taxes along with interest at the rate of 18% per annum.
5. We find this action to be in tune with terms and conditions of the auction which the petitioner has accepted. The question, however, is whether the petitioner is entitled for payment of taxes under the provisions of the MGST Act of 2017, the same having came into force with effect from 1-7-2017. As such, the last date for payment of taxes in both the auctions, if the extended period is to be considered, will fall after 1-7-2017, however, if we permit the petitioner to pay taxes in terms of the provisions of the MGST Act of 2017, the condition which the petitioner has agreed to, for payment of interest at the rate of 18% per annum on the tax liability will be nullified. Such course, in our view, is not permissible, particularly when sale was made absolute on 17-4-2017 and 17-5-2017 respectively. The tax liability was fixed on those dates and payment thereof agreed in terms of conditions of contract. Once the parties enter into contract, they will be bound by the terms of contract.
6. The respondents have relied upon Section 64 of the Sale of Goods Act, 1930 (for short ‘the Act of 1930’) which provides that in case of sale by auction, the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner. Thus, in the present case, the sale was complete on 17-4-2017 and 17-5-2017. The tax payable at that time was under the provisions of the Forest Tax Act, 1983 and the Act of 1959.
7. As against, the counsel for petitioner submits that Section 142(10) of the MGST Act of 2017 provides that the goods or services supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act.
8. Sub-section (10) of Section 142 reads as under :-
“(10) Save as otherwise provided in this Chapter, the goods or services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act.”
Thus, what is required is that the supply of goods should be after the appointed day, which is 1-7-2017.
9. Learned counsel for the petitioner submits that the goods purchased by the petitioner will be supplied to him by the respondents only upon full payment, the last date of which was after 1-7-2017. According to him, the said eventuality will qualify him for payment of tax in terms of the provisions of the MGST Act of 2017 and not in terms of the Forest Tax Act, 1983 or the Act of 1959.
10. We are not impressed with the submissions. The goods were ready for supply on completion of auction i.e. on 17-4-2017 and 17-5-2017 respectively. The petitioner was under obligation to deposit the amount and collect the goods. The extension of time of certain period was subject to payment of interest at the rate of 18% per annum. The tax was payable on the date of completion of sale. This penal provision cannot be taken aid of to contend that goods were to be supplied on or after 1-7-2017. As stated earlier, the goods were ready for delivery on the date of completion of auction. The delayed payment, which attracted penalty, will be, therefore, of no help to the petitioner to claim any benefit of subsequent development.
11. Learned counsel for the petitioner has also relied upon Section 64-A of the Act of 1930 which provides that unless a different intention appears from the terms of the contract, in the event of any tax on the sale or purchase of goods is imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of making of the contract or for sale or purchase of such goods tax-paid where tax was chargeable at that time, the seller may add the price of taxes or decrease the price equivalent to the amount payable in respect of such tax.
12. In our view, the reliance placed by the petitioner’s counsel upon Section 64-A is misconceived. Section 64-A commences with a condition that unless a different intention appears from the terms of the contract in respect of increase or decrease of payment of tax. In the present case, the terms of contract for payment of tax was determined and agreed by the purchaser. The payment of tax under the provisions of Forest Tax Act, 1983 and the Act of 1959 was made applicable on the auction price. In fact, the petitioner deposited 1/4th amount along with proportionate Forest tax. That being so, he will be under obligation to pay remaining amount of tax in terms of agreed conditions of contract, which also includes payment of interest on delayed payment.
13. The Hon’ble Supreme Court in the case of Bihar State Electricity Board v. Usha Martin Industries (1997) 5 SCC 289, while dealing with scope of Section 64-A, held that the applicability of Section 64-A of the Act of 1930 will depend upon agreement between the parties. In the said case, it was specifically mentioned in one of the clauses of tariff notification that if the excise duty was enhanced, the tariff would be raised. No provision was made for reduction of tariff under any circumstances. Hon’ble Supreme Court held that absence of provision for reduction of tariff indicated that there was no intention on the part of Board to reduce the tariff in the case of lowering or abolition of the excise duty.
14. In our view, though the above finding is rendered in context with fixation of tariff, the effect of increase/decrease in excise duty was considered saying that the parties agreed to not reduce the tariff, even if, excise duty is abolished. The benefit under Section 64-A was thus not extended. The petitioner herein failed to show, from terms of conditions or otherwise, that parties agreed to reduce the tax liability upon abolition of Forest Tax Act, 1983 or otherwise.
15. Thus, sale under question was completed prior to coming into force the CGST or MGST Act of 2017 and the petitioner agreed to make payment of taxes in terms of conditions of contract and had partly paid the taxes in terms of conditions. The petitioner, therefore, will be bound to pay remaining amount and taxes in terms of agreed conditions and the provisions of the tax law then existing. That being so, we do not find any merit in the petition.
16. At this stage, we are informed that the petitioner has deposited remaining amount and the goods released pending petition. We, accordingly, dismiss the petition with directions to the Registry to transfer the amount deposited along with interest accrued thereon in favour of respondent no. 2. No costs.