1979 (3) TMI 176 - SC - VAT and Sales Tax

Whether the sales made by respondent 1 were made at Faridabad in the course of inter-State trade as contended by the State of Haryana or whether they were intra-State sales effected within the Union Territory of Delhi as contended by the appellant? Held that - Appeal dismissed. The High Court was, therefore, right in holding that the sales in question are inter-State sales and that the turnover of sales is assessable to sales tax under the Central Sales Tax Act, 1956, at the instance of the sales tax authorities at Faridabad. The amount of tax which the respondent has wrongly paid to the sales tax authorities at Delhi on such inter-State sales from April 1, 1961, to September 30, 1965, shall have to be transferred by the sales tax authorities at Delhi to the sales tax authorities at Faridabad, as directed by the High Court.

Issues Involved:
1. Jurisdiction to assess sales tax
2. Nature of sales (inter-State vs. intra-State)
3. Applicability of the Central Sales Tax Act, 1956
4. Transfer of wrongly paid sales tax

Issue-wise Detailed Analysis:

1. Jurisdiction to assess sales tax:
The primary issue in this case was the jurisdictional dispute between the sales tax authorities of the Union Territory of Delhi and the State of Haryana regarding which authority could assess the respondent to sales tax. The respondent, a private limited company, was registered as a dealer in both territories. The company contended that it was uncertain to whom it should pay the sales tax, as both authorities were demanding payment for the same transactions.

2. Nature of sales (inter-State vs. intra-State):
The respondent company manufactured goods in Faridabad (Haryana) and carried out other business activities, including sales, from its head office in Delhi. The sales tax authorities in Haryana claimed that the sales were inter-State sales liable to tax under the Central Sales Tax Act, 1956, as the goods moved from Faridabad to Delhi and then to the customers. Conversely, the Union of India contended that the sales were intra-State sales within Delhi, governed by the Bengal Finance (Sales Tax) Act, 1941.

3. Applicability of the Central Sales Tax Act, 1956:
The Court examined the relevant provisions of the Central Sales Tax Act, 1956, particularly Section 3(a), which states that a sale is considered to be in the course of inter-State trade if it occasions the movement of goods from one State to another. The Court analyzed the course and nature of the transactions, concluding that the movement of goods from Faridabad to Delhi was a result of the contracts of sale made at Delhi. The contracts required the goods to be manufactured in Faridabad and then moved to Delhi for further dispatch to customers, making the sales inter-State under Section 3(a).

4. Transfer of wrongly paid sales tax:
The Delhi High Court had previously ruled that the sales in question were inter-State sales and directed that the sales tax wrongly paid to the Delhi authorities be transferred to the Haryana authorities. The Supreme Court upheld this decision, confirming that the sales tax authorities at Faridabad had the jurisdiction to assess the sales tax. The Court ordered that the tax paid to the Delhi authorities for the period from April 1, 1961, to September 30, 1965, should be transferred to the authorities at Faridabad.

Conclusion:
The Supreme Court dismissed the appeal, affirming that the sales were inter-State sales assessable under the Central Sales Tax Act, 1956, by the authorities at Faridabad. The wrongly paid tax to Delhi authorities was to be transferred to the Haryana authorities as directed by the High Court. The appeal was dismissed without any order as to costs.

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