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1992 (8) TMI 241 - SC - VAT and Sales TaxWhether the purchases made by commission agents in U.P. on behalf of the principals outside the State, where the goods so purchased were despatched to such principals, were inter-State purchases not exigible to tax under the U.P. Sales Tax Act, 1948? Held that - Appeal dismissed. An out-State principal may first instruct his commission agent within the State of U.P. to purchase the goods on his behalf and to await his further instructions. Depending upon the market conditions and other circumstances, the ex-State principal may instruct his agent in the State either to sell the goods within the State or to despatch the goods beyond the State. If such were the case, Sri Sehgal would have been right in saying that the State of U.P. was competent to tax the purchase by the respondent-dealer. But that is not the case here on the facts found by the appropriate authorities. The case of the authorities was that the respondent- dealer represented to the authorities by issuing form III-C-I that the purchases effected by him are intra-State purchases liable to be taxed under the State enactment and thereby prevented the authorities from taxing the transactions under the Central Sales Tax Act; he must, therefore, make good that tax amount. Assuming that what the authorities say is true, even so the respondent-dealer cannot be proceeded against under section 3-B for the reason that the said section applies to a situation where the tax leviable under this Act , i.e., State Act, is evaded. It does not apply where the tax payable under the Central enactment is evaded. This appeal has to be dismissed on this short ground alone, and is accordingly dismissed.
Issues Involved:
1. Nature of purchases made by commission agents in U.P. on behalf of ex-U.P. principals. 2. Applicability of U.P. Sales Tax Act versus Central Sales Tax Act. 3. Interpretation of inter-State sale/purchase under Section 3 of the Central Sales Tax Act, 1956. 4. Liability under Section 3-B of the U.P. Sales Tax Act for issuing false or wrong certificates. Issue-wise Detailed Analysis: 1. Nature of Purchases Made by Commission Agents in U.P. on Behalf of Ex-U.P. Principals: The core issue revolves around whether purchases made by commission agents in Uttar Pradesh (U.P.) on behalf of principals located outside the state (ex-U.P. principals) are inter-State purchases, which are not taxable under the U.P. Sales Tax Act, 1948. The Allahabad High Court had previously ruled in Commissioner of Sales Tax v. Hanuman Trading Co. [1979] that such purchases were inter-State and thus not subject to U.P. Sales Tax. The Supreme Court examined the facts of Civil Appeal No. 1809 of 1982, where the respondent, a registered dealer in U.P., purchased goods as a commission agent for ex-U.P. principals and dispatched them to these principals. The purchases were made from cartmen and agriculturists, whose sales are exempt from tax under the U.P. Sales Tax Act. 2. Applicability of U.P. Sales Tax Act versus Central Sales Tax Act: The U.P. Sales Tax Act exempts sales of agricultural produce by agriculturists. However, if the purchase qualifies as an inter-State purchase under Section 3 of the Central Sales Tax Act, 1956, the U.P. Legislature cannot tax it due to Article 286(1) of the Constitution of India. The Supreme Court emphasized that the movement of goods from U.P. to another state as a result of the purchase makes it an inter-State purchase. The purchase and subsequent dispatch of goods were part of the same transaction, fulfilling the criteria of an inter-State sale under Section 3(a) of the Central Sales Tax Act. 3. Interpretation of Inter-State Sale/Purchase under Section 3 of the Central Sales Tax Act, 1956: Section 3(a) of the Central Sales Tax Act defines an inter-State sale/purchase as one that occasions the movement of goods from one state to another. The Court referred to several precedents, including Tata Iron & Steel Co. Ltd. v. S.R. Sarkar [1960] and Union of India v. K.G. Khosla and Co. Ltd. [1979], which clarified that the movement of goods must be a necessary incident of the sale/purchase. The Supreme Court concluded that the purchases made by the respondent-dealer were inter-State purchases since the goods were dispatched to ex-U.P. principals as part of the same transaction, even if the contract did not explicitly stipulate such movement. 4. Liability under Section 3-B of the U.P. Sales Tax Act for Issuing False or Wrong Certificates: In Civil Appeal No. 1534 of 1990, the respondent-dealer issued forms III-C-I and paid tax under the U.P. Sales Tax Act but later claimed a refund after the Allahabad High Court's decision. The authorities proceeded against the respondent under Section 3-B of the U.P. Sales Tax Act, which penalizes issuing false or wrong certificates that lead to tax evasion. The Supreme Court held that Section 3-B applies only to situations where tax under the U.P. Act is evaded, not where tax under the Central Act is evaded. Therefore, the appeal was dismissed on this ground. Conclusion: The Supreme Court dismissed the civil appeals, affirming that the purchases made by the respondent-dealer were inter-State purchases not taxable under the U.P. Sales Tax Act. The movement of goods from U.P. to another state was an integral part of the purchase transaction, making it an inter-State sale under Section 3(a) of the Central Sales Tax Act. Additionally, the respondent-dealer could not be penalized under Section 3-B of the U.P. Sales Tax Act for issuing forms III-C-I, as this section does not cover evasion of tax under the Central Sales Tax Act. Appeals were dismissed without costs.
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