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1993 (4) TMI 270 - SC - VAT and Sales TaxLevy of sales tax on the cane supplies made from areas in Madras State - Held that - Appeal allowed. The stipulation in the G.O. Ms. No. 2260 cannot also be relied upon by the State of Tamil Nadu for sustaining the levy. A tax can be levied only by a statutory provision. This is not a case where the State of Tamil Nadu is seeking to enforce any agreement between the parties. It was an assessment under the Madras Act. In such a case, the agreement, if any, incorporated in G.O. Ms. No. 2260 is not relevant. In this view of the matter, it is also not necessary to examine the submission of Sri Poti that the State of Tamil Nadu was not competent to impose such a condition under the Sugarcane (Control) Order, 1966.
Issues:
Inter-state sale of sugarcane, Levying of purchase tax under Tamil Nadu General Sales Tax Act, Connection between sale and movement of goods, Interpretation of Section 3 of the Central Sales Tax Act, 1956, Applicability of Sale of Goods Act, 1930, and G.O. Ms. No. 2260 in tax assessment. Inter-state Sale of Sugarcane: The case involved a cooperative sugar factory in Kerala purchasing sugarcane from Tamil Nadu under a government order. The dispute arose when Tamil Nadu authorities levied purchase tax on the sale, considering it an intra-state sale. The appellant argued it was an inter-state sale under the Central Sales Tax Act, 1956. The High Court held that since the sale and transfer of goods occurred within Tamil Nadu, the movement of goods to Kerala did not affect the taxability. The Supreme Court analyzed the connection between the sale and the movement of goods to determine the nature of the transaction. Levying of Purchase Tax: The Tamil Nadu authorities imposed purchase tax on the appellant, considering the sale of sugarcane within Tamil Nadu. The appellant contended that it was an inter-state sale and not subject to tax under the Tamil Nadu General Sales Tax Act. The Supreme Court examined the provisions of the Central Sales Tax Act, 1956, to determine the taxability of the transaction based on the movement of goods and the connection between the sale and the transport of goods. Connection between Sale and Movement of Goods: The Court emphasized that for a sale to be considered inter-state, the movement of goods must be a necessary consequence of the sale. In this case, the purchases made by the appellant in Tamil Nadu were exclusively for transporting sugarcane to Kerala. The Court held that the movement of goods was inseparably connected with the sale/purchase, making it an inter-state transaction. The Court rejected the argument that the sale occurred only in Kerala due to certain specifications, emphasizing the indivisible connection between the sale and the movement of goods. Interpretation of Section 3 of the Central Sales Tax Act, 1956: The Court referred to precedents to explain the scope of Section 3, highlighting that the movement of goods must be an essential incident of the sale for it to be considered inter-state. The Court clarified that the sale and the transport of goods must be interconnected to qualify as an inter-state sale, irrespective of where the sale technically occurs. Applicability of Sale of Goods Act, 1930, and G.O. Ms. No. 2260: The appellant argued that the sale took place in Kerala based on certain specifications and provisions of the Sale of Goods Act, 1930. However, the Court deemed this argument immaterial, focusing on the connection between the sale and the movement of goods. Additionally, the Court held that the government order, G.O. Ms. No. 2260, could not be used by Tamil Nadu to justify the tax levy, as taxation required statutory provisions and not agreements between parties. In conclusion, the Supreme Court allowed the appeal, quashing the assessment made by Tamil Nadu authorities, emphasizing the inseparable connection between the sale and the movement of goods for determining the taxability of inter-state transactions.
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