1994 (7) TMI 301 - SC - VAT and Sales Tax

CERTIFICATE OF REGISTRATION - RESALE IN THE COURSE OF INTER-STATE TRADE RESALE NOT WITHIN THE STATE-DECLARATION CONTRAVENED LIABILITY TO PAY TAX ARISES

Summary

Issues:
Interpretation of the definition of 'sale' under the Orissa Sales Tax Act, 1947 in the context of sales in the course of inter-State trade and commerce.

Analysis:
The case involved a dispute regarding the interpretation of the definition of 'sale' under the Orissa Sales Tax Act, 1947 in the context of sales in the course of inter-State trade and commerce. The Sales Tax Tribunal, Orissa, referred a question to the High Court regarding the correct application of the definition of 'sale' under section 2(g) of the Act. The High Court ruled in favor of the assessee, holding that the sales in question were made within the State of Orissa, thereby exempting the assessee from tax liability. The State of Orissa appealed against this judgment.

The High Court's reasoning was based on the presumption that goods were within the State unless proven otherwise by the taxing department. It emphasized that the assessee had purchased goods for resale in Orissa, and since the goods were actually resold in Orissa, the proviso to section 5(2)(A)(a)(ii) of the Act did not apply. The High Court concluded that the Tribunal had correctly annulled the assessment and directed the refund of tax and penalty.

However, the Supreme Court disagreed with the High Court's interpretation. The Court held that for a sale to be considered in the course of inter-State trade, there must be a transport of goods from one State to another under the contract of sale. As the disputed sales were in the course of inter-State trade, they could not be considered sales within the State of Orissa. The Court cited previous judgments to support its view that violating the undertaking given by the assessee regarding resale within the State attracts tax liability.

The Supreme Court also addressed the burden of proof regarding the location of goods at the time of the contract. It held that the onus to show that the goods were sold within the State of Orissa was on the assessee, especially when the goods were intended for resale within the State. The Court emphasized that a contract of sale involving the transport of goods between States cannot be construed as a sale within a single State under the Act.

In conclusion, the Supreme Court allowed the appeals, set aside the High Court's judgment, and held that the Sales Tax Tribunal's decision was incorrect in considering sales in the course of inter-State trade as sales within the State of Orissa. The Court awarded costs to the appellant and clarified the application of the definition of 'sale' under the Act in the context of inter-State transactions.