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2007 (4) TMI 362 - SC - VAT and Sales TaxIs the purchase of kendu leaves by the petitioners an inter-State trade or intra-State trade? Held that - Appeal allowed. Having regard to the facts and circumstances mentioned above and the entire gamut of dealings between the parties, we are inclined to hold that (i) the OFDC sold kendu leaves to the petitioners and (ii) the sale occasioned the movement of goods from the State of Orissa to the State of West Bengal as a necessary incident or necessary consequence. As the pre-conditions essential for a sale in course of inter-State trade have been satisfied, the transaction has to be held an inter-State sale within the meaning of section 3(a) of the Act. For the reasons aforesaid, the petitioners are entitled to get refund of the excess amount collected from them under the Orissa Sales Tax Act, 1947. The opposite parties are hereby directed to refund it to the petitioners within two months of receipt of writ from this court. If the excess amount is not paid within the time granted, the petitioners would be entitled to receive interest at the rate of 16 per cent per annum on the differential amount from the date of default.
Issues Involved:
1. Whether the purchase of kendu leaves by the petitioners constitutes inter-State trade or intra-State trade. 2. Whether the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, are unauthorized and without jurisdiction. 3. Whether the excess amount collected under the guise of Orissa sales tax should be refunded to the petitioners. Issue-wise Detailed Analysis: 1. Whether the purchase of kendu leaves by the petitioners constitutes inter-State trade or intra-State trade: The central issue revolves around the classification of the trade of kendu leaves as inter-State or intra-State. The petitioners argued that the sale/purchase of kendu leaves occasioned the movement of goods from Orissa to West Bengal, thus qualifying as inter-State trade under Section 3(a) of the Central Sales Tax Act, 1956. They relied on precedents like *Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti* and *Indian Explosives Limited v. State of Bihar* to support their claim that the transactions were inter-State sales. Conversely, the respondents, including the Commissioner of Commercial Taxes and OFDC, contended that the contract did not necessitate the movement of goods from one State to another, and the sale did not occasion such movement, thus constituting intra-State trade. They cited cases like *Commissioner of Sales Tax, U.P. v. Suresh Chand Jain* and *Similipahar Forest Development Corporation Limited v. State of Orissa* to argue that the transactions were intra-State sales. The court examined the contractual obligations, the issuance of transport permits, and the movement of goods. It was noted that the sale of kendu leaves was completed only after the issuance of transport permits specifying the destination, indicating that the movement of goods was a necessary incident of the sale. Thus, the court concluded that the sale occasioned the movement of goods from Orissa to West Bengal, satisfying the conditions for inter-State trade under Section 3(a) of the Central Sales Tax Act, 1956. 2. Whether the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, are unauthorized and without jurisdiction: Given the court's conclusion that the transactions were inter-State sales, the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, were deemed unauthorized and without jurisdiction. The court emphasized that the transactions were exigible to Central sales tax under the Central Sales Tax Act, 1956, and not to local sales tax. 3. Whether the excess amount collected under the guise of Orissa sales tax should be refunded to the petitioners: The court directed the opposite parties to refund the excess amount collected under the Orissa Sales Tax Act, 1947, to the petitioners within two months of receipt of the writ from the court. If the excess amount was not paid within the stipulated time, the petitioners would be entitled to receive interest at the rate of 16 percent per annum on the differential amount from the date of default. Conclusion: The court allowed the writ petitions, concluding that the transactions in question constituted inter-State sales, and thus, the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, were unauthorized. The excess amount collected was ordered to be refunded to the petitioners.
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