1960 (11) TMI 96 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the turnover in question is exigible to tax under rule 5(2) of the Hyderabad General Sales Tax Rules.
2. Whether the transactions in dispute qualify as inter-State trade or commerce and are exempted under Article 286 of the Constitution.

Analysis:
1. The petitioner contended that as a purchaser, the turnover is not liable to tax under rule 5(1) of the Hyderabad General Sales Tax Rules. However, the Court held that rule 5(2) governs the taxation of purchases, not rule 5(1). The Court determined that tobacco falls under the scope of rule 5(2)(f) which includes "agricultural produce." Since tobacco is not excluded from the term "agricultural produce," the first contention was rejected. The Court emphasized that the tax is levied under rule 5(2) on purchases, not sales.

2. Regarding the exemption under Article 286 of the Constitution, the Court found that the transactions were not in the course of inter-State trade or commerce. The Deputy Commissioner's order established that the purchases were completed within the Hyderabad State and the goods moved out as the company's property. The Court emphasized that for a transaction to qualify as inter-State trade, the sale itself must occasion the transport of goods across State borders. Mere movement of goods after a sale within one State does not constitute inter-State trade. The Court dismissed the argument that the purchase was not complete before the movement of goods, as it was inconsistent with the petitioner's conduct of taking delivery in Hyderabad and transporting the goods himself.

3. The Court rejected the petitioner's reliance on a previous case where deliveries were made in a different State, emphasizing that in the present case, the sale was completed within Hyderabad. The Court found no merit in the argument that the price payment after inspection indicated incomplete purchase before movement. Ultimately, the Court dismissed the petition, stating that the transactions did not qualify as inter-State trade and were subject to taxation.