1965 (8) TMI 67 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Article 286(1)(a) of the Constitution regarding taxation on sales outside the State of U.P.; Determination of actual delivery of goods for consumption in another State; Jurisdiction of the Judge (Revisions) to record fresh evidence; Adverse presumption from failure to produce evidence; Validity of sales without government sanction.

Analysis:
The case involved a dispute over the taxation of sales by Upper Doab Sugar Mills under Article 286(1)(a) of the Constitution, which prohibits a State from taxing sales taking place outside its territory. The Judge (Revisions) initially held that the turnover of sales was exempt from tax as the sugar was transported outside the State of U.P. However, the High Court found this decision incomplete as it did not consider whether the actual delivery of goods for consumption in another State had occurred. The Court emphasized that both conditions - actual delivery in another State and consumption there - must be satisfied for a sale to be deemed outside the taxing State.

Upon further inquiry, it was revealed that the transport agents acted on behalf of the purchasers, not the assessee, indicating that the actual delivery took place within the State. The Court clarified that actual delivery involves physically handing over the goods to the purchaser or their agent, not just transporting the goods across borders. As no actual delivery occurred in another State, the sales were deemed to have taken place within the State of U.P., allowing for taxation by the State.

Regarding the jurisdiction of the Judge (Revisions) to record fresh evidence, the Court noted that the finding about the transport agents acting on behalf of the purchasers was not based on new evidence produced by the Sales Tax Commissioner, but on existing facts. It was also established that the failure of the assessee to produce evidence initially allowed for an adverse presumption, even though no new evidence was accepted later.

Moreover, the Court dismissed arguments about the necessity of proving consumption in another State, emphasizing that the focus was on whether the sales took place in another State for taxation purposes. The Court declined to address the legality of the sales without government sanction, as it was not part of the referred question and was not raised during the proceedings. Ultimately, the Court answered the question in the negative, affirming the State's jurisdiction to tax the sales within its territory.

The judgment concluded by directing the dissemination of the decision to the relevant authorities and awarding costs to the Commissioner of Sales Tax, highlighting the resolution of the reference in favor of taxing the sales within the State of U.P.