1967 (8) TMI 113 - HC - VAT and Sales Tax

Summary

Issues:
Jurisdiction of the State of Madras to tax subsequent inter-State sales, interpretation of provisions of the Central Sales Tax Act, 1956, applicability of proviso to section 9(1) in determining jurisdiction for taxing subsequent sales, compliance requirements for obtaining Form C under section 8(4)(a) in connection with subsequent sales.

Detailed Analysis:
The case involved a dispute regarding the jurisdiction of the State of Madras to tax subsequent inter-State sales made by the respondent to a local buyer during the course of inter-State movement of goods. The turnover in question was Rs. 5,296, subject to a 7% tax under the Central Sales Tax Act, 1956. The respondent had transferred the documents of title to a buyer in Madras while the goods were in transit, originating from the State of Gujarat, where the sales were exempt from tax. The revenue argued that the subsequent sales were taxable under the proviso to section 9(1) as they were outside the purview of section 6(2) of the Act. The Tribunal disagreed with this view, leading to the case being brought before the High Court.

The High Court analyzed the relevant provisions of the Central Sales Tax Act, 1956, applicable to the assessment year in question. It highlighted the definitions of "Appropriate State," "Place of business," and the charging section under section 6. The Court emphasized the conditions for exemption under section 6(2) for subsequent sales by a registered dealer to another registered dealer, subject to the furnishing of a certificate in Form E-1. The importance of Form C declarations under section 8(4)(a) for concessional rates of tax was also discussed.

The crux of the issue revolved around the interpretation of the proviso to section 9(1) in determining the jurisdiction of the taxing State for subsequent sales. The revenue argued that the jurisdiction is based on the second seller obtaining Form C in connection with the purchase of goods. However, the Court held that both conditions of obtaining Form C from the taxing State and in connection with the specific goods involved in the subsequent sale must be satisfied to confer jurisdiction. The Court reasoned that the proviso aimed to identify the State with jurisdiction for taxing particular subsequent sales, emphasizing the need for a direct link between the Form C certificate and the specific transaction.

The Court acknowledged a potential lacuna in the proviso to section 9(1) concerning subsequent sales by a registered dealer to another registered dealer without compliance with the proviso to section 6(2). Despite the legislative intent for a broader scope of taxation, the actual language of the proviso did not cover such scenarios, leading to the dismissal of the tax case. The Court emphasized the importance of compliance with statutory requirements for obtaining Form C and Form E-1 in determining the jurisdiction of the taxing State for subsequent inter-State sales.