1972 (2) TMI 80 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the State of Bihar is legally entitled to levy Central sales tax on the sales effected by the S.T.C. to the H.S.L. when certificates in forms E-1/E-2 are produced.
2. Validity of the Tribunal's order of remand allowing the opposite party to furnish certificates in forms E-1/E-2 and modifying the assessment accordingly.

Issue-wise Detailed Analysis:

Issue 1: Levy of Central Sales Tax and Forms E-1/E-2

The primary issue revolves around whether the State of Bihar can levy Central sales tax on the sales by the State Trading Corporation of India Ltd. (S.T.C.) to Hindustan Steel Ltd. (H.S.L.) when certificates in forms E-1/E-2 are produced. The S.T.C. argued that its sales to H.S.L. were subsequent inter-State sales exempt from taxation under Section 6(2) of the Central Sales Tax Act, 1956. The assessing officer, however, treated the transactions as separate and distinct, taxing the sales by S.T.C. to H.S.L. as inter-State trade sales.

The Tribunal, upon examining the contracts between the mine owners and the S.T.C., and the S.T.C. and the H.S.L., concluded that both sales were inter-State sales. The Tribunal noted that the mine owners were obligated to move goods to destinations outside Bihar, thus integrating the sales into a single inter-State transaction. The Tribunal held that the subsequent sales by S.T.C. to H.S.L. were exempt from tax under Section 6(2) of the Act, provided the necessary certificates in forms E-1 and E-2 were furnished.

Issue 2: Validity of the Tribunal's Remand Order

The Tribunal's order of remand aimed to provide the S.T.C. sufficient opportunity to furnish the required certificates in forms E-1/E-2, which are essential for claiming exemption under Section 6(2) of the Act. The Commissioner of Commercial Taxes challenged this order, arguing that the sales by the mine owners to the S.T.C. were intra-State sales, making the subsequent sales by S.T.C. to H.S.L. taxable as separate transactions.

The High Court upheld the Tribunal's decision, emphasizing that the sales by the mine owners to the S.T.C. were indeed inter-State sales. The court noted that the movement of goods from Bihar by the mine owners was occasioned by the contract with the S.T.C., making the sales part of an integrated inter-State transaction. The court found that the Tribunal was justified in remanding the case to allow the S.T.C. to furnish the necessary certificates, as this was a procedural requirement following the primary determination of the nature of the transactions.

Conclusion:

The High Court answered both questions in the affirmative, ruling in favor of the assessee (S.T.C.) and against the Commissioner of Commercial Taxes. The court confirmed that the sales by the mine owners to the S.T.C. were inter-State sales, and the subsequent sales by S.T.C. to H.S.L. were exempt from tax under Section 6(2) of the Central Sales Tax Act, provided the necessary certificates in forms E-1 and E-2 were furnished. The Tribunal's order of remand was deemed valid, allowing the S.T.C. to comply with the procedural requirements for claiming the exemption.