1972 (2) TMI 82 - HC - VAT and Sales Tax

Issues Involved:
1. Determination of the nature of the transactions under the Central Sales Tax Act.
2. Jurisdiction of the State of Tamil Nadu to tax the transactions.

Detailed Analysis:

1. Determination of the Nature of the Transactions under the Central Sales Tax Act:

The petitioner, a dealer in machinery, electrical goods, dairy products, and tractor parts, contended that the disputed turnover of Rs. 65,47,342.29 represented inter-State sales under section 3(a) of the Central Sales Tax Act. The goods were appropriated and moved from its factory in Bombay to the buyer's place pursuant to contracts of sale. The petitioner argued that these transactions were not sales effected by transfer of documents of title to the goods during transit under section 3(b). The petitioner also asserted that the same transaction could not be taxed under both sections 3(a) and 3(b).

The court examined the manner in which the transactions occurred. Orders were placed either with the Madras office or the head office in Bombay. The factory at Powai manufactured the goods as per specifications and dispatched them directly to the customers. The railway receipts were either sent to the Madras office or directly to a bank in the buyer's place, with the Madras office handling all subsequent correspondence.

The court relied on precedents, including Larsen and Toubro Ltd. v. Joint Commercial Tax Officer and Cement Distributors (P.) Ltd. v. D.C.T.O., Lalgudi, which clarified the application of sections 3 and 4 of the Central Sales Tax Act. It was established that if the Bombay office appropriated the goods towards the orders at Bombay, the sale would fall under section 3(a) as the contract of sale occasioned the movement of goods. The court concluded that it was not possible to invoke both sections 3(a) and 3(b) for the same transaction unless a sale from the head office to the branch office was presumed.

The court also referred to Tata Oil Mills Ltd. v. State of Andhra Pradesh, where it was held that the jurisdiction to tax inter-State sales under section 3(b) lies with the state from which the goods commenced their movement.

2. Jurisdiction of the State of Tamil Nadu to Tax the Transactions:

The petitioner contended that the tax under the Central Sales Tax Act was exigible only in the State of despatch, Maharashtra, and that Tamil Nadu had no jurisdiction to tax these transactions. This argument was based on the premise that the transactions were inter-State sales under section 3(a) and, even if considered under section 3(b), the jurisdiction to tax lay with the State of origin as per section 9(1) of the Act.

The respondent argued that the transactions fell under section 3(b) as the transfer of documents of title occurred in Tamil Nadu during the transit of goods. The respondent contended that the Madras office's endorsement of railway receipts constituted the first inter-State sale.

The court concluded that the transactions in question should be treated as inter-State sales under section 3(a). Even if assumed to fall under section 3(b), the State of Tamil Nadu had no jurisdiction to tax them under section 9(1). The court emphasized that the same transaction could not be simultaneously treated under both sections 3(a) and 3(b).

Based on these findings, the court allowed the writ petition, quashing the revised assessment order by the respondent and awarding costs to the petitioner.

Petition allowed.

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