1977 (4) TMI 159 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the State of Tamil Nadu to assess the inter-State sale.
2. Applicability of Section 3(b) of the Central Sales Tax Act.
3. Appropriation and transfer of property in goods.
4. Application of Section 9(1) proviso of the Central Sales Tax Act.

Detailed Analysis:

1. Jurisdiction of the State of Tamil Nadu to Assess the Inter-State Sale
The Sales Tax Appellate Tribunal concluded that the sale fell within Section 3(a) of the Central Sales Tax Act, thereby asserting that the State of Tamil Nadu had no jurisdiction to assess the inter-State sale since the goods were not within the State of Tamil Nadu at the time of appropriation. The Tribunal further noted that even if the sale fell within Section 3(b), Section 3(a) would prevail in this particular case, and thus the State should not tax them as the goods were not within this State at the time of appropriation.

2. Applicability of Section 3(b) of the Central Sales Tax Act
The primary question raised in the tax revision case was whether the Sales Tax Appellate Tribunal was justified in holding that Section 3(b) of the Central Sales Tax Act did not apply to the turnover in question. Section 3(b) states that a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase is effected by a transfer of documents of title to the goods during their movement from one State to another. The court found that the transfer of documents took place after the goods were delivered to the common carrier and before they were delivered to the purchaser, thus falling within the scope of Section 3(b).

3. Appropriation and Transfer of Property in Goods
The assessee contended that the goods had not been appropriated until they reached the destination in Kerala, and therefore, the transfer of property in the goods took place only in Kerala. However, the court noted that the goods were of specified description and were despatched from Bombay to Cochin at the instance of the assessee, who sold them to the Kerala Government in identical form and condition. The court cited the Supreme Court decision in Balabhagas Hulaschand v. State of Orissa, which clarified that where the description of the goods is clear and such goods have been sent in conformity with such description, there is appropriation of the goods to the contract. Therefore, the property in the goods passed on the endorsement being made in the railway receipts.

4. Application of Section 9(1) Proviso of the Central Sales Tax Act
Section 9(1) specifies the State which is entitled to tax the transaction. The proviso to Section 9(1) states that in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained the form prescribed for the purposes of Section 8(4)(a). The court found that there were two sales: a sale by the Bombay party to the assessee and a subsequent sale by the assessee to the Government of Kerala. Since the assessee obtained the prescribed form from the State of Tamil Nadu, this State was entitled to levy and collect the tax.

In conclusion, the court held that the present case fell within Section 3(b) read with Section 9(1) proviso, and that the State of Tamil Nadu was justified in taxing the said transaction under the Central Sales Tax Act. The tax revision case was allowed, and the petitioner was entitled to its costs.

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