1978 (10) TMI 142 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. The legality of the Additional Revising Authority's decision regarding the taxability of inter-State purchases under section 3-D of the U.P. Sales Tax Act.
2. The assessee's liability to pay tax under section 3-D(2) of the U.P. Sales Tax Act on sales made to unregistered dealers.
3. The justification of the Additional Judge (Revisions), Gorakhpur, in setting aside the assessment if the first question is answered in the negative and the second in the affirmative.

Issue-wise Detailed Analysis:

1. Legality of the Additional Revising Authority's Decision on Inter-State Purchases:
The first question addresses whether the purchases of foodgrains and oil-seeds in U.P. by agents of ex-U.P. principals were liable to tax under section 3-D of the U.P. Sales Tax Act, considering them as inter-State purchases under section 3(a) of the Central Sales Tax Act. The court examined the facts and found that the purchases made by the assessee were contractual, and the goods were sent to the ex-U.P. principals in fulfillment of these contracts. The movement of goods from U.P. to other states was occasioned by these purchases. The court referred to the Supreme Court's interpretation in Tata Iron & Steel Co. Ltd. v. S.R. Sarkar and other cases, which held that a sale or purchase that occasions the movement of goods from one state to another qualifies as inter-State trade. Thus, the court concluded that the purchases made by the assessee were indeed inter-State purchases, and the Additional Revising Authority was justified in its decision.

2. Assessee's Liability under Section 3-D(2) of the U.P. Sales Tax Act:
The second question pertains to whether the assessee is liable to pay tax under section 3-D(2) on sales made to unregistered dealers. The court analyzed the language of section 3-D(2), which indicates that when goods notified under section 3-D(1) are first purchased by an unregistered dealer from a selling agent, the turnover is assessed in the hands of the selling agent. The court clarified that the term "first purchase" in section 3-D(2) refers to the first purchase within the state of U.P. and not outside it. Since the unregistered dealers purchased the goods from the assessee, who was the selling agent of ex-U.P. principals, the conditions for the applicability of section 3-D(2) were fulfilled. Therefore, the assessee was liable to be taxed on this turnover.

3. Justification of the Additional Judge (Revisions) in Setting Aside the Assessment:
The third question becomes relevant only if the first question is answered in the negative and the second in the affirmative. However, since the court answered both the first and second questions in the affirmative, the third question became academic and was not addressed.

Conclusion:
The court answered the first and second questions in the affirmative, confirming the legality of the Additional Revising Authority's decision and the assessee's liability under section 3-D(2). The third question was returned unanswered as it became academic. The assessee was entitled to costs assessed at Rs. 200. The reference was answered accordingly.