1983 (1) TMI 244 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of the situs of the purchase of Egyptian cotton.
2. Applicability of section 4(2) of the Central Sales Tax Act, 1956.
3. Interpretation of explanation (3)(a)(i) and (3)(a)(ii) to section 2(n) of the Tamil Nadu General Sales Tax Act, 1959.
4. Validity and genuineness of the letters relied upon by the petitioner.
5. Burden of proof regarding the situs of the purchase.

Detailed Analysis:

1. Determination of the Situs of the Purchase of Egyptian Cotton:
The primary issue in this case is whether the purchases of Egyptian cotton by the petitioner occurred in the United Arab Republic (UAR) or within the State of Tamil Nadu for the purposes of the Tamil Nadu General Sales Tax Act, 1959. The petitioner argued that the purchases took place in the UAR as the goods were lying in UAR ports at the time of the purchase contracts. However, the Tribunal found that the goods were not specific or ascertained at the time of the contracts and thus the purchases were deemed to have taken place in Tamil Nadu.

2. Applicability of Section 4(2) of the Central Sales Tax Act, 1956:
The Tribunal initially discussed the issue in terms of section 4(2) of the Central Sales Tax Act, 1956, which is concerned with inter-State transactions. However, the court clarified that this section does not apply to the present case as the issue is about whether the purchases took place outside India, specifically in the UAR, or within the State of Tamil Nadu. The court emphasized that section 4(2) is limited to determining the situs of sales between different States within India.

3. Interpretation of Explanation (3)(a)(i) and (3)(a)(ii) to Section 2(n) of the Tamil Nadu General Sales Tax Act, 1959:
The petitioner's case hinged on explanation (3)(a)(i) to section 2(n), which states that the sale or purchase of specific or ascertained goods takes place where the goods are at the time of the agreement. The court found that the goods were not specific or ascertained as they were vaguely described as lying in some port in the UAR. Therefore, the goods were considered unascertained, and according to explanation (3)(a)(ii), the purchase takes place where the goods are appropriated to the contract. The petitioner failed to prove that the appropriation occurred while the goods were outside the State of Tamil Nadu.

4. Validity and Genuineness of the Letters Relied Upon by the Petitioner:
The petitioner relied on letters from the importing mills to support its claim. However, the Tribunal found these letters to be fabricated and not genuine. The letters were written on loose sheets rather than the mills' official stationery, and the timing of the letters was deemed improbable. The Tribunal concluded that the letters did not prove that the goods were specific or ascertained at the time of the contracts.

5. Burden of Proof Regarding the Situs of the Purchase:
The court held that the burden of proof lies on the petitioner to show that the transactions are exempt from the tax or fall outside the scope of the taxing provisions. The petitioner did not provide sufficient evidence to prove that the appropriation of the goods occurred while they were in the UAR. Consequently, the Tribunal's finding that the purchases took place within Tamil Nadu was upheld.

Conclusion:
The court dismissed the petitioner's revision and upheld the assessment made by the taxing authorities, confirming that the purchases of Egyptian cotton occurred within the State of Tamil Nadu and were subject to the Tamil Nadu General Sales Tax Act, 1959. The court also emphasized that special terms in private contracts cannot override statutory provisions designed to determine the situs of sales for tax purposes. The petitioner was ordered to pay costs, including counsel's fee of Rs. 250.