1985 (8) TMI 343 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the purchase of khair billets and/or forest products from the forest department in the State of Bihar constitutes a sale within the State of Bihar or in the course of inter-State sale, liable to the payment of Central sales tax at the rate of 4% on filing of a declaration in form C.

Issue-wise Detailed Analysis:

1. Nature of Sale: Intra-State vs. Inter-State Sale

The core issue in all four writ petitions was whether the purchase of khair billets and/or forest products from the forest department in Bihar constitutes an intra-State sale or an inter-State sale, which would determine the applicable tax regime.

Arguments by Petitioners:
The petitioners, who are companies or firms registered under the Central Sales Tax Act and carrying on manufacturing business outside Bihar, argued that the goods purchased were meant for consumption in their factories located in other states (Uttar Pradesh and Orissa). They contended that the sale occasioned the movement of goods from Bihar to these states, thus qualifying as inter-State sales under Section 3 of the Central Sales Tax Act. They emphasized that the contracts and permits issued by the forest department mandated the movement of goods to specific destinations outside Bihar, which should be considered an incident of the contract of sale.

Arguments by Respondents:
The respondents, represented by the learned Advocate-General, argued that the sales were concluded within Bihar, as the transactions, including the payment and delivery orders, occurred within the state. They maintained that the subsequent movement of goods to other states was irrelevant to the determination of the nature of the sale. The respondents relied on the decisions in Balabhagas Hulaschand v. State of Orissa and Manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax to support their position that the sale was intra-State.

Court's Analysis:
The court examined the provisions of Section 3 and Section 9(1) of the Central Sales Tax Act, which define inter-State sales. It referred to precedents, including Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, Union of India v. K.G. Khosla and Co. Ltd., and English Electric Company v. Deputy Commercial Tax Officer, to elucidate the principles governing inter-State sales. The court noted that a sale is considered inter-State if it occasions the movement of goods from one state to another, irrespective of where the property in the goods passes.

The court observed that the contracts and permits issued by the forest department explicitly mandated the movement of goods to destinations outside Bihar. The permits formed an integral part of the sale agreements, specifying the route and destination of the goods. The court concluded that the movement of goods was an incident of the contract of sale, and the sale occasioned the inter-State movement of goods.

Conclusion:
The court held that the sales in question were in the course of inter-State trade and commerce, falling within the ambit of Section 3(a) of the Central Sales Tax Act. Consequently, the petitioners were liable to pay Central sales tax at the rate of 4% on filing a declaration in form C, and not Bihar sales tax.

Final Judgment:
The writ petitions were allowed. The respondents were directed not to demand or realize Bihar sales tax from the petitioners for such transactions. The respondents were also instructed to refund or adjust any Bihar sales tax already collected from the petitioners. The court refrained from awarding costs due to the intricate legal questions involved, with each party bearing its own costs.