1987 (1) TMI 459 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transactions are inter-State dealings and thus fall under the Central Sales Tax Act.
2. Whether the revision petitioner is liable to pay tax under the Tamil Nadu General Sales Tax Act.

Detailed Analysis:

Issue 1: Inter-State Dealings

The core issue revolved around whether the auction sales conducted by the revision petitioner were inter-State sales, thereby falling under the Central Sales Tax Act, or intra-State sales, making them liable under the Tamil Nadu General Sales Tax Act. The Tribunal had initially held that the auction sales were completed at the fall of the hammer, thus constituting local sales within Tamil Nadu. This conclusion was based on Section 64(2) of the Sale of Goods Act, which states that a sale is complete when the auctioneer announces its completion by the fall of the hammer.

However, the revision petitioner argued that the sales were inter-State transactions because the final delivery of the diamonds occurred in Bombay, and the property in the goods only passed to the buyer upon full payment and physical delivery in Bombay. This argument was supported by the auction rules, specifically Rule 11, which stated that the property in the diamonds would pass to the purchaser only after full payment and delivery.

The court noted that the auction rules had been temporarily modified for the 55th diamond auction, removing the provision that the property in the goods would remain with the seller until full payment was made. Despite this, the court found that the intention of the parties, as evidenced by the issuance of C forms and letters requesting delivery in Bombay, indicated that the transactions were intended to be inter-State sales.

The court also referenced several legal precedents, including the Supreme Court's decision in Consolidated Coffee Ltd. v. Coffee Board, which held that the movement of goods from one state to another in pursuance of a contract of sale constitutes an inter-State sale. The court concluded that the movement of the diamonds from Tamil Nadu to Bombay was an integral part of the sales transactions, thus making them inter-State sales.

Issue 2: Liability under Tamil Nadu General Sales Tax Act

Given the conclusion that the transactions were inter-State sales, the court held that they were not liable to tax under the Tamil Nadu General Sales Tax Act. The court emphasized that the movement of goods from Tamil Nadu to Bombay was in pursuance of the sales contracts, and the property in the goods passed to the buyers only upon full payment and delivery in Bombay. Therefore, the sales were taxable under the Central Sales Tax Act.

Conclusion:

The court set aside the Tribunal's order and held that the transactions in question were inter-State sales, taxable only under the Central Sales Tax Act. The revisions were allowed with costs, and the counsel's fee was fixed at Rs. 500.