1991 (3) TMI 359 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales to SPIC by the assessee were inter-State sales exempt u/s 6(2) of the Central Sales Tax Act, 1956, or intra-State sales.
2. Whether the levy of sales tax under the Tamil Nadu General Sales Tax Act, 1959, was permissible if the sales were not exempt u/s 6(2) of the Central Act.

Summary:

Issue 1: Inter-State vs. Intra-State Sales

The petitioner, a dealer in high-density polythene woven sacks, was assessed for the years 1975-76 and 1976-77. For 1975-76, the Joint Commercial Tax Officer assessed a taxable turnover of Rs. 23,48,630.92, granting exemption on Rs. 6,72,861.47 u/s 6(2) of the Central Sales Tax Act, 1956, for sales in the course of inter-State movement. However, upon inspection, it was found that the sales were intra-State, not inter-State. The assessee had a contract with SPIC for delivering HDPE bags at Tuticorin, with the goods being subject to inspection and approval by SPIC. The assessing authority concluded that the transactions between the assessee and SPIC were intra-State sales as the goods were delivered directly to SPIC's premises in Tuticorin, and not by transfer of documents of title during inter-State movement. This conclusion was upheld by the Sales Tax Appellate Tribunal, which found no material evidence supporting the claim of inter-State sales.

Issue 2: Levy of Sales Tax under Tamil Nadu Act

For the year 1976-77, the assessee's claim for exemption on "transit" sales to SPIC was also denied. The Tribunal confirmed that the transactions were intra-State sales, subject to local sales tax under the Tamil Nadu Act. The Tribunal found that the goods were consigned directly to SPIC under the instructions and account of the assessee, and the property in the goods did not pass to SPIC during their movement from Bangalore to Tuticorin. The mere production of El form and C form was insufficient to constitute the sales as inter-State sales exempt u/s 6(2) of the Central Act.

Conclusion:

The High Court upheld the Tribunal's findings that the sales between the assessee and SPIC were intra-State sales, not covered by the exemption u/s 6(2) of the Central Act. The Court emphasized that the appropriation of goods occurred at Tuticorin, where the goods were subject to inspection and approval by SPIC. The Court rejected the alternative plea that the sales could not be subjected to levy under the Tamil Nadu Act, affirming that the transactions were local sales assessable under the State Act. Consequently, the revisions were dismissed, and the orders of assessment were upheld.