1994 (11) TMI 403 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of inter-State sale under Orissa Sales Tax Act, 1947.

Analysis:
The case involved a dispute regarding the classification of sales of timber by an assessee-corporation as either intra-State or inter-State sales under the Orissa Sales Tax Act, 1947. The Sales Tax Tribunal referred the question to the High Court to determine the nature of the sales. The assessee treated the sales as inter-State sales and paid tax under the Central Sales Tax Act, while the Sales Tax Officer considered them to be intra-State sales as the transactions were completed within the State of Orissa. The appellate authority upheld the intra-State classification but allowed certain deductions. The Full Bench of the Tribunal, with a majority view, concluded that the sales to non-resident buyers were not inter-State sales. The minority view differed, considering them as inter-State sales. The assessee contended that the movement of goods out of Orissa should classify the sales as inter-State sales, citing relevant case laws.

The key question was whether there was a link between the sale and the movement of goods from one state to another under a contract of sale. The High Court referred to precedents, including the Supreme Court decisions, emphasizing that for a sale to be an inter-State sale, there must be a connection between the sale and the movement of goods. The movement should be an incident of the contract of sale or a result of a covenant in the contract. The Court highlighted that the movement of goods must be due to the contract of sale, even if the sale itself does not explicitly mention the movement. After analyzing the terms of the auction sale and the findings of the lower forums, the Court concluded that no link was established between the sale and the movement of goods, leading to the decision that the sales were intra-State sales. The Court held that the majority view of the Tribunal was justified, and the sales could not be classified as inter-State sales under the Central Sales Tax Act.

The judgment, delivered by Justices Patnaik and Naik, answered the reference in favor of the Revenue, affirming that the sales of timber by the assessee were intra-State sales and not inter-State sales under the Orissa Sales Tax Act, 1947. The decision was based on the lack of a clear link between the sale and the movement of goods from one state to another, as required for classification as an inter-State sale.