1995 (1) TMI 361 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of the nature of the sale (inter-State or intra-State).
2. Liability of the assessee to pay tax on the sale turnover of Badal fans.
3. Validity of the Tribunal's reliance on correspondence to establish the nature of the sale.
4. Application of judicial precedents in determining the tax liability.

Detailed Analysis:

1. Determination of the Nature of the Sale (Inter-State or Intra-State):

The core issue was whether the sale of Badal fans by the assessee was an inter-State sale or an intra-State sale. The assessee claimed that it purchased the fans from M/s. Anamika's branch office in Madras, which in turn purchased them from Domestic Fan Engineering (P) Ltd., also in Madras. The department contended that the fans were directly purchased from Domestic Fan Engineering's head office in Calcutta, making it an inter-State sale.

2. Liability of the Assessee to Pay Tax on the Sale Turnover of Badal Fans:

The assessee argued that it was a third seller and therefore not liable to pay the tax, as the first sale by Domestic Fan Engineering (P) Ltd. to Anamika had already been taxed at 9%. The Appellate Assistant Commissioner agreed with the assessee, concluding that the tax had already been paid by either the first or second seller, thus absolving the assessee from further tax liability. However, the Tribunal reversed this decision, asserting that the sale by the assessee was the first sale and hence taxable.

3. Validity of the Tribunal's Reliance on Correspondence to Establish the Nature of the Sale:

The Tribunal relied on letters between Anamika at Calcutta and the assessee to conclude that the goods were directly dispatched to the assessee, thus constituting an inter-State sale. The assessee contested this, arguing that there was no direct delivery from Calcutta to Madras, and the correspondence did not conclusively establish such a link. The court noted that despite the correspondence, there was no evidence that the assessee received goods directly from Calcutta.

4. Application of Judicial Precedents in Determining the Tax Liability:

The court referred to several judicial precedents to determine the nature of the sale. In "Indian Duplicators Ltd. v. State of Tamil Nadu" and "State of Tamil Nadu v. Hercules Rubber Co.", it was held that without a direct link between the head office and the buyer, the transactions were not inter-State sales. The Supreme Court's decision in "Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes" emphasized the need to examine each transaction individually to establish a completed contract of sale.

The court concluded that the evidence did not establish a direct link between the goods dispatched from Calcutta and their receipt by the assessee in Madras. The bills produced indicated that the sales were made by Anamika's branch office in Madras, with tax already paid by Domestic Fan Engineering (P) Ltd. This lack of direct evidence and the judicial precedents led the court to determine that the Tribunal's decision was unsustainable.

Conclusion:

The court set aside the Tribunal's order, ruling that the assessee was not liable to pay the tax on the sale turnover of Badal fans, as the tax had already been paid by Domestic Fan Engineering (P) Ltd. The revision filed by the assessee was allowed, with no order as to costs.