1999 (11) TMI 840 - AT - VAT and Sales Tax

Summary

Issues Involved:
Distinction between an inter-State sale and a local sale.

Issue-wise Detailed Analysis:

1. Exigibility to Tax on Certain Purchases of Cotton:
The primary issue across all cases involves the determination of whether the purchases of cotton from the Maharashtra State Co-operative Marketing Federation (the Federation) by various textile mills in Tamil Nadu constituted inter-State sales or local sales under the Tamil Nadu General Sales Tax Act (TNGST Act). The assessment years in question range from 1983-84 to 1993-94.

2. Modus Operandi of Transactions:
The modus operandi involved brokers in Coimbatore selecting cotton from Maharashtra and requesting the Federation to dispatch the selected lots to Tamil Nadu mills under the "mill godown facility scheme." The Federation maintained ownership and control over the cotton until full payment was made by the mills, with the cotton stored in mill godowns under the Federation's lock and key.

3. Legal Provisions and Definitions:
The judgment references Section 3(a) of the Central Sales Tax Act, 1956 (CST Act), which defines an inter-State sale as one that occasions the movement of goods from one State to another. It also discusses Section 2(n) of the TNGST Act and Section 4 of the CST Act, which provide definitions and conditions for determining the situs of sale and the movement of goods.

4. Arguments and Evidence:
The assessees argued that the movement of goods from Maharashtra to Tamil Nadu was occasioned by a contract of sale, making it an inter-State sale. They relied on various documents, including offer letters, confirmation letters, provisional contracts, and despatch instructions, to demonstrate that the transactions involved specific agreements for the movement of goods.

5. Lower Authorities' Findings:
The lower authorities, including the assessing officer and the Joint Commissioner, held that the transactions were local sales. They emphasized that the ownership and control of the goods remained with the Federation until payment was made in Tamil Nadu, and the movement of goods was not directly linked to a contract of sale.

6. Judicial Precedents:
The judgment cites numerous judicial precedents to elucidate the principles governing inter-State sales. Key cases include:
- [1963] 14 STC 899 (Mad.) (Lakshmi Mills Company Ltd. v. State of Madras)
- [1969] 23 STC 86 (Mad.) (Cement Distributors (P.) Ltd., Dalmiapuram v. Deputy Commercial Tax Officer, Lalgudi)
- [1975] 35 STC 445 (SC) (Oil India Ltd. v. Superintendent of Taxes)
- [1981] 47 STC 1 (SC) (Indian Oil Corporation Ltd. v. Union of India)

These cases establish that the movement of goods from one State to another as a result of a contract of sale constitutes an inter-State sale, regardless of where the property in the goods passes.

7. Tribunal's Conclusion:
The Tribunal concluded that the transactions in question were indeed inter-State sales. It held that the movement of goods from Maharashtra to Tamil Nadu was occasioned by a firm contract of sale, as evidenced by the offer and acceptance, confirmation letters, and despatch instructions. The Tribunal emphasized that technicalities related to the passing of property and payment terms could not detract from the nature of the inter-State sale.

8. Reassessment and Further Orders:
The Tribunal allowed the tax appeals and tax revision cases, setting aside the lower authorities' findings. It permitted the respective assessing authorities to make reassessments on other issues involved in the cases.

Conclusion:
The Tribunal held that the transactions involving the purchase of cotton from Maharashtra by Tamil Nadu mills constituted inter-State sales under Section 3(a) of the CST Act and were not taxable as local sales under the TNGST Act. The judgment underscores the importance of the movement of goods occasioned by a contract of sale in determining the nature of the transaction.