2001 (9) TMI 1097 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of assessment order under the Orissa Sales Tax Act, 1947 for the year 1997-98.
2. Classification of goods supplied to lessee as "intra-State sale."
3. Interpretation of agreements for financing and supply of equipment.
4. Assessment of turnover and tax liability for inter-State sales.
5. Requirement of declaration forms "C" and "E" for exemption from tax.
6. Jurisdiction of assessment under the Orissa Sales Tax Act for subsequent transit sales.
7. Quashing of the assessment order under section 12(4) of the Orissa Sales Tax Act, 1947.

Analysis:
1. The petitioner challenged the validity of the assessment order dated November 6, 1998, made by the Sales Tax Officer under section 12(4) of the Orissa Sales Tax Act, 1947. The petitioner disputed the treatment of goods supplied to the lessee as "intra-State sale" in the assessment order.

2. The petitioner, a financial institution registered under the Companies Act, 1956, entered into agreements for financing and supply of equipment with customers like M/s. International Aluminium Products Limited (I.A.P.L.). The agreements were for the acquisition of equipment not exceeding Rs. 800 lakhs. The petitioner claimed exemption from tax on the turnover of sales, stating that the goods were subject to tax at the first point in the series of sales.

3. The assessing officer found transactions involving supply of goods from outside the State, which were subsequently sold to I.A.P.L. during transit. The petitioner endorsed transit documents in favor of the lessee, indicating inter-State sales. The assessing officer required declaration forms "C" and "E" for exemption from further tax, which the petitioner failed to produce.

4. The petitioner contended that the findings of the assessing officer were legally untenable, while the department supported the order based on the facts presented. The assessing officer determined that the goods supplied from outside the State were subject to inter-State sales tax.

5. The High Court analyzed the provisions of the Central Sales Tax Act and the Orissa Sales Tax Act. It concluded that the assessment under the Orissa Sales Tax Act was without jurisdiction for subsequent transit sales and that the assessing officer erred in drawing adverse inferences for non-production of declaration forms "C" and "E."

6. Referring to a Supreme Court judgment, the court clarified that the taxability of goods for which the right to use is transferred is based on where the contract is executed. The court found that even if subsequent sales were taxable, they would be considered inter-State sales, falling under section 3(b) of the Central Sales Tax Act.

7. Consequently, the High Court quashed the assessment order made under section 12(4) of the Orissa Sales Tax Act, allowing the writ petition. It granted the department the option to initiate proceedings under the Central Sales Tax Act to determine the exemption of subsequent transit sales under section 6(2).