1996 (5) TMI 412 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the sales transactions (inter-State vs. intra-State).
2. Procedural irregularity in allowing the department to advance an alternative submission at the revisional stage.

Detailed Analysis:

1. Nature of the Sales Transactions (Inter-State vs. Intra-State):
The primary issue was whether the sales transactions were inter-State sales, taxable under the Central Sales Tax Act, or intra-State sales, taxable under the Bihar Sales Tax Act, 1959. The assessee, acting as an agent for manufacturers in Madras and Bombay, facilitated sales to a purchaser in Jamshedpur. The assessee collected Central sales tax and deposited it in Madras and Bombay, claiming the transactions were inter-State sales.

The assessing officer disagreed, holding that each transaction involved two sales: one between the manufacturer and the assessee (inter-State) and another between the assessee and the purchaser (also inter-State but taxable in Bihar). The appellate authority upheld this view, but the Tribunal found each transaction involved only one sale, which it deemed intra-State and taxable in Bihar.

The Tribunal's decision was based on the agency agreement terms, which stated that the goods remained the manufacturer's property until sold, and the invoices indicated the goods were sent on consignment. The Tribunal concluded that the sale occurred in Bihar when the purchaser paid for the goods and received the railway receipts, thus making it an intra-State sale.

However, the High Court disagreed with the Tribunal, citing Supreme Court precedents. The Court emphasized that a sale occasioning the movement of goods from one State to another is an inter-State sale, regardless of when the property in the goods passes. The Court referenced several Supreme Court cases, such as Oil India Ltd. v. Superintendent of Taxes and English Electric Company of India Ltd. v. Deputy Commercial Tax Officer, which clarified that the inter-State movement must be a result of the sale contract, even if the sale itself happens later.

Based on this interpretation, the High Court concluded that the transactions were inter-State sales, as the movement of goods from Madras and Bombay to Jamshedpur was occasioned by the sales contracts. Therefore, the Central sales tax was correctly collected and deposited by the assessee in the originating States.

2. Procedural Irregularity:
The second issue was whether the Tribunal was justified in allowing the department to change its stance at the reply stage, arguing that the transactions were intra-State sales in Bihar. The High Court acknowledged this procedural concern but found it unnecessary to address it in detail, given that the main issue regarding the nature of the sales was resolved in favor of the assessee.

Conclusion:
The High Court answered the second question in favor of the assessee, confirming that the transactions were inter-State sales. Consequently, the Central sales tax was rightly collected and deposited in Madras and Bombay. The first question, dealing with procedural irregularity, was deemed moot and left unanswered. The reference was answered in favor of the petitioner.