2005 (2) TMI 783 - HC - VAT and Sales Tax

Summary

Issues:
Exigibility of sales tax under the Kerala General Sales Tax Act for sandalwood auction transactions.

Analysis:
The writ appeals raised a common point concerning the applicability of sales tax under the Kerala General Sales Tax Act to sandalwood auction transactions. The appellants contended that they should only be liable to pay tax under the Central Sales Tax Act, as their intention was to transport sandalwood to destinations outside Kerala. However, the learned single Judge disagreed with this argument, stating that the situs of the sale was within Kerala, making the State Act applicable. The Government Pleader cited a Supreme Court decision emphasizing that the sale of goods in auctions is complete at the fall of the hammer, establishing the tax liability based on the sale location.

The appellants heavily relied on Supreme Court judgments in similar cases, such as Consolidated Coffee Ltd. v. Coffee Board and Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu. These cases discussed the inter-State nature of transactions and the obligations imposed on purchasers to claim exemption from State sales tax based on movement of goods. However, the auction conditions in the sandalwood cases did not involve statutory or contractual obligations for movement of the timber post-purchase, distinguishing them from the cases cited by the appellants.

In Consolidated Coffee's case, the sale of coffee was governed by specific conditions set by the Coffee Board under the Coffee Act, establishing control over pricing and export. Co-operative Sugar's case involved a sugar factory purchasing sugarcane from Tamil Nadu for transport to Kerala, with the Supreme Court ruling that the obligation to pay sales tax under Tamil Nadu law was inoperative due to the inter-State nature of the purchase and transport. In National Thermal Power Corporation's case, the Supreme Court upheld that the sale of electricity to multiple states was inter-State, rejecting the attempt to levy State sales tax.

The Supreme Court decisions highlighted by the appellants emphasized the need for a pre-existing obligation on the purchaser to claim exemption from State sales tax based on inter-State movement. The judgments clarified that a mere intention to transport goods out of the State was insufficient, requiring an imposition in existence at the time of purchase. The auction conditions in the sandalwood cases did not impose such obligations, leading to the affirmation of the learned single Judge's decision and the dismissal of the writ appeals.