2005 (2) TMI 796 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Jammu and Kashmir High Court to entertain the petitions.
2. Applicability of local sales tax versus Central Sales Tax (CST).
3. Validity of the clause excluding the application of CST.
4. Petitioners' entitlement to concessional rate of tax under CST.
5. Exemption from tax for goods sold in Leh.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Jammu and Kashmir High Court:
The court examined whether it had the jurisdiction to entertain the petitions under Section 103 of the Constitution of Jammu and Kashmir read with Article 226 of the Constitution of India. The court concluded that it had jurisdiction because part of the cause of action, specifically the delivery of goods, occurred within Jammu and Kashmir. The court cited the Sale of Goods Act, noting that delivery of goods is an integral part of the sale transaction, thereby establishing jurisdiction.

2. Applicability of Local Sales Tax versus Central Sales Tax:
The primary dispute was whether the sales in question were inter-State sales attracting CST or local sales subject to the Jammu and Kashmir General Sales Tax Act. The court referred to the contractual terms, which explicitly stated that local sales tax would be charged, and excluded the applicability of CST by superseding clause 9.2 of the general terms and conditions. The court held that the sale was local because the contract did not stipulate inter-State movement of goods, and the movement of goods outside Jammu and Kashmir was not an incident of the contract of sale.

3. Validity of the Clause Excluding the Application of CST:
The petitioners challenged the legality of the clause excluding CST. The court held that the clause was valid as it was part of the contractual terms agreed upon by the parties. The court emphasized that the stipulation for local sales tax was clear and unambiguous, and the petitioners were bound by it. The court also noted that the petitioners did not provide any evidence that the goods were moved out of Jammu and Kashmir pursuant to any contractual obligation.

4. Petitioners' Entitlement to Concessional Rate of Tax under CST:
The petitioners sought to pay tax at the concessional rate under CST by submitting "C forms." The court ruled that the petitioners were not entitled to this benefit as the sales were local and not inter-State. The court referenced several judgments, including State of Andhra Pradesh v. National Thermal Power Corporation Ltd., to establish that for a sale to be considered inter-State, it must occasion the movement of goods from one State to another as an integral part of the sale transaction, which was not the case here.

5. Exemption from Tax for Goods Sold in Leh:
Petitioners argued for tax exemption on goods sold in Leh under Notification S.R.O. 40 dated March 8, 1995. The court held that the exemption was not applicable as the petitioners did not fulfill the conditions stipulated in the notification, such as obtaining an exemption license and importing goods into Leh for resale. The court clarified that the exemption applied only to sales by dealers in Leh and Kargil, and the petitioners did not meet these criteria.

Conclusion:
The court dismissed the petitions, holding that the sales were local and subject to the Jammu and Kashmir General Sales Tax Act. The petitioners were not entitled to the concessional rate of tax under CST or the tax exemption for goods sold in Leh. The differential amount of tax deposited by the petitioners was ordered to be transmitted to the respondents for deposit under the General Sales Tax Act.