2003 (4) TMI 553 - HC - VAT and Sales Tax

Issues Involved:
1. Classification of stock transfer as inter-State sale.
2. Jurisdiction to levy tax on inter-State sales.
3. Validity of Tribunal's distinction between cutch and kattha transactions.
4. Relevance of amendment in Section 9 of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Classification of Stock Transfer as Inter-State Sale:
The primary issue was whether the stock transfers of kattha and cutch from Bareilly to Calcutta constituted inter-State sales. The assessing authority treated these transfers as inter-State sales based on the agreement between the dealer and M/s. Kedia Brothers, Calcutta, who acted as the sole distributor for West Bengal and Orissa. The dealer contended that the transfers were stock transfers and not sales. However, the Tribunal accepted the dealer's plea for kattha but not for cutch, resulting in the Commissioner of Sales Tax filing revisions.

2. Jurisdiction to Levy Tax on Inter-State Sales:
The assessing authority and the first appellate authority concluded that the movement of goods from Bareilly to Calcutta was in pursuance of a prior contract of sale, thereby classifying it as an inter-State sale. The Tribunal's decision to treat kattha as a stock transfer was challenged on the grounds that it was inconsistent with the treatment of cutch and lacked a valid basis. The Tribunal's reliance on the table furnished by the dealer was deemed insufficient to establish that the goods were first received at the Calcutta depot and then supplied to M/s. Kedia Brothers based on subsequent orders.

3. Validity of Tribunal's Distinction Between Cutch and Kattha Transactions:
The Tribunal's distinction between cutch and kattha transactions was found to be erroneous. The assessing authority had observed that both types of goods were dispatched under similar conditions, with R.R. (Railway Receipts) prepared in the name of the managing agent or self and subsequently endorsed in favor of M/s. Kedia Brothers. The Tribunal failed to provide a valid reason for treating kattha differently from cutch, leading to the conclusion that the Tribunal's order was perverse and without basis.

4. Relevance of Amendment in Section 9 of the Central Sales Tax Act, 1956:
The Tribunal had held that the transactions where R.R. was endorsed in favor of M/s. Kedia Brothers were not liable to tax for the years under consideration due to an amendment in Section 9 of the Central Sales Tax Act, 1956, effective from September 7, 1976. However, it was clarified that this amendment was irrelevant to the issue at hand, as the relevant years were prior to the amendment. During the relevant period, the State from where the movement of goods started had the jurisdiction to levy tax. Thus, the State of U.P. had the right to levy tax on these transactions.

Conclusion:
The High Court found that the Tribunal's order was erroneous and illegal for several reasons, including the lack of distinction in the mode of stock transfer for cutch and kattha, the incorrect basis for treating kattha as a stock transfer, and the misapplication of the amendment in Section 9 of the Central Sales Tax Act, 1956. The Court held that the transactions in question were inter-State sales, as there was a clear link between the movement of goods from Bareilly and the buyer's order, fulfilling the criteria for inter-State trade under Section 3 of the Central Sales Tax Act, 1956. Consequently, all revisions were allowed, and the Tribunal's order dated February 5, 1991, was set aside.

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