2004 (10) TMI 573 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales made by the petitioner can be termed a sale made inside the State.
2. Whether the same sale can be termed both, i.e., a sale inside the State as well as a sale in the course of export.
3. Whether the Tribunal was right in upholding the levy of purchase tax and penalty under section 47 of the Haryana General Sales Tax Act.

Issue-wise Detailed Analysis:

1. Sale Made Inside the State:
The petitioner, a manufacturer of polythene bags, sold goods to exporters outside Haryana, who then exported them internationally. The Assessing Authority imposed additional tax, interest, and penalty, arguing that the petitioner was not entitled to purchase raw materials tax-free for manufacturing goods sold in export. The Tribunal upheld this view based on earlier judgments. However, the Supreme Court in Murli Manohar and Co. v. State of Haryana [1991] 80 STC 79 reversed this, stating that sales to exporters within the state should be treated as local sales, exempt from purchase tax under section 9(1)(b) of the Central Act. This precedent supported the petitioner's claim that their sales should be considered as made inside the State.

2. Sale Inside the State and Course of Export:
The Supreme Court's ruling in Murli Manohar clarified that sales to exporters, even if the goods are eventually exported, are local sales if the goods are delivered within the state. The judgment emphasized that the movement of goods occasioned by the sale determines the nature of the sale. If the goods are delivered to the purchaser within the state, it constitutes a local sale. Therefore, the same sale cannot be simultaneously termed as both a local sale and a sale in the course of export.

3. Levy of Purchase Tax and Penalty:
The Tribunal upheld the levy of purchase tax and penalty under section 47 of the State Act, which was contested by the petitioner. The Supreme Court's interpretation in Murli Manohar and subsequent cases like Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 held that the petitioner was not liable to pay purchase tax on raw materials used for manufacturing goods sold to exporters. The court found that the Assessing Authority committed a jurisdictional error by imposing additional tax, interest, and penalty. The decision to levy interest and impose a penalty was legally unsustainable and nullified.

Conclusion:
The High Court concluded that the Assessing Authority's decision to impose tax, interest, and penalty was incorrect based on the Supreme Court's interpretation of relevant sections of the Central and State Acts. The judgment in Monga Rice Mill v. State of Haryana [2004] 135 STC 549 was deemed irrelevant to the issues at hand. The questions referred by the Tribunal were answered in favor of the petitioner, nullifying the orders of the Assessing Authority, Joint Excise and Taxation Commissioner (Appeals), and the Tribunal.