2008 (6) TMI 559 - HC - VAT and Sales Tax

Whether the sales effected by the respondent are inter-State sales liable to tax under the Act? Held that - Immediately after the respondent delivered the goods to the persons who came to its shop the property in those goods passed on to the buyer by virtue of section 20 of the Sale of Goods Act. Therefore the fact that person who took delivery of the goods had thereafter consigned the goods taken delivery of by him from the respondent to his head office which is located in another State would not make the sale made by the respondent an inter-State sale.

Summary

Issues:
1. Whether the sales by the respondent are inter-State sales liable to tax under the Central Sales Tax Act, 1956?

Analysis:

The respondent, a private limited concern dealing in photographic paper and film, filed returns disclosing nil turnovers under the Central Sales Tax Act. The assessing authority held that while a stock transfer was exempt, inter-State sales worth Rs. 33,50,727 were taxable at 10%. The respondent contended that the sales were local, as goods were delivered at their shop in Hyderabad and they were unaware of subsequent movements. The Appellate Deputy Commissioner dismissed the appeal, stating that sales were inter-State as per authorizations issued by buyers. The Sales Tax Appellate Tribunal (STAT) later ruled in favor of the respondent, stating the sales were local, leading to the State filing a revision.

The key contention was whether the sales were inter-State, with the Special Standing Counsel arguing that authorizations indicated inter-State sales. Referring to legal precedents, it was highlighted that for sales tax imposition under the Act, goods must move out of the State based on a contract between the seller and buyer. The onus to prove inter-State sales lies with the Revenue, especially when the respondent claims sales were local. Notably, the place of payment is not decisive in determining inter-State sales.

The assessing authority and appellate authority considered the head office receiving payment as evidence of inter-State sales. However, it was clarified that property in goods passes to the buyer upon delivery, regardless of payment location. The authorizations provided did not prove inter-State sales, as goods were delivered at Hyderabad, making the buyer the owner at that point. The Tribunal's error in referencing specific cases was noted, with the judgment emphasizing that the sales were local, and the respondent's appeal was upheld.

In conclusion, the High Court dismissed the revision, affirming the STAT's decision that the sales were local and not inter-State, based on legal principles and factual analysis.