2008 (8) TMI 868 - HC - VAT and Sales Tax

Whether the Tribunal was legally justified in holding that the transaction relating to 1,02,944 was a purchase for and on behalf of ex-U.P. principals despite the fact that evidence on record does not indicate that the purchases in question have been made in compliance with the orders from ex-U.P. principals and the despatches of such goods had occasioned the said purchases? Held that - Keeping in view the facts of the present case, it would be clear that the Tribunal has committed an error of law in reaching the conclusion that the purchases by the dealer-opposite party were made on behalf of ex-U.P. principals in the course of inter-State purchases. The dealer-opposite party has failed to establish that the purchase of goods and dispatch outside State of U.P., were parts of the same transaction. In this regard, the Tribunal has not set aside the contrary findings recorded by the two authorities below it. Purchase orders may be oral but nonetheless the dealer is required to maintain a record of such orders to establish that it made the purchases as agent on behalf of a particular principal and the purchased goods have been dispatched to the principal at the earliest opportunity. Thus the order of the Tribunal is indefensible and is liable to be set aside. Both the revisions succeed and are allowed and the common order of the Tribunal is set aside.

Summary

Issues:
Taxability of transactions for assessment years 1987-88 and 1988-89, Legality of holding transactions as inter-State purchases on behalf of ex-U.P. principals, Classification of "tangoon" as cattle feed.

Analysis:
1. Taxability of Transactions: The revisions were filed against the Trade Tax Tribunal's order concerning transactions worth Rs. 1,02,944 for 1987-88 and Rs. 2,87,494 for 1988-89. The dealer claimed these purchases were made on behalf of ex-U.P. principals in inter-State purchases. The assessing authority and first appellate authority did not agree, but the Tribunal accepted the dealer's plea. The key issue was whether the Tribunal was justified in holding these transactions as purchases for ex-U.P. principals.

2. Inter-State Purchases: The Tribunal based its decision on factors like purchases within U.P. from farmers mentioning ex-U.P. traders, selling goods at the purchase price with only a commission. The Department argued that these factors did not conclusively prove inter-State purchases for ex-U.P. principals. The Tribunal was criticized for not thoroughly examining the transactions and reversing the assessment order without sufficient evidence. The Supreme Court's precedent highlighted that inter-State purchases involve the goods' purchase and dispatch to ex-State principals as part of the same transaction.

3. Legal Error: The Tribunal erred in concluding that the purchases were on behalf of ex-U.P. principals for inter-State transactions. Mere commission charges and mentioning of out-of-state dealers in documents were insufficient to prove inter-State purchases. The Supreme Court emphasized the importance of a continuous transaction from purchase to dispatch for inter-State sales. In this case, the Tribunal failed to address conflicting findings by lower authorities and did not establish a clear link between purchases and dispatch outside U.P.

4. Conclusion: The Tribunal's decision was deemed legally flawed as it did not adequately prove the transactions as inter-State purchases for ex-U.P. principals. The lack of evidence connecting purchases to dispatch outside U.P. and failure to address lower authorities' findings led to the decision being set aside in favor of the revisions. The judgment emphasized the necessity of maintaining proper records to establish purchases on behalf of specific principals for inter-State transactions.