2010 (3) TMI 1037 - HC - VAT and Sales Tax

Whether the movement of goods to Pondicherry was an inter-State sale? Held that - The AO has relied on the orders placed by Petrogel India Private Limited Chennai enclosing the cheque for certain sum towards the supply of cement to their factory at Pondicherry. This is one of the instances for which the records were scrutinised and were relied upon by the assessing officer. This finding based on the above records has been confirmed by both the Appellate Assistant Commissioner as well as the Tribunal which in our considered view requires no interference. Further as per section 3(a) of the Central Sales Tax Act 1956 there is a deeming provision which states that a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. Accordingly we reject the first contention of the learned counsel for the petitioner. A reading of the impugned orders does not indicate the consideration of any individual transaction barring the transaction relating to the 276 metric tonnes out of 2, 242 metric tonnes. Thus as regards the payment of sales tax in respect of 276 metric tonnes the orders impugned in the writ petition are confirmed.In respect of the rest of the quantity of cement i.e. 1, 966 metric tonnes the matter is remitted back to the assessing officer for individual consideration afresh and in accordance with law.

Summary

Issues:
Interpretation of stock transfer vs. inter-State sale for sales tax exemption.
Consideration of individual transactions for levy of sales tax.

Interpretation of stock transfer vs. inter-State sale for sales tax exemption:
The case involved a dispute over the classification of transactions as stock transfers or inter-State sales for the purpose of sales tax exemption. The petitioner, a cement manufacturing company, claimed exemption from sales tax on the transfer of cement to Pondicherry, arguing it was a stock transfer. However, the assessing officer considered it an inter-State sale under the Central Sales Tax Act. The petitioner contended that the authorities' finding that the transfers were sales lacked evidence and that each transfer should be assessed independently. The court examined the instructions given by the petitioner to its agent for transferring cement to Pondicherry, which included details of dealers/customers, rates, and advances received, supporting the conclusion that the transfers were sales and not stock transfers. The court upheld the authorities' decision that the transactions constituted inter-State sales based on the records and rejected the petitioner's argument.

Consideration of individual transactions for levy of sales tax:
The assessing officer had levied sales tax on the entire quantity of cement transferred to Pondicherry without examining each individual transaction separately. The court noted that the officer should have assessed each transaction to determine if it qualified as an inter-State sale. Citing a Supreme Court judgment, the court emphasized the importance of scrutinizing each transaction individually before imposing tax. The court found that the assessing officer had not considered individual transactions except for one instance involving 276 metric tonnes out of 2,242 metric tonnes. Consequently, the court directed that sales tax on the 276 metric tonnes be confirmed, while the remaining 1,966 metric tonnes be re-evaluated individually by the assessing officer in compliance with the law. The court disposed of the writ petition with these directions, highlighting the necessity of examining each transaction separately for tax assessment purposes.