2009 (6) TMI 965 - HC - VAT and Sales Tax

Demand of tax and penalty levied under section 30B(3) of the Kerala General Sales Tax Act, 1963 - Held that - In this case goods started its movement from Tuticorin to Karnataka through Kerala and it never reached Karnataka. Therefore the appellant cannot treat the local sale of timber in Kerala during its movement as an inter-State sale from Karnataka. The Central sales tax if any paid in Karnataka is a clear violation of section 9(1) of the Central Sales Tax Act. Therefore all the contentions of the appellant fail. However we feel even now that the appellant can be exonerated from penalty provided the entire tax with interest up to date payable under section 30B(3) read with section 23(3A) is paid within one month from receipt of this judgment. If the appellant settles the tax liability with interest payable under section 23A as above before the officer concerned, he will revoke the penalty.

Summary

Issues:
Appeal against demand of tax and penalty under section 30B(3) of the Kerala General Sales Tax Act, 1963 for sales of timber transported from Tuticorin to Karnataka through Kerala.

Analysis:
The court considered whether the transactions were inter-State sales from Karnataka to Kerala. The appellant argued that since the goods were in the course of inter-State movement, subsequent sales should be treated as inter-State sales under the CST Act. However, the Government Pleader contended that the sales were local as they occurred in Kerala, not during the movement between states. The court agreed with the Government Pleader, stating that the sales were not connected to the inter-State movement. The appellant obtaining form 27C for transport to Karnataka indicated that the sales occurred in Kerala. Therefore, the transactions did not fall under section 3(a) or 3(b) of the CST Act.

Furthermore, the court addressed the appellant's argument that they had paid tax under the Central Sales Tax Act for transactions in Karnataka. However, section 9(1) of the Act mandates that tax should be paid in the state where the goods started their movement. Since the goods never reached Karnataka and were sold in Kerala, any tax paid in Karnataka was a violation of the Act. The court ruled that all contentions of the appellant failed in this regard.

The court provided an opportunity for the appellant to settle the tax liability with interest within one month to avoid the penalty. If the appellant complies, the penalty will be revoked; otherwise, it will stand confirmed, and the respondents can proceed with recovery. Ultimately, the appeals were disposed of based on the above considerations.