2010 (10) TMI 965 - HC - VAT and Sales Tax

Whether purchase of tendu leaves by the petitioners, who are registered exporters under the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (for short, the Adhiniyam 1964 ) read with the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Niyamavali, 1966 (for short, the Niyamavali, 1966 ), falls within the definition of inter-State sale or intra-State sale? Held that - The purchase of tendu leaves was an independent transaction, which was complete in the State of Chhattisgarh. Movement of tendu leaves thereafter was a different transaction and independent of the contract of sale. There is no link between the contract of sale and movement of leaves from State of Chhattisgarh to outside the State of Chhattisgarh. Further, the movement of leaves to outside State of Chhattisgarh was not occasioned by sale of tendu leaves, as it was not on account of covenant of the contract of sale. Thus, the sales are intra-State sales. The petitioners are liable to pay all the taxes accordingly under the provisions of the State Acts. All the interim reliefs granted earlier stand vacated. The petitioners are accordingly directed to make payment of balance amount of taxes to the respondentState, as aforestated. In the result, all the writ petitions are liable to be and are hereby dismissed.

Summary

Issues Involved:
1. Whether the purchase of tendu leaves by the petitioners, who are registered exporters, constitutes an inter-State sale or an intra-State sale.

Detailed Analysis:

1. Nature of Sale - Inter-State or Intra-State:
The core issue is whether the sale of tendu leaves to the petitioners, registered as exporters under the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, and the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Niyamavali, 1966, constitutes an inter-State sale or an intra-State sale.

Petitioners' Arguments:
- The petitioners argued that they are registered exporters and dealers under both State and Central Sales Tax Acts. They asserted that the sale of tendu leaves and their movement to manufacturing units outside Chhattisgarh are inseparably connected, making it an inter-State sale under Section 3(a) of the CST Act.
- They referenced the Commissioner, Commercial Tax's circular No. 9767 dated October 10, 2001, which treated the sale of industrial bamboo moved outside the State as an inter-State sale, arguing that their case is identical.
- They cited several judgments, including Similipahar Forest Development Corporation Limited v. State of Orissa and others, to support their contention that the movement of goods incidental to the contract of sale constitutes an inter-State sale.

Respondents' Arguments:
- The State argued that the movement of goods from one State to another must be under the contract of sale to be considered an inter-State sale. If the movement is independent of the contract, it does not qualify as an inter-State sale.
- They cited several Supreme Court judgments, including Bengal Immunity Company Limited v. State of Bihar and others, to assert that the transport or movement must be under the contract of sale.

Court's Analysis:
- The Court noted that the Federation is an instrumentality of the State with a monopoly in the transaction of tendu leaves, regulated by the Adhiniyam, 1964, and the Niyamavali, 1966.
- The Court found that the provisions of the Adhiniyam, 1964, and the Niyamavali, 1966, are not part of the agreement but are conditions for compliance.
- The Court held that the movement of tendu leaves was not a part of the contract of sale and did not require movement from Chhattisgarh to another State. The requirement of a Transport Permit (TP) for movement is a regulatory measure and not a part of the contract of sale.
- The Court cited several judgments, including Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, to support the view that the movement of goods must be a result of the contract of sale to be considered an inter-State sale.
- The Court concluded that the sale of tendu leaves to the petitioners was an intra-State sale, as the movement of leaves was independent of the contract of sale.

Conclusion:
- The Court held that the purchase of tendu leaves by the petitioners was an independent transaction completed within the State of Chhattisgarh. The movement of tendu leaves outside the State was a separate transaction and not occasioned by the sale under the contract.
- The sales were deemed intra-State sales, and the petitioners were liable to pay all applicable taxes under the State Acts.
- All interim reliefs granted earlier were vacated, and the petitions were dismissed without any order as to costs.