2007 (3) TMI 733 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Impleading Proposed Respondents
2. Correctness of the Order Dated 27-3-2006
3. Availability of Alternative Remedy
4. Nature of the Contract and Tax Liability

Summary:

1. Impleading Proposed Respondents:
I.A.V./2006 was filed to implead the proposed respondents. The application was allowed, and the appellant was permitted to implead the proposed respondents as respondents 4 and 5. The learned counsel for the appellant was directed to amend the cause title accordingly.

2. Correctness of the Order Dated 27-3-2006:
The appeal was directed against the order dated 27-3-2006 passed by the learned single Judge in W.P. No. 3306/2006. The appellant questioned the correctness of this order, urging various grounds and praying to allow the appeal and writ petition by setting aside the impugned order and quashing the order of assessment passed by respondent No. 3.

3. Availability of Alternative Remedy:
The learned single Judge declined to interfere with the orders passed by respondent No. 3 on the ground of availability of alternative remedy. The appellant contended that the movement of goods from Bangalore to Delhi was incidental and not an incident of sale, arguing that the orders passed by respondent No. 3 were illegal and without authority of law.

4. Nature of the Contract and Tax Liability:
The factual background involved a contract awarded to a Consortium by DMRC for the supply of train sets on a turn-key basis. The Consortium established a project office at Delhi, and ROTEM tied up with BEML at Bangalore for the fabrication of car bodies. Notices were issued to ROTEM by respondent No. 3 for assessment years 2003-04 and 2004-05, fixing the tax liability. The appellant challenged these orders, arguing that the contract between ROTEM and BEML was independent of the contract between DMRC and the Consortium, and thus, the movement of goods was not related to inter-state sale.

The court referred to various Supreme Court decisions, establishing principles that a sale becomes taxable u/s 3(a) if the movement of goods from one state to another is under a covenant or incident of the contract of sale. The court concluded that the contract between ROTEM and BEML was to fulfill the contractual obligation of the Consortium with DMRC, making it an inter-state sale. Therefore, the State of Karnataka had the authority to levy and collect the tax.

Judgment:
The appeal was dismissed, and the court directed respondents 4 and 5 to refund the amount paid under the Delhi Sales Tax Act, as it was the State of Karnataka that could levy and collect the tax. The appellant was instructed to deposit the balance amount within four weeks.