2016 (4) TMI 1210 - HC - VAT and Sales Tax

Intra-state sale - Jharkhand VAT - it is the petitioner s case that instead of Central Sales Tax @ 5% it should have been Jharkhand Value Added Tax @ 5% as the sale between this petitioner and respondent no.5 is an intra-State Sale i.e. respondent no.5 has treated first sale between this petitioner and respondent 5 as a inter-State sale Held that - the petitioner is an auction purchaser of the coal from respondent-C. C.L. Petitioner is also a registered dealer within the State of Jharkhand. Respondent no.5 has sold the commodity viz. coal to this petitioner within the State of Jharkhand . Thus, it is intra-State sale and hence, under the Jharkhand Value Added Tax Act the petitioner is liable to make payment of Jharkhand Value Added Tax @ 5% of the sale price. The coal is not a consumable commodity by the petitioner. Coal is bound to be resold by the trader like this petitioner - in 2nd sale the coal is sold by this petitioner to Kamakhya Traders, Gorakhpur, Uttar Pradesh and to another party which is also situated in the State of Uttar Pradesh - Thus, the movement of the goods from one State to another i.e. from the State of Jharkhand to the State of Uttar Pradesh is not because of the first sale (intra-State sale), but, the movement of the goods from one State to another State is because of 2nd sale between the petitioner and the purchaser in the State of Uttar Pradesh (inter-State sale). The present matter is between A and B i.e. the first sale which is inter-State sale, whereas transaction between B and C i.e. from the petitioner and Uttar Pradesh Sale, which is the second sale - there is no privity of facts between A and C i.e. between respondent no.5 and the purchaser of the Uttar Pradesh, nor from one sale or purchaser of coal, there is a movement of goods from one State to another State. Coal is not such a commodity which will be consumed by the purchaser, always. He may purchase for captive consumption or he may not. Sometimes, petitioner may be a trader also. A trader is bound to further sell the coal, within the State, outside the State or even outside the country. In the fact of the present case, in the second sale, the movement of goods has taken place from one State to another State and, therefore, respondent no.5 could not have levied Central Sales Tax under Section 3 of the Central Sales Tax Act, 1956. This aspect of the matter has also not been properly appreciated by respondent no.5 while levying Central Sales Tax at the rate of 5% as stated in Tax cum Excise Invoice (Annexure 3). The movement of goods from one State to another is not due to incidence of e-auction of coal between respondent no.5 and petitioner. Therefore, Central Sales Tax cannot be levied, by respondent no.5, but, only Value Added Tax can be levied. The movement of goodscoal from Jharkhand to Uttar Pradesh is independent of incidence of e-auction. The Central Sales Tax levied at the rate of 5% by respondent no.5 is impermissible in the eyes of law. Instead of that, it should have been Value Added Tax under the Jharkhand Value Added Tax Act, 2005 - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Validity of the Tax-cum-Excise Invoice raised by respondent no.5.
2. Determination of whether the sale is intra-State or inter-State.
3. Applicability of Central Sales Tax (CST) versus Jharkhand Value Added Tax (JVAT).
4. Legal implications of e-auction sales and subsequent sales.

Issue-wise Detailed Analysis:

1. Validity of the Tax-cum-Excise Invoice raised by respondent no.5:
The petitioner challenged the Tax-cum-Excise Invoice raised by respondent no.5, which demanded Central Sales Tax (CST) at 5% of the sale price. The petitioner argued that the sale should be subject to Jharkhand Value Added Tax (JVAT) at 5% instead of CST, as the transaction between the petitioner and respondent no.5 was an intra-State sale.

2. Determination of whether the sale is intra-State or inter-State:
The court examined the nature of the transactions. It was found that the petitioner, an auction purchaser of coal from respondent-C.C.L., conducted an intra-State sale within Jharkhand. The subsequent sale of coal by the petitioner to parties in Uttar Pradesh was an inter-State sale. The movement of goods from Jharkhand to Uttar Pradesh occurred due to the second sale, not the initial intra-State sale.

3. Applicability of Central Sales Tax (CST) versus Jharkhand Value Added Tax (JVAT):
The court noted that under Section 3 of the Central Sales Tax Act, 1956, a sale is deemed inter-State if it involves the movement of goods from one State to another. In this case, the movement of goods was due to the second sale. Therefore, the initial sale between the petitioner and respondent no.5 should be subject to JVAT at 5%, not CST. The court emphasized that the quantum of tax remains the same, but the nomenclature changes, impacting the petitioner's eligibility for Input Tax Credit under the JVAT Act.

4. Legal implications of e-auction sales and subsequent sales:
The court referred to previous judgments, including M/s Amit Enterprises Vs. Central Coalfields Limited, and the High Court of Madras decision in Surya Vinayaka Industries Limited, to support the view that the movement of goods due to subsequent sales does not justify the levy of CST on the initial sale. The court reiterated that the movement of goods from one State to another due to a second sale does not affect the tax liability of the first sale, which remains an intra-State transaction subject to JVAT.

Conclusion:
The court concluded that respondent no.5 incorrectly levied CST at 5% instead of JVAT at 5%. The court directed respondent no.5 to amend the Tax-cum-Excise Invoice to reflect JVAT instead of CST and to issue the necessary JVAT404 Form within four weeks. The writ petition was allowed without imposing costs on the respondents.