2011 (3) TMI 1427 - SC - VAT and Sales Tax

Whether in the facts and circumstances of the case, the sale or purchase of goods can be said to have taken place in the course of inter-State trade or commerce and thereby exigible to tax under the Central Sales Tax Act, 1956 - sales agreement between the parties which was entered into some time in the year 1979 and the same was to expire some time in the year 1984. Under this agreement, UIL had agreed to purchase the products manufactured by the assessee and sell it as an independent principal. The assessee has its godown in every State including Delhi. The UIL has also its divisional office in different names at every place wherever the assessee s godown is located Held that - assessing officer, in his detailed and well considered order, has looked into nearly 378 documents and voluminous correspondence between the assessee and UIL and has discussed and co-related the documents to prove on facts that the disputed transaction is inter-State sales though the assessee claims that it is a mere stock transfer, transactions in question were inter-State sales taxable under the Central Act, no merit in this appeal and the same is accordingly dismissed

Issues Involved:
1. Whether the sale or purchase of goods can be said to have taken place in the course of inter-State trade or commerce and thereby exigible to tax under the Central Sales Tax Act, 1956.
2. The nature of transactions between the assessee and Usha Sales Ltd. (UIL) and whether they constitute inter-State sales or branch transfers.
3. The interpretation and application of Section 3(a) of the Central Sales Tax Act, 1956.
4. The relevance and implications of the sales agreement between the assessee and UIL.
5. The validity of the assessments and findings made by the assessing authority, Tribunal, and High Court.

Detailed Analysis:

1. Whether the sale or purchase of goods can be said to have taken place in the course of inter-State trade or commerce and thereby exigible to tax under the Central Sales Tax Act, 1956.
The court emphasized that for a sale to be considered as taking place in the course of inter-State trade or commerce under Section 3(a) of the Central Sales Tax Act, 1956, there must be an obligation to transport goods outside the State, arising from statute, contract, mutual understanding, or the nature of the transaction. This obligation can be inferred from circumstantial evidence, not necessarily requiring direct evidence in a written contract.

2. The nature of transactions between the assessee and Usha Sales Ltd. (UIL) and whether they constitute inter-State sales or branch transfers.
The court examined the nature of transactions, noting that the assessee claimed exemptions on turnover, arguing that the transactions were stock transfers. However, the assessing authority, Tribunal, and High Court found that the transactions were inter-State sales based on the sales agreement and the movement of goods from the factory to various godowns for delivery to UIL or its nominees. The court upheld this finding, noting that the movement of goods was in pursuance of the sales agreement and the indents or orders placed by UIL.

3. The interpretation and application of Section 3(a) of the Central Sales Tax Act, 1956.
Section 3(a) of the Act 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. The court referenced several precedents to clarify that even if the contract does not explicitly stipulate inter-State movement, such movement can be an incident of the contract. The court concluded that the transactions in question met the criteria under Section 3(a) as the goods moved from one State to another in pursuance of the sales agreement.

4. The relevance and implications of the sales agreement between the assessee and UIL.
The sales agreement between the assessee and UIL was central to the court's analysis. Key clauses in the agreement indicated that UIL would purchase the products as an independent principal and that deliveries would be made to UIL or its nominees at the assessee's factories or regional godowns. The court found that these clauses created an obligation for the assessee to move goods inter-State, thus supporting the conclusion that the transactions were inter-State sales.

5. The validity of the assessments and findings made by the assessing authority, Tribunal, and High Court.
The court reviewed the findings of the assessing authority, Tribunal, and High Court, noting that they had thoroughly examined the sales agreement, correspondence, and other evidence. The court found no reason to interfere with their conclusions that the transactions were inter-State sales. The court also dismissed the contention that the assessing officer should have examined each transaction individually, noting that the officer had reviewed extensive documentation and correspondence to support the finding of inter-State sales.

Conclusion:
The court dismissed the appeal, upholding the findings of the assessing authority, Tribunal, and High Court that the transactions in question were inter-State sales taxable under the Central Sales Tax Act, 1956. The court emphasized that the movement of goods was in pursuance of the sales agreement and the indents or orders placed by UIL, thus meeting the criteria under Section 3(a) of the Act.

← Previous Next →