2014 (5) TMI 209 - HC - VAT and Sales Tax

Nature of Sale Inter-state sales or local sales Held that - Judgment in CCT, Bihar Vs. Bhag Singh Milkha Singh 1973 (5) TMI 94 - PATNA HIGH COURT followed The obligation to take goods outside the State may be either an express covenant or an implied one under the contract by a mutual understanding and it is not necessary that in all cases, there must be direct evidence showing certain obligations - The obligation could be inferred from circumstantial evidence also - Relying upon Oil India Ltd. v. Superintendent of Taxes 1975 (3) TMI 96 - SUPREME COURT OF INDIA it was held that for a transaction, to be an inter-State sale, there must be a movement of goods occasioned by the said sale from one State to another - No matter in which State the property in the goods passes, the movement of goods occasioned by the sale from one State to another would make a sale as one in the nature of inter-State sale - It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement and it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State must be specified in the contract itself - The decision was applied in Union of India Vs. Khosla & Co. Ltd. 1979 (3) TMI 176 - SUPREME COURT OF INDIA Whether insurance charges borne by purchaser decisive of nature of sale Held That - Also relying upon Co-operative Sugars (Chittur) Ltd. Vs. State of Tamil Nadu 1993 (4) TMI 270 - SUPREME COURT OF INDIA It was observed that the movement of goods was an incident of sale or purchase; amounted to an inter-State sale or purchase and it is not necessary that the contract of sale has to expressly provide for the movement of goods; it was sufficient that the movement of goods is implicit in the sale - Therefore, the criteria for considering the transaction as an inter-State sale or not, is the movement of goods intimately connected with the sale - The fact that the purchaser had borne the insurance charges or the seller had borne the insurance charges or that the purchaser had moved the goods at their own cost would not be a decisive factor for the purpose of determining the nature of sale as inter-State sale or not - The Tribunal and the other authorities had misdirected themselves in placing emphasis on the transport and insurance made by the purchaser as indicators of the sale being a local sale - Order of the Tribunal Set aside Revision allowed Decided in favour of assessee.

Summary

Issues:
1. Interpretation of sales transaction as inter-state or local.
2. Justification of tax liability on specific turnover.

Issue 1 - Interpretation of sales transaction as inter-state or local:
The case involved an appeal against the Tribunal's order regarding the assessment year 1989-90, focusing on whether the sale represented inter-state or local sales. The Assessing Officer considered it a local sale as the delivery was within the state, leading to assessment under the Tamil Nadu General Sales Tax Act. The Appellate Authority and Sales Tax Appellate Tribunal upheld this view based on factors like ex-godown price, buyer's delivery, and insurance. The petitioner argued that despite no written agreement, the sale was inter-state due to the intimate link between movement and sale, citing relevant case laws. The Government Advocate supported the local sale view, emphasizing buyer's actions post-delivery.

Issue 2 - Justification of tax liability on specific turnover:
The petitioner contested the tax liability on a specific turnover, highlighting the lack of reasons from the Assessing Authority and non-consideration by the Appellate Assistant Commissioner. The petitioner's counsel argued that contractual matters like insurance and movement by the buyer should not solely determine the sale's nature. The Government Advocate relied on case law to support the view that buyer's actions post-delivery indicated a local sale. After considering the arguments and legal precedents, the Court held that the movement and sale were intricately linked, making it an inter-state sale. The emphasis on buyer's actions post-delivery was deemed misplaced, leading to the Tribunal's order being set aside.

This detailed analysis of the judgment showcases the legal intricacies involved in interpreting sales transactions as inter-state or local and justifying tax liabilities based on specific turnovers. The Court's thorough examination of the facts, legal arguments, and relevant case laws resulted in a decision favoring the petitioner's stance on the nature of the sale, ultimately setting aside the Tribunal's order.