2016 (11) TMI 1180 - HC - VAT and Sales Tax

Imposition of VAT - inter-state sale treated as intra-state sale - Held that - if the goods moved in the course of inter-state movement and reaches the buyer in satisfaction of a contract of a purchase and there is a nexus between the movement of goods and the contract entered into, for which the movement of the goods takes place, then such a sale is deemed to be in the course of inter-state trade or commerce, and based on the contract of sale as is provided in the contract. The Assessing Officer has not discharged the statutory function properly and has passed an order of assessment imposing liability on the petitioner without adverting to consider relevant factual aspects and legal question, as are indicated hereinabove. Infact the learned Assessing Officer should have gone into the contract in detail, analysed it and then recorded a finding as to whether the sale in question or the transaction is an inter-state sale or intra-state sale . This having not been done, we are of the considered view that this petition should be allowed and matter remanded back to the Assessing Officer for reconsideration. Appeal allowed by way of remand.

Summary

Issues:
Challenging assessment of 'inter-state sale' as 'intra-state sale' and imposition of VAT.

Analysis:
The petitioner challenged an order by the Commercial Tax Officer regarding the assessment of certain sales as 'intra-state' instead of 'inter-state,' leading to the imposition of Value Added Tax (VAT). The petitioner was awarded a contract for various electrical works by the Railways, requiring purchases from approved suppliers outside the state. The petitioner claimed these transactions to be 'inter-state sales' as per the contract terms, but the Assessing Officer considered them 'intra-state,' leading to VAT liability.

The petitioner argued that the Assessing Officer ignored legal principles, including the Supreme Court's ruling in a similar case. The petitioner provided extensive documentation to support their claim, but the assessment order was passed casually in one page. The petitioner contended that the finding of 'intra-state sale' was perverse and should be quashed.

The State argued that the matter should be addressed through a statutory appeal, and determining the nature of the sale is a factual inquiry. Reference was made to the Supreme Court judgment on 'benami transactions,' suggesting further consideration.

The Court noted the Supreme Court's ruling that if goods move in 'inter-state' commerce based on a purchase contract with a nexus between the movement and the contract, it constitutes an 'inter-state sale.' Despite prima facie correctness of the petitioner's claim, the Assessing Officer failed to consider relevant facts and legal questions. The Court found the assessment lacked proper scrutiny and remanded the matter back for reconsideration.

The Court allowed the writ petition, quashed the assessment order, and remanded the case to the Assessing Officer for a fresh decision considering all aspects and legal principles presented by the petitioner. The Court emphasized the need for a detailed analysis in line with the Supreme Court's guidelines before determining the nature of the sale transaction.