2022 (4) TMI 1203 - HC - VAT and Sales Tax

Validity of assessment order - reversal of exemption granted to the petitioner for transit sale - claim of exemption disallowed on transit sale by treating it as a local sale - reason for rejection of the claim for exemption is that the Form E1 issued by the supplier from Calcutta contains the place of destination as Kalpakkam and in transit sale, the supplier should not be made aware of the purchaser's name and address. HELD THAT - The case of the petitioner is that they have received an order from the Atomic Power Project, Kalpakkam for supply of certain electrical goods. The purchase order so received has been forwarded by them to its supplier at Calcutta and they in turn supplied the goods directly to the Atomic Power Project, Kalpakkam. However, it is stated that such supply and/or delivery of goods effected by the supplier at Calcutta is for and on behalf of the petitioner and consequently, they are entitled to claim exemption under Section 6 (2) of the CST Act. But, such claim of the petitioner was rejected and the sale was treated as a local sale by the third respondent on the ground that form E1 issued by the supplier from Calcutta contains the place of destination as Kalpakkam and in a transit sale, the supplier may not be knowing the purchaser's name and address - Therefore, whether the supply of goods effected by the petitioner was a transit sale or it was a local sale, disentitling them from claiming exemption, has to be examined. The supply of goods effected by the petitioner through a supplier at Calcutta to the Atomic Energy Project, Kalpakkam cannot be regarded as local sales and it is a transit sale - Petition allowed.

Summary

Issues:
1. Claim of exemption under the Central Sales Tax Act for transit sale.
2. Interpretation of Form E1 in transit sale transactions.
3. Determination of whether the supply of goods was a transit sale or a local sale.

Analysis:
The petitioner, a dealer in electrical and hardware items, sought exemption under the Central Sales Tax Act for transit sales. The petitioner received a purchase order from the Atomic Power Project, Kalpakkam, forwarded it to a supplier in Calcutta, who then supplied the goods directly to Kalpakkam. The dispute arose when the claim for exemption on transit sale was rejected under the Tamil Nadu General Sales Tax Act. The rejection was based on the argument that the supplier in Calcutta was aware of the destination, Kalpakkam, which should not be the case in a transit sale. The petitioner contended that the supplier's knowledge of the destination should not disqualify them from claiming exemption, as delivery was taken at Kalpakkam, fulfilling the requirements for exemption under the CST Act.

The appellate authority initially ruled in favor of the petitioner, but the Revenue appealed to the Tribunal, which overturned the decision. The petitioner then filed a writ petition challenging the Tribunal's order. The petitioner argued that since there was no break in the journey of goods and they did not handle the goods until delivery at Kalpakkam, treating the sale as local for tax purposes was unjustified. The petitioner had complied with all mandatory requirements, including producing E1 and C declaration forms. The petitioner emphasized that the delivery of goods at Kalpakkam was crucial for claiming exemption under the CST Act.

The respondents contended that the sale was a straight sale from the supplier in Calcutta to the petitioner, as the goods were imported against a purchase order from the Atomic Energy Project, Kalpakkam. They argued that the Tribunal correctly interpreted the transaction as a local sale, warranting dismissal of the writ petition.

The High Court analyzed the situation in light of a previous judgment and held that the supply of goods by the petitioner through the Calcutta supplier to Kalpakkam constituted a transit sale, not a local sale. Citing the precedent that even if the buyer and seller are in the same state, an interstate sale can occur if the contract involves movement of goods outside the state, the Court ruled in favor of the petitioner. Consequently, the Tribunal's decision was set aside, and the writ petition was allowed, with no costs imposed.