2022 (8) TMI 371 - HC - VAT and Sales Tax

Deletion of demand of entry tax created under Section 12 of Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 - sale of sugar manufactured by the assessee - when it is found that delivery of sugar has been given at the factory gate and thereafter the purchaser was at liberty to transport the goods at his own choice - local sale made by the opposite party/dealer or not - delivery of sugar outside the State of U.P. or the export of the same outside the State not established - HELD THAT - Undisputedly, the levy of entry tax under the Act arises on scheduled goods when they are proposed to be consumed, used or sold in another local area, within the State. By very nature of that levy, two exclusions arise. First, no Entry Tax may be levied on goods that are intended to be consumed, used or sold within the local area where they are produced. It is so because the levy of Entry Tax is only on the causing of entry of scheduled goods into a local area. It assumes goods to be taxed were in existence before their entry into that local area. Only then they may be brought into a different local area which would lead to levy of entry tax. Therefore, goods consumed, used and sold within the local area of their origin or manufacture would not attract levy of entry tax. This necessary exclusion is incorporated in the statute itself, under Section 4(1) of the Act. The second exclusion that must always exist is with respect to goods that may be taken out of the local area where they are produced, to a local area outside the State of U.P. whether by way of export to another place within the country or in the course of export sale outside the country. That exclusion must exist as it is inherent in the Constitutional scheme - By using the phrase intends to bring into the local area , the legislature had made it plain that the provision of Section 12 of the Act would apply only if the intention of the purchaser is to take the goods to a local area as defined under Section 2(d) of the Act. Those areas would be such as may fall within the territory of State of U.P. only and not outside it. In the facts of the present case, the assessee relied on documents such as invoice, transportation documents and payments received through bank. On the contrary, the revenue only relied on the delivery of goods made at the factory gate of the assessee and, therefore, the sale being complete at that point of time. Hence intention to carry the goods outside the State was stated to be lacking. Thus, for the purpose of applicability of Section 5 of the Central Act, it was necessary to establish existence of prior contract of sale occasioning the movement of goods, to outside the country. That issue is not before this Court, in the present case. It would arise and would have to be tested on its own merit, in the central assesment, if that issue arose. However, for the purposes of the Act, the lesser test would allow the assessee to successfully contend that no occasion arose as may have created the obligation on the assessee to charge and receive payment on entry tax act while making sale of goods that were intended to be carried outside the State of U.P. In absence of any evidence led by the revenue to doubt the intention (to transport the taxable goods outside the State of U.P. for their consumption, use or sale at such other place), established on the strength of sale invoice, transportation documents and payments made, no liability arose under Section 12 of the Act. In absence of any evidence led by the revenue to establish that the goods were not actually exported and in absence of any credible material to doubt the evidence led by the assessee that the goods were taken outside the State of U.P., there is no perversity in the order of the Tribunal. Revision dismissed.

Issues Involved:
1. Delay in filing the revision.
2. Applicability of Entry Tax on local sales.
3. Establishment of inter-state or export sales.
4. Interpretation of Section 12 of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007.

Issue-wise Detailed Analysis:

1. Delay in filing the revision:
The court acknowledged the delay in filing the revision and found the cause shown for the delay to be sufficiently explained. Consequently, the delay condonation application was allowed.

2. Applicability of Entry Tax on local sales:
The revision was filed by the revenue against the order of the Commercial Tax Tribunal, which had dismissed the revenue's appeal and confirmed the first appeal order deleting the demand of entry tax. The revenue argued that since the delivery of sugar was given at the factory gate, it constituted a local sale, making entry tax chargeable. However, the Tribunal and the Appeal Authority concluded that the transactions were performed against orders placed by the selling agents of the assessee at Delhi, and the transportation documents reflected the movement of goods outside the State of U.P. Payments were received through banking channels, and the transportation was insured, indicating the goods were intended for destinations outside U.P.

3. Establishment of inter-state or export sales:
The assessee claimed inter-state sales of sugar and provided documents such as invoices, transportation documents, and bank payments to support their claim. The revenue's reliance on the delivery of goods at the factory gate was insufficient to establish that the goods were not intended for inter-state or export sales. The court emphasized that for the purpose of Section 12 of the Act, the intention to carry goods outside the State was crucial, rather than the strict test required for establishing inter-state or export sales under the Central Sales Tax Act.

4. Interpretation of Section 12 of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007:
Section 12 of the Act mandates that entry tax is payable when goods are intended to be brought into a local area within the State. The court noted that the provision applies only if the intention is to take the goods to another local area within U.P. The lesser test of 'intention' under Section 12 was satisfied by the assessee through documentation and evidence of transportation and payment. The court clarified that the provision does not create a tax liability on the manufacturer if the goods are intended for inter-state trade or export.

Conclusion:
The court found no evidence from the revenue to doubt the intention of the assessee to transport the goods outside U.P. The Tribunal's findings were based on substantial material, and no perversity or patent error was established by the revenue. Consequently, the revision was dismissed, and no costs were awarded.

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