2004 (1) TMI 365 - SC - VAT and Sales Tax

Whether any sale has occasioned by movement of goods or not? Whether a legal fiction can be applied to determine whether a particular inter-State transaction amounted to an inter-State sale or a mere transfer of stock? Held that - The question as to whether the transaction in question constitutes inter-State sale or intra-State sale has been decided up to Tribunal. They have approached this Court without availing the statutory remedies provided for under the statutes. We, therefore, decline to exercise our discretion and direct that the parties may avail the remedies under the statute. In view of our aforementioned findings, the parties may approach the High Court. If necessary, the other States wherein the local sales tax had been deposited, may be impleaded as parties so that the lis may be determined in their presence. However, in the event, in the meanwhile, any forum is created by any Parliamentary Act in terms whereof the inter se disputes between the parties vis-a-vis the claim of the assessee may be determined, they may approach the said forum.

Summary

Issues Involved:
1. Interpretation of Section 6-A of the Central Sales Tax Act, 1956.
2. Jurisdiction of Tamil Nadu authorities to reopen assessments.
3. Conclusiveness of orders under Section 6-A(2) of the Central Act.
4. Applicability of the principle of res judicata.
5. Validity of reassessment proceedings based on fraud or misrepresentation.

Detailed Analysis:

1. Interpretation of Section 6-A of the Central Sales Tax Act, 1956:
The appeals and writ petition primarily involve the interpretation of Section 6-A of the Central Sales Tax Act, 1956. The appellants, engaged in the manufacture of commercial vehicles, contended that the transfer of goods to their regional sales offices constituted stock transfers, not inter-State sales. They relied on declarations in Form F, which were accepted by the assessing authority. The Supreme Court examined whether Section 6-A creates a conclusive presumption regarding the nature of the transaction.

The Court held that Section 6-A(2) creates a legal fiction, making the movement of goods deemed to have been occasioned otherwise than as a result of sale. This legal fiction must be given full effect, making the order of the assessing authority conclusive for all purposes of the Act. Reopening such orders is permissible only on limited grounds such as fraud, misrepresentation, or suppression of material facts.

2. Jurisdiction of Tamil Nadu Authorities to Reopen Assessments:
The appellants challenged the jurisdiction of Tamil Nadu authorities to reopen assessments, arguing that the orders under Section 6-A(2) attained finality and could not be reopened. The Court noted that the power to reopen assessments depends on the provisions of the concerned State sales tax enactments by virtue of Section 9(2) of the Central Act. The Court emphasized that an order under Section 6-A(2) is part of the assessment order and can be reopened only if the relevant State Act allows it.

3. Conclusiveness of Orders Under Section 6-A(2) of the Central Act:
The Court overruled its earlier decision in Ashok Leyland, holding that an order under Section 6-A(2) is conclusive and cannot be reopened merely on the ground of error in judgment. The Court emphasized that such orders can only be challenged on limited grounds like fraud or misrepresentation. The Court stated, "Once an order in terms of sub-section (2) of section 6-A of the Central Act is passed, the transactions involved therein would go out of the purview of the Central Act."

4. Applicability of the Principle of Res Judicata:
The principle of res judicata was discussed in the context of reopening assessments. The Court clarified that res judicata is a procedural provision and does not apply where there is inherent lack of jurisdiction. An order passed without jurisdiction is a nullity and cannot be supported by invoking procedural principles like estoppel, waiver, or res judicata.

5. Validity of Reassessment Proceedings Based on Fraud or Misrepresentation:
The Court acknowledged that orders obtained by fraud, misrepresentation, or suppression of material facts could be reopened. The Court stated, "An order of assessment is albeit passed under the State Act. But once it is held that the concerned State Act as also the Central Act is not applicable, as a consequence whereof sales tax would be payable under another State Act, it is doubtful as to whether the power to reopen the proceedings under the State Act or the Central Act would be attracted."

Conclusion:
The Supreme Court concluded that the appellants could move the High Court to ventilate their grievances. If a new forum is created by the Central Government, the appellants may approach it. The Court emphasized the need for a central mechanism to resolve disputes involving inter-State transactions to avoid conflicting assessments by different States. The appeals and writ petitions were disposed of with these directions and observations.