1990 (11) TMI 358 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of assessment under section 11(1) of the Tripura Sales Tax Act.
2. Determination of whether the sales were inter-State or intra-State.

Summary:

1. Validity of Assessment u/s 11(1) of the Tripura Sales Tax Act:
The petitioner, a partnership firm, received a notice of demand from the Superintendent of Taxes, Agartala, demanding sales tax on materials supplied for a contract in Tripura. The petitioner challenged the assessment on the grounds that it was illegal and without jurisdiction, as no valid notice u/s 11(1) of the Tripura Sales Tax Act was served, which is a condition precedent for initiating assessment proceedings. The court examined section 11 of the Tripura Act, which outlines the conditions for assuming jurisdiction and initiating assessment proceedings. It was found that no notice u/s 11(1) was served on the petitioner, making the assessment illegal and unsustainable. The court held that the condition precedent for assessment under section 11, namely, service of a notice, was not fulfilled, rendering the assessment invalid.

2. Determination of Inter-State vs. Intra-State Sales:
The petitioner argued that the sales were inter-State, as the materials were supplied from outside Tripura, and thus, the transactions were exigible to tax under the Central Sales Tax Act. The Superintendent of Taxes treated the transactions as intra-State sales, asserting that the transfer of property occurred in Tripura. The court referred to the Supreme Court's decision in Builders Association of India v. Union of India, which established that sales tax laws levying taxes on the transfer of property in goods involved in works contracts are subject to the restrictions of article 286 of the Constitution. The court concluded that the principles for determining inter-State sales u/s 3 of the Central Sales Tax Act apply to works contracts. The court cited several Supreme Court decisions, emphasizing that the movement of goods from one State to another as a result of a contract constitutes an inter-State sale, irrespective of where the property in the goods passes. Consequently, the court held that the sales in question were inter-State sales, and the assessment treating them as intra-State sales was contrary to the law laid down by the Supreme Court.

Conclusion:
The writ petition was allowed, the impugned order of assessment and the notice of demand were quashed. The respondents were directed to pay Rs. 1,000 to the petitioner as costs.