2013 (1) TMI 551 - HC - VAT and Sales Tax

Manufactur and sell of kathha and catechu - basic raw material khair wood is procured through auction purchase - the petitioner was enjoying the benefit of Section 4B of the U.P. Trade Tax Act - after 9.11.2000 the territory from which the kathha was being procured by the petitioner became the part of Uttarakhand - benefit of notification issued by the State of Uttarakhand on 26.12.2000 - Held that - Notification dated 26.12.2000 states that such dealers who were getting the benefit under Section 4-B, now under U.P. Reorganisation Act, they would continue to get the concession against Form C of Central Sales Tax Act, 1956, as the said sale will now be an inter-state sale. Disallowance of concessional rate against Form-C as the purchase made by the petitioner is in an open auction which cannot be considered as an inter-state sale is not a factum of the sale which would define it as an inter-state sale but in order to bring a particular sale under the definition of inter-state sale is both a question of fact as well as law and what the Court has to see is the totality of circumstances and the fact that the goods which have been purchased in State A are actually being transported to State B which would make it an inter-state sale. The ruling of the State of Bihar and another v. Tata Engineering & Locomotive Co. Ltd. (1970 (11) TMI 73 - SUPREME COURT OF INDIA) gives a wide meaning to the definition of inter-state sale. In this petition the petitioner in order to strengthen his argument has also annexed invoice bills which show that the Forest Development Corporation itself, from whom the khair wood was purchased, has prepared the invoice on the strength of which the goods were being transported to Uttar Pradesh and there was enough evidence to consider that it was an inter-state sale - writ petition succeeds. The petitioner is entitled to get the benefit of notification dated 26.12.2000 provided he gives enough evidence before the said authorities that the goods which he has purchased are to be consumed at its factory at Kotwali Road, Najibabad, District Bijnor (U.P.), which would make it an inter-state sale - in favour of assessee.

Summary

Issues:
Interpretation of inter-state sale under the Central Sales Tax Act, 1956; Benefit under Section 4-B of the U.P. Trade Tax Act; Applicability of notification dated 26.12.2000; Failure to furnish Form-C for concessional rate; Classification of auction purchase as inter-state sale.

Interpretation of Inter-State Sale:
The case involved a private limited company engaged in manufacturing "kathha" and catechu, requiring "khair wood" as a raw material procured from Uttarakhand post its separation from Uttar Pradesh. The issue revolved around the applicability of the inter-state sale concept under the Central Sales Tax Act, 1956. The State contended that the auction purchase of "khair wood" did not qualify as an inter-state sale due to the nature of the transaction. The petitioner argued that the transportation of goods from one state to another should define an inter-state sale, supported by legal precedents. The High Court analyzed the totality of circumstances, emphasizing the movement of goods as a crucial factor in determining inter-state sales.

Benefit under Section 4-B and Notification Applicability:
The petitioner sought the benefit under Section 4-B of the U.P. Trade Tax Act, which was extended post the separation through a notification dated 26.12.2000. The State's refusal to provide concessional rates was based on the petitioner's alleged failure to furnish Form-C. However, the petitioner contended that the auction purchase of "khair wood" should qualify for the benefit under the notification. The Court examined the notification's intent to continue concessions for dealers under Section 4-B, emphasizing the need for evidence to support inter-state sales for availing benefits.

Failure to Furnish Form-C and Concessional Rate:
The State argued that the petitioner's failure to furnish Form-C led to the denial of concessional rates. The petitioner, on the other hand, highlighted the importance of transportation and consumption of goods in a different state to qualify for inter-state sales benefits. The Court considered the State's stance on auction purchases and the petitioner's contention regarding the transportation of goods to determine the applicability of concessional rates under Section 4-B.

Classification of Auction Purchase as Inter-State Sale:
A critical aspect of the case was the classification of auction purchases as inter-state sales. The State and Uttarakhand Forest Development Corporation contended that auction sales did not automatically qualify as inter-state sales, as the goods could be resold within Uttarakhand. The petitioner argued that the transportation of goods to Uttar Pradesh post-auction indicated an inter-state sale, supported by invoice evidence. The Court referenced legal precedents to establish the broader interpretation of inter-state sales, ultimately ruling in favor of the petitioner's entitlement to benefits under the notification.

Conclusion:
The High Court allowed the writ petition, granting the petitioner the benefit of the notification dated 26.12.2000 upon providing sufficient evidence of inter-state sales. The Court clarified the prospective effect of the order to avoid unjust enrichment and refused the petitioner's request for a refund with interest. The judgment highlighted the importance of evidence supporting inter-state transactions and the broader interpretation of inter-state sales under the Central Sales Tax Act, 1956.