2015 (7) TMI 1004 - HC - VAT and Sales Tax

Classification of sale - Inter state sale or intra state sale - timber sold through auction by the forest corporation - validity of Circular No. 1251, dated 5.10.1993 issued by the Commissioner of Sales Tax , U.P. Lucknow - Held that - A sale of goods can be said to have taken place in the course of inter-State Trade or commerce under Clause (a) of Section 3 of the Act if it can be shown that the sale has occasioned the movement of goods from one State to another. - The word occasions is used as a verb and means to cause or to be the immediate cause of . A transaction of sale becomes subject to tax on completion of sale. For a sale to be exigible to tax under the Act, it must be shown to have occasioned the movement of goods from one State to another and the movement must be the result of a covenant or incident of the contract of sale. Thus, the sale of goods is in the course of inter-State Trade if the sale and movement of goods from one State to another are integral part of the same transaction. There must exist a direct nexus between the sale and movement of goods from one State to another. - A movement of goods which takes place independently of a contract of sale would not fall within the ambit of the above clause (a) of Section 3 of the Act Clause 3 of the approval specifically provides that if the timber is not removed by the auction purchaser within the specified time or within a further period of 15 days on payment of late fees then the amount deposited by the purchaser shall be forfeited and the Forest Corporation shall also become the owner of the timber of the lots, kept in the depot. This indicates that the delivery to the petitioner of the timber auctioned was complete at the depot of the Forest Corporation on payment of the agreed amount of consideration. - auction by the forest corporation is an intrastate sale and not inter-state sale - Decided against assessee.

Summary

Issues Involved:
1. Legality of Circular No. 1251 dated 5.10.1993.
2. Classification of auction sale as inter-state or intra-state.
3. Refund of value-added tax (VAT) collected.

Detailed Analysis:

1. Legality of Circular No. 1251 dated 5.10.1993:
The petitioner challenged Circular No. 1251 issued by the Commissioner of Sales Tax, U.P., which classified timber sold through auction by the forest corporation as an intra-state sale. The petitioner argued that this classification violated Section 3 of the Central Sales Tax Act, 1956. The court examined the circular and found that it merely reiterated established legal principles concerning auction sales, as laid down by the Supreme Court. Therefore, the circular did not suffer from any infirmity.

2. Classification of Auction Sale as Inter-State or Intra-State:
The petitioner contended that the auction sale of timber should be classified as an inter-state sale, thereby necessitating the acceptance of Form-C and making the VAT collected refundable. The court noted that the classification of a sale as inter-state or intra-state is a factual determination that should be made by the statutory authorities under the Act, based on the evidence and conditions of the tender. The court emphasized that the sale was complete within the state of U.P. upon acceptance of the bid, as per the provisions of Section 64 of the Sales of Goods Act and relevant case law, including the Supreme Court's judgments in Union of India v. M/s K.G. Khosla & Company Ltd. and others, and Commissioner of Commercial Taxes, Hyderabad v. Desai Beedi Company, Andhra Pradesh. The court concluded that the sale was an intra-state sale, as the movement of goods was not an integral part of the transaction.

3. Refund of Value-Added Tax (VAT) Collected:
The petitioner sought a refund of the VAT collected, arguing that the auction sale was an inter-state sale and thus outside the purview of the U.P. VAT Act. The court found that the VAT collection by the respondent was lawful, as the sale was complete within the state and classified as intra-state. The assessment for the relevant year had been completed, and the petitioner had not challenged these assessments. Consequently, the court held that the VAT collected was not refundable.

Conclusion:
The court dismissed the writ petition, upholding the classification of the auction sale as an intra-state sale and validating the VAT collection by the respondent. The court reiterated that such factual determinations should be made by statutory authorities and not under writ jurisdiction.