2016 (12) TMI 513 - HC - VAT and Sales Tax

Inter state sale or intra state sale - eCommerce transactions - movement of goods - registration of dealer - Whether the retail sale of mobile phones, computer spare parts, personal healthcare products, car accessories, cameras etc., done by the petitioner via the online portal www.flipkart.com would qualify as an inter-state sale or a local sale within the union territory of Puducherry? - Held that - the purchase order is placed outside the State of Tamil Nadu and the movement of goods has occasioned on account of the purchase. This fact is not disputed by the Revenue, they have clearly admitted that after the customer chooses a particular product, the bill is raised and the identified package is consigned to Puducherry. In the instant case, there can hardly be any doubt, as the revenue has accepted that the purchase order, which is placed outside the State has occasioned the movement of goods. One more aspect pointed out by the Revenue is with regard to use of incorrect TIN number in the E-Sugam form generated by the petitioner at Karnataka. Admittedly, the form is electronically generated and unless and until all columns are filled, the computer system will not generate the form. The petitioner s explanation is that the furnishing of TIN number is not required. However, the said column cannot be left blank and the movement of goods are to Puducherry, the first three digits of Puducherry code are mentioned and this is no way amounts to suppression. The explanation given by the petitioner is reasonable considering the facts and the nature of transaction done by the petitioner. The consigner and the consignee is the petitioner and the goods moved from State of Karnataka to Puducherry and it is on self basis. The consignment is shown as electronic items, garments etc., stored in several bags. Therefore, mere mention of TIN number by giving only the code of Puducherry as assigned by the Commercial Taxes Department that by itself will not be a ground to state that the petitioner has committed an offence. The transactions done by the petitioner are inter-state sales and the order impugned in the Writ Petition is not sustainable and liable to be set aside - petition allowed - decided in favor of petitioner-assessee.

Issues Involved:
1. Classification of sales as inter-state or local within Puducherry.
2. Requirement for registration under Puducherry Value Added Tax Act (PVAT).
3. Allegation of using non-existing TIN number.
4. Jurisdiction of the Puducherry tax authorities to levy tax on transactions claimed as inter-state sales.

Detailed Analysis:

1. Classification of Sales as Inter-State or Local within Puducherry:
The primary issue was whether sales of goods such as mobile phones, computer spare parts, and other products by the petitioner via an online portal constituted inter-state sales or local sales within Puducherry. The petitioner argued that goods were stored in warehouses in various states and transported to Puducherry upon customer orders, qualifying as inter-state sales under the Central Sales Tax Act, 1956 (CST Act). The respondent contended that the movement of goods to the delivery hub in Puducherry and subsequent delivery to customers constituted local sales taxable under the PVAT Act. The court held that the transactions were inter-state sales since the movement of goods from warehouses in other states to Puducherry was occasioned by customer orders, satisfying the criteria for inter-state sales.

2. Requirement for Registration under Puducherry Value Added Tax Act (PVAT):
The petitioner was directed to register under the PVAT Act and provide details of sales and transactions. The petitioner argued that their delivery hub in Puducherry was only a sorting facility and not involved in sales or inventory holding, and therefore, they were not required to register under the PVAT Act. The court found that the petitioner’s operations in Puducherry were limited to logistics and did not constitute local sales, thereby negating the need for registration under the PVAT Act.

3. Allegation of Using Non-Existing TIN Number:
The petitioner was accused of using a non-existing TIN number for transporting goods from Karnataka to Puducherry. The petitioner explained that the form required a TIN number, and since the consignee was in Puducherry, they used the Puducherry TIN code. The court accepted the petitioner’s explanation, stating that the use of the Puducherry TIN code did not constitute an offense and was reasonable given the electronic form requirements.

4. Jurisdiction of Puducherry Tax Authorities to Levy Tax on Transactions Claimed as Inter-State Sales:
The petitioner challenged the jurisdiction of Puducherry tax authorities to levy tax on transactions that were claimed as inter-state sales. The court examined the legal principles governing inter-state sales and concluded that the transactions in question met the criteria for inter-state sales. The court held that the movement of goods from warehouses in other states to Puducherry was incidental to the purchase orders placed by customers, thus qualifying as inter-state sales. Consequently, the Puducherry tax authorities lacked jurisdiction to levy tax under the PVAT Act on these transactions.

Conclusion:
The court concluded that the transactions conducted by the petitioner were inter-state sales and not local sales within Puducherry. The impugned order by the Puducherry tax authorities was quashed, and the petitioner was not required to register under the PVAT Act or pay taxes under it for these transactions. The court emphasized the importance of the movement of goods occasioned by customer orders in determining the nature of the sales as inter-state.

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