2017 (12) TMI 981 - HC - Customs

Rate of tax - inter-state sale or not? - e-auction - Whether the clarification issued by the Commissioner dated 07.04.2006, is valid and proper? Held that - Merely because, one of the officers of the Customs Department, issued a receipt to the petitioner accepting 4% of the tax, that would not prevent the Commercial Taxes Department to take appropriate steps to recover the tax payable in the State of Tamil Nadu. It appears that only for that reason, when action was initiated by the assessing officer, the petitioner rushed to the Commissioner and sought for clarification. In the facts and circumstances, the clarification issued by the Commissioner is perfectly legal and valid and there is no reason to interfere with the same - petition dismissed - decided against petitioner.

Summary

Issues: Validity of the clarification issued by the Commissioner dated 07.04.2006 in a case involving an E-auction sale and the liability for sales tax under the Central Sales Tax Act, 1956.

Analysis:

Issue 1: Validity of the clarification
The main issue in this case is whether the clarification issued by the Commissioner dated 07.04.2006 is valid and proper. The petitioner participated in an E-auction conducted by the Customs Department from Mumbai, bidding on PVC Resin. The petitioner argues that the transaction was interstate and liable for tax at 4% under the Central Sales Tax Act, 1956. However, the terms and conditions of the auction clearly state that all sales are treated as local sales unless otherwise specified. The petitioner's claim that the sale was interstate due to participation in the E-auction is not accepted as the goods were inspected and delivered in Chennai, and taxes were paid there. The Commissioner's clarification is deemed legal and valid, and the petitioner's contention is dismissed.

Issue 2: Liability for sales tax
The petitioner claimed that the sale transaction was interstate and thus subject to tax at 4% under the Central Sales Tax Act, 1956. However, the terms and conditions of the auction clearly stated that sales would be treated as local sales unless specified otherwise. The petitioner's participation in the E-auction from Mumbai does not change the fact that the goods were inspected and delivered in Chennai, with taxes paid there. The Commissioner's clarification was upheld, directing the recovery of sales tax dues from the petitioner for the transaction. The court dismissed the writ petition and vacated the interim stay, allowing the recovery of the sales tax amount.

In conclusion, the judgment upholds the validity of the clarification issued by the Commissioner and establishes the petitioner's liability for sales tax under the Central Sales Tax Act, 1956. The court's decision emphasizes the importance of adhering to the terms and conditions of auctions and the applicable tax laws in determining the tax liability for transactions involving the movement of goods between states.