2019 (4) TMI 1632 - HC - VAT and Sales Tax

Benefit of concessional rate of tax for purchase of raw material used in the manufacture and sale of kathha , and cutch - whether the sale, of khair wood to the petitioner, is in the course of inter-State trade or commerce from the place of business of the Corporation i.e. in the State of Uttarakhand, for it is only in the case of an inter-State sale would Section 8(4) of the CST Act require the petitioner to submit a declaration in Form-C to the Corporation, and for the Corporation in turn to submit the said declaration to the Trade Tax Department? HELD THAT - Among the conditions stipulated in the notification dated 26.12.2000, is that the sale must be in the course of inter-State trade or commerce. As the Notification dated 26.12.2000 provides for a concessional rate of tax, on fulfillment of the conditions prescribed therein, and such a notification must be strictly construed, it is only if the sale of goods is in the course of inter-State trade or commerce would the benefit of the said notification be available to the petitioner. The field of taxation on the sale or purchase of goods, taking place in the course of inter-state trade or commerce, was excluded from the competence of the State Legislature. The situs of the sale or purchase was wholly immaterial as regards inter-state trade or commerce. In view of Section 3(a) of the CST Act, all that had to be ascertained was whether the sale or purchase occasioned the movement of goods from one State to another. If the transaction of sale satisfied this requirement, it was deemed to be a sale or purchase of goods in the course of inter-State trade or commerce and, by virtue of Articles 269 and 286 of the Constitution, was beyond the legislative competence of a State legislature to tax. There is no integral link between the contract of sale and the movement of goods (Khair wood) from the State of Uttarakhand to the State of Uttar Pradesh. Sale of goods (i.e. Khair wood), in the present case, cannot therefore be said to be an inter-State sale falling within the ambit of Section 3(a) of the CST Act. The order under appeal, to the extent the learned Single Judge held it to be an inter- State sale falling within the ambit of Section 3(a) of the CST Act, must be and is, accordingly, set aside. Doctrine of unjust enrichment - HELD THAT - The very collection and/or retention of tax, without authority of law, entitles the person, from whom it is collected, to claim its refund - the doctrine of unjust enrichment has no application, in the facts and circumstances of the present case, as Khair wood purchased by the petitioner was not sold as they were, but were used as inputs for the manufacture of kattha. The subject sale is an intra-State sale liable to tax under the Uttarakhand Sales Tax laws, and not under the CST Act, the question of refund of the arrears of tax, collected by the Corporation from the petitioner, does not arise. Decided in favor of revenue.

Summary

Issues Involved:
1. Whether the sale of khair wood by the Corporation to the petitioner is an inter-State sale or an intra-State sale.
2. Whether the petitioner is entitled to a refund of the excess tax paid, considering the doctrine of unjust enrichment.

Detailed Analysis:

I. Whether the sale of khair wood by the Corporation to the petitioner is an inter-State sale or an intra-State sale:

Relevant Statutory Provisions:

Section 3(a) of the CST Act requires a sale to be deemed an inter-State sale if the sale or purchase of goods occasioned its movement from one State to another. Section 8(4) stipulates that the provisions of sub-section (1) shall not apply to any sale unless the dealer selling the goods furnishes a declaration in Form-C.

Notification Dated 26.12.2000:

The Notification dated 26.12.2000 provides a concessional rate of tax for sales in the course of inter-State trade or commerce from Uttarakhand to Uttar Pradesh, subject to certain conditions, including the submission of Form-C.

Analysis of Sale by Auction:

Section 64(2) of the Sale of Goods Act stipulates that, in a sale by auction, the sale is complete when the auctioneer announces its completion by the fall of the hammer. Section 20 specifies that, in an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made.

Terms and Conditions of Auction:

The auction terms required the highest bidder to deposit 10% of the auctioned value as security money. Once the competent authority sanctioned the bid, the successful purchaser was intimated by approval letter. The purchaser was required to deposit the payable amount within 24 days following receipt of the intimation letter. Permission to lift the timber was given only on receipt of the balance payment along with statutory taxes and duties.

Conclusion on Inter-State Sale:

The terms and conditions of the auction did not obligate the khair wood purchased by the petitioner to be transported outside the State. The sale took place, and the property in the goods passed to the petitioner, within the State of Uttarakhand upon approval by the competent authority. The transportation of khair wood by the petitioner to their manufacturing unit in Uttar Pradesh was at their volition and not under the contract of sale. Therefore, there is no integral link between the contract of sale and the movement of goods from Uttarakhand to Uttar Pradesh. Hence, the sale of khair wood by the Corporation to the petitioner is an intra-State sale, not an inter-State sale.

II. Whether the petitioner is entitled to a refund of the excess tax paid, considering the doctrine of unjust enrichment:

Doctrine of Unjust Enrichment:

The doctrine of unjust enrichment does not apply if the goods purchased are used for manufacturing another product and not sold as they are. The Supreme Court in Bhadrachalam Paperboards Ltd. held that the principle of unjust enrichment is not applicable where the goods are consumed for manufacturing another product.

Application to the Present Case:

The petitioner used the khair wood purchased from Uttarakhand for manufacturing kattha and did not sell the khair wood as it was. Therefore, the doctrine of unjust enrichment does not apply to the petitioner's claim for a refund of excess tax paid.

Conclusion on Refund:

Since the sale of khair wood by the Corporation to the petitioner is an intra-State sale, the petitioner is liable to pay tax under the Uttarakhand Sales Tax laws. Consequently, the question of refund of the arrears of tax collected by the Corporation from the petitioner does not arise.

Conclusion:

Special Appeal No. 249 of 2013 preferred by the State of Uttarakhand is allowed, and Special Appeal No. 52 of 2013 preferred by the assessee-dealer is dismissed. The sale of khair wood by the Corporation to the petitioner is an intra-State sale, and the petitioner is not entitled to a refund of the excess tax paid.