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2020 (10) TMI 205 - HC - VAT and Sales TaxInter-state sale or local sale - inter-State sales to other States by the petitioner, in pursuance to agreement of sales - assessable under CST Act, 1956 or TNGST Act, 1959 - fall under section 3(a) or 3(b) of the CST Act? HELD THAT - The Seller in the present case is only M/s.Baynee Trading Company, who made the inter-State Sales and as per the pre-existing contract only the goods were transited by the Assessee to M/s.Gayathri Trading Company of Pondicherry and freight was also borne by the Assessee. In view of this admitted and clear facts, we are of the clear opinion there is nothing to establish that the sales in question are intra-State Sales leviable with local sales tax under TNGST Act and when the same transaction having already been taxed under the previous CST Act in the hands of M/s.Baynee Trading Company at 4% against 'C' Forms issued by the purchaser M/s.Gayathri Trading Corporation of Pondicherry cannot be taxed again as local sales in the hands of the Appellant M/s.National Engineering Industries. The reason given by the learned Tribunal in its impugned order cannot be appreciated, that merely because the two parties viz., the Assessee M/s.National Engineering and M/s.Baynee Industries were located within the State of Tamil Nadu at Chennai, no inter-State sales could have taken place - this view taken by Tribunal also against the well established principles of inter- State Sales as envisaged under Section 3(a) of the CST Act, 1956. Appeal allowed - decided in favor of assessee.
Issues:
1. Whether the inter-State sales are assessable under CST Act, 1956 or TNGST Act, 1959? 2. Whether the inter-State Sales fall under section 3(a) or 3(b) of the CST Act? Analysis: 1. The Assessee filed a Tax Case challenging the order of the Tamil Nadu Sales Tax Appellate Tribunal regarding the taxability of inter-State sales as local sales under the TNGST Act for the Assessment Year 2004-05. The Tribunal held that the transactions were local sales and not inter-State sales as claimed by the Assessee. The Tribunal emphasized that for E1 transaction exemption, the first leg of the transaction must involve inter-State movement of goods. Since the transactions were between dealers within Tamil Nadu without goods moving across State boundaries initially, they were deemed local sales under the TNGST Act. The Tribunal dismissed the Assessee's appeal, upholding the local tax liability under TNGST Act. 2. The Assessee contended that the Tribunal erred in determining the sales as local instead of inter-State. The Assessee argued that the transactions satisfied the conditions for E1 Sales, as evidenced by the issuance of 'C' Forms and Form E1, indicating inter-State movement and sale. The Assessee highlighted a Division Bench decision stating that inter-State sales could occur even between dealers within the same State if goods were intended for delivery outside the State. The Respondent acknowledged the relevance of the Division Bench judgment and conceded that the Tribunal misinterpreted the nature of the sales. 3. The Court examined the facts and concluded that the sales in question were indeed inter-State sales, not subject to local tax under the TNGST Act. The Court emphasized that the movement of goods from the Assessee to the purchaser in Pondicherry constituted inter-State sales, supported by 'C' Forms and the contractual arrangements between the parties. The Court disagreed with the Tribunal's rationale that the location of the parties within Tamil Nadu precluded inter-State sales. The Court cited Section 3(a) of the CST Act, emphasizing the criteria for inter-State sales, and ruled in favor of the Assessee, setting aside the Tribunal's order and relieving the Assessee from local tax liability. 4. The judgment highlights the importance of correctly categorizing transactions as inter-State or local sales based on statutory provisions and contractual arrangements. The decision clarifies the applicability of tax laws concerning inter-State sales under the CST Act and local sales under state-specific legislation like the TNGST Act. The case underscores the significance of proper documentation, such as 'C' Forms and Form E1, to substantiate the inter-State nature of sales transactions and avoid erroneous tax assessments.
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