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2021 (7) TMI 392 - HC - VAT and Sales TaxLevy of purchase tax - transactions corresponding to the sale of colour monitors by M/s. BPL Ltd. to the petitioner were purchases by the petitioner within the State of Karnataka - Applicability of Section 6 of the K.S.T. Act, 1957 - HELD THAT - The nature of transaction in question is required to be ascertained by the authorities under the Act in order to determine whether Section 6 of the Act could be invoked to levy purchase tax on the petitioner. The tribunal was also required to determined whether the transactions were transactions in the course of inter state sale. Section 6 cannot be invoked to levy purchase tax in case of goods sold or purchased in course of an inter-state trade or commerce. Thus, before invoking Section 6 of the Act, the authorities under the Act were required to ascertain the nature of transaction. It is found from the order of the tribunal that no finding has been recorded with regard to the nature of transaction and with reference to the material available on record and a general observation has been made that branch transfers are nothing but dispatches by the petitioner to outside the branches as a consequence of purchase. Before upholding the levy of tax, the nature of transaction was required to be looked into, which has not been done. Matter remitted to the tribunal for decision afresh - petition allowed by way of remand.
Issues:
Interpretation of Section 6 of the Karnataka Sales Tax Act, 1957 regarding the levy of purchase tax on goods sold in the course of inter-state trade or commerce. Analysis: The petitioner, a company registered under the Companies Act, 1956, challenged an order passed by the Karnataka Appellate Tribunal regarding the levy of purchase tax under Section 6 of the Act for the Assessment Year 2004-05. The petitioner contended that the sales by M/s BPL Ltd. to the petitioner constituted inter-state sales as goods were delivered outside Karnataka, falling under Section 3(a) of the Central Sales Tax Act, 1956. The petitioner argued that as per Supreme Court and Gujarat High Court decisions, inter-state sales are not covered under the Act's taxable turnover definition, hence not subject to the Act's provisions. The Deputy Commissioner of Commercial Taxes re-assessed the petitioner's liability for purchase tax and penalty under the 1956 Act, which was upheld by the Joint Commissioner and the tribunal. The petitioner maintained that the goods were moved outside Karnataka due to sales by M/s BPL Ltd., qualifying as inter-state sales under Section 3(1) of the 1956 Act, thus exempt from the Act's provisions. Conversely, the Additional Government Advocate argued that since goods were moved outside the state other than by sale, the petitioner was liable to pay purchase tax under Section 6 of the Act. The High Court analyzed the nature of the transaction to determine if Section 6 could be invoked for levying purchase tax. Referring to the Supreme Court case of 'OIL INDIA LTD. VS. SUPERINTENDENT OF TAXES,' the Court outlined parameters for identifying inter-state sales. It emphasized that the movement of goods and the sale must be inseparably connected to qualify as an inter-state sale. The Court also highlighted the relevant extract of Section 6, stating that it does not apply to goods sold or purchased in the course of inter-state trade or commerce. Consequently, the Court found that the tribunal failed to ascertain the nature of the transaction adequately and remitted the matter back for fresh consideration. The Court directed the tribunal to make a decision within four months and did not address the substantial question of law due to the remand. As a result, the petition was disposed of accordingly.
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