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TMI Blog2008 (12) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Central Sales Tax Act, 1956 ("the CST Act, 1956", for short). The appellant was awarded three independent contracts towards- (i) supply of capacitor banks, (ii) execution of civil works and (iii) erection and commissioning of capacitor banks at various sub-stations of the Karnataka Power Transmissions Corporation Limited ("KPTCL", for short) in the State of Karnataka. Pursuant to the contracts, the appellant appointed M/s. Bay West Power and Energy Pvt. Ltd. ("M/s. Bay West", for short) as EPC contractor located outside the State of Karnataka for procuring the capacitor banks ("equipment", for short) because the said EPC contractor had a prior arrangement with the manufacturers of the said equipment. In that transaction four parties were involved, namely, the appellant, M/s. Bay West, manufacturers of the equipment and KPTCL being the ultimate consumer. Although four parties had intervened, in substance, there were three independent contracts involved in the transaction. The first contract was between the appellant and KPTCL for supply of the equipment. The second was between the appellant and M/s. Bay West. It was a procurement contract. The third contract was betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Appellate Tribunal, Bangalore, by the appellant. It was held that mere failure of the appellant to prove its case for exemption under section 6(2) of the CST Act, 1956 did not make the tax leviable by the State of Karnataka. The Tribunal observed that the dealer in this case was located in the State of Karnataka and the purchaser was also in the State of Karnataka. According to the Tribunal, the movement of goods under the contract was not from the State of Karnataka but into the State of Karnataka and, therefore, there was no inter-State sale in the State of Karnataka and, therefore, the levy of tax on the value of the goods supplied was totally unjustified. Aggrieved by the said decision of the Tribunal, the Department preferred Sales Tax Revision Petition No. 85 of 2005 under section 23(1) of the Karnataka Sales Tax Act, 1957. By the impugned judgment See [2008] 13 VST 177. the High Court held that the sale of goods in favour of KPTCL was completed when the goods were appropriated by KPTCL before commencement of movement of goods from the place of manufacturers in Chennai (Tamil Nadu) to KPTCL in the State of Karnataka and, therefore, the inter-State sale of goods fell under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase,- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. Section 6. Liability to tax on inter-State sales.-(1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Officia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other name); and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section. . . . Section 9. Levy and collection of tax and penalties.-(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2), in the State from which the movement of the goods commenced: Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected,- (a) where such subsequent sale has been effected by a registered dealer in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract whereas in the latter case the contract comes into existence only after the commencement and before termination of the inter-State movement of the goods. Therefore, it follows that an inter-State sale can either be governed under section 3(a)-if it occasions movement of goods from one State to another-or under section 3(b)-if it is effected by transfer of documents of title after such movement has started and before the goods are actually delivered. In other words, a sale which takes place under section 3(a) shall stand excluded from the purview of section 3(b) and vice versa. By section 3, it was intended to define the class of sales which shall be deemed to be sales in the course of inter-State trade or commerce. Under the CST Act, 1956, tax is leviable on the sale of goods and not because of the movement of the goods. The movement of the goods is only material for the purpose of deciding whether the sale took place in the course of inter-State trade or commerce or whether such sale was purely an intra-State transaction. The name given to a transaction by the parties concerned, does not decide the nature of the transaction. In order to make a transaction taxable under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption would not be admissible to such subsequent sales. This is the scheme of section 6 of the CST Act, 1956. In the present case, according to the Assessing Officer, the second and the third sales were not subsequent sales. According to the Assessing Officer, all the three sales are inter-State sales falling under section 3(a) and consequently section 6(2) (which deals with the exemption) never stood attracted and, therefore, the appellant was not entitled to exemption. The question before us is: if the sales stood covered under section 3(a) and if they were not entitled to exemption under section 6(2), whether the appellant could have been taxed by the Department by invoking the proviso to section 9(1) of the CST Act, 1956? The object of section 9(1) is two-fold. Firstly, it provides that the tax on inter-State sales under section 3(a) shall be levied by the Government of India and collected by the State Government from which the movement of goods commenced. Secondly, it specifies the appropriate State competent to levy tax on second and subsequent sales made during the movement of goods from one State to another as also the authority, where such second and subsequent sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in to and deal with distinct topics and different aspects of articles 286 and 269. It follows that if a question arises whether a sale is an inter-State sale or not, it has to be answered with reference to and on the basis of section 3 and section 3 alone. Section 4, or for that matter section 5, is not relevant on the said question-see the Constitution Bench decision in Tata Iron & Steel Co. Limited v. S.R. Sarkar [1960] 11 STC 655 (SC) and the decisions in Manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax [1976] 37 STC 489 (SC); [1976] 4 SCC 124 and Union of India v. K.G. Khosla & Co. Ltd. [1979] 2 SCC 242 See [1979] 43 STC 457. Similarly, where the question arises, in which State is the tax leviable, one must look to and apply the test in section 9(1); no other provision is relevant on this question. 18.. We may, at this stage refer to the decision of the Bombay High Court in Commissioner of Sales Tax v. Barium Chemicals Ltd. [1981] 48 STC 121. A particular transaction of inter-State sale was subjected to Central sales tax in Andhra Pradesh. The same sale was again sought to be taxed under Central Sales Tax Act in Maharashtra, which was questioned. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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