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TMI Blog2019 (4) TMI 1632X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict-Bijnor in the State of Uttar Pradesh, carries on business in the manufacture and sale of "kathha", and "cutch" which is a type of tenin and is a by-product of kathha. The raw material for manufacture of kathha is khair wood, and the petitioner was hitherto purchasing khair wood from the U.P. Forest Corporation. The petitioner is also a registered dealer under the U.P. Trade Tax Act, 1948 (hereinafter referred to as the "1948 Act") and the Central Sales Tax Act, 1956 (hereinafter referred to as the "CST Act"). They applied for a recognition certificate under Section 4-B of the 1948 Act and the assessing authority, vide order dated 07.06.1994, granted them a recognition certificate, as a result of which the petitioner was entitled to purchase raw material at a concessional rate of tax. This recognition certificate was, by order dated 09.09.1997, made applicable for the lifetime of the company. Prior to the bifurcation of the State of Uttar Pradesh, and the State of Uttarakhand coming into being on 09.11.2000, the petitioner's manufacturing unit, and the source of its procurement from the U.P. Forest Corporation, were both located within the State of Uttar Pradesh. After the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x ever since the assessment year 2001-02 to 2007-08 at the regular rate of tax, and that they have been charged Rs. 1,61,26,132/- in excess as tax than what the State of Uttarakhand was entitled to. They invoked the jurisdiction of this Court seeking a mandamus directing the respondents not to realize Trade Tax at more than 2.5% from them; a mandamus directing the respondents to give them the benefit of the recognition certificate, and to comply with the provisions of the notification dated 26.12.2000 issued by the State of Uttarakhand; and a mandamus directing the respondents to refund Rs. 1,61,26,132/-, with interest, which was illegally realized from them. 6. In the counter affidavit filed on behalf of the second respondent, by the Deputy Commissioner, Commercial Tax, Haridwar, it is stated that a dealer is entitled to pay tax, at a concessional rate, on furnishing Form-C only in the case of an inter- State sale; if the sale is completed within one State, then Form-C cannot be issued, as such a sale cannot be considered an inter-State sale; the sale of khair wood had concluded within the State of Uttarakhand, and as the petitioner had purchased it in an open auction, he was fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm-C to the respondents at the time of purchase of khair wood, but the respondents refused to accept Form-C, and denied them the benefit of concessional rate of tax as provided by the notification issued by the State Government; the sale was not completed within the State of Uttarakhand; the Corporation has issued sale bills/invoices in favour of the petitioner at Najibabad, District Bijnor in the State of Uttar Pradesh; it also issued a transit pass from Chiriyapur Depot in the State of Uttarakhand to Najibabad, District Bijnor in the State of Uttar Pradesh; it is pursuant to the purchase made by the petitioner that the goods moved to the State of Uttar Pradesh; it was, therefore, an inter-State sale and not an intra- State sale; before the notification dated 26.12.2000 was issued, the petitioner had submitted Form-3B to the Forest Department; and as the sale bills/invoices were issued in their name at their address in the State of Uttar Pradesh, and the goods moved from the State of Uttarakhand to the State of Uttar Pradesh, it is an inter-State sale and not an intra-State sale within the State of Uttarakhand. 9. Sri S.K. Posti, learned counsel for the petitioner, would submit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sale; it is because an invoice is required to be issued on the sale of khair wood, was the name of dealer and his address reflected therein; a transit pass was issued to enable movement of the goods from the depot to the dealer's premises; mere issuance of an invoice and a transit pass would not justify an intra- State sale being treated as an inter-State sale; and the benefit of the notification dated 26.12.2000 is unavailable since the sale is an intra- State sale, and not an inter-State sale. Learned Brief Holder would rely on Section 64 of the Sales of Goods Act, 1930; on Balabhagas Hulaschand vs. State of Orissa (1976) 2 SCC 44; M.M. Traders vs. State of M.P. and others (2010) 4 M.P.L.J. 515; Karnataka Soaps and Detergents Ltd. vs. District Forest Officer, Sathyamangalam Division and others (2005) 140 STC 112 (Mad); and Similipahar Forest Development Corporation Limited vs. State of Orissa (1995) 96 STC 627. I. RELEVANT STATUTORY PROVISIONS: 11. Before examining the rival contentions, it is useful to refer to the relevant provisions of the CST Act, other relevant enactments, and the scope of Section 3(a) of the CST Act which requires a sale to be deemed as an inter-Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification. No tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) as may be mentioned in the notification. The power, conferred under clauses (a) and (b) of Section 8(5) of the CST Act, is to exempt a dealer from paying tax, or for calculation of tax at a rate lower than those specified in Section 8(1), on a notification being issued in this regard. II. NOTIFICATION DATED 26.12.2000: ITS CONTENTS: 13. The Notification dated 26.12.2000, on which reliance is placed by Mr. S.K. Posti, learned counsel for the petitioner, reads thus: "51/Vitta Vyapar Kar/2000 Dated: Dehradun: December 26, 2000 (Gazette dt. 26.12.2000) Whereas, the State Government is satisfied that it is necessary so to do in public interest; Now, Therefore, in exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Act no.74 of 1956), the Governor is pleased to direct that with effect from the date of publication of this notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Ltd. (1990) 4 SCC 256; La Opala R.G. Limited (2014) 15 SCC 136;]. An exemption notification should be read literally, and should be construed strictly, which means that the benefit thereof should not be granted to one who is not entitled therefor. A person claiming the benefit of an exemption notification must show that he satisfies the eligibility criteria. [Collector of Customs (Preventive), Amritsar vs. Malwa Industries Limited (2009) 12 SCC 735]. 15. It is settled rule of construction of a notification, which grants tax incentives, that, at the outset, a strict approach ought to be adopted in administering whether a dealer/ manufacturer is covered by it at all. [La Opala R.G. Limited (2014) 15 SCC 136;]. The exemption notification should be construed on the basis of the language used. [La Opala R.G. Limited (2014) 15 SCC 136;; CCE, Chandigarh v. Bhalla Enterprises AIR 2005 SC 2891; Tata Iron & Steel Co. Ltd. v. State of Jharkhand & others (2005) 4 SCC 272; Kartar Rolling Mills v. Commissioner of Central Excise, New Delhi (2006) 4 SCC 772; Eagle Flask Industries Ltd. v. The Commissioner of Central Excise Pune (2004) 7 SCC 377; Govt. of India & others v. Indian Tobacco Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. An exemption notification should be interpreted strictly. The burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or the exemption notification. When there is ambiguity in the exemption notification, which is subject to a strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee, and it must be interpreted in favour of the revenue. [Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company and others (2018) 9 SCC 1 18. Bearing these principles in mind, let us now take note of the conditions stipulated in the said Notification and, thereafter, examine whether the petitioner has fulfilled those conditions, for it is only if he has, would he then be entitled to claim the benefit of the notification. The conditions to be fulfilled, in terms of the Notification dated 26.12.2000, are (i) the dealer must have his place of business in the State of Uttarakhand in respect of the sales made by him; (ii) such sales must be in the course of inter-state trade or commerce, from such place of business; (iii) the sale must be of (a) any raw material, (b) processing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. As noted hereinabove, 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. 22. The respondents claim that, since the Corporation was formed after the State of Uttarakhand came into being, the question of furnishing the certificate in Form III-B would not arise. It is unnecessary for us to examine this contention, as it is only if the sale of khair wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly if it fell within clauses (a) & (b) thereof. Section 3(a) stipulated that 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 occasioned the movement of goods from one State to another. Within Section 3(b) were sales in which the property in the goods passed during movement of the goods from one State to another by transfer of documents of title thereto. Section 3(a) covered sales, other than those included in clause (b), in which the movement of goods from one State to another was under the contract of sale, and property in the goods passed in either of the States. A sale which took place under Section 3(a) stood excluded from the purview of Section 3(b) and vice versa. In respect of an inter-State sale, tax was leviable only once, and that indicated that the two clauses of Section 3 were mutually exclusive. The dividing line between sales under Section 3(a) and those falling under Section 3(b) was that, in the former, the movement was under the contract whereas, in the latter, the contract came into existence only after commencement and before termination of the inter-State movement of the goods. [T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the sale of goods, and not because of the movement of the goods. The movement of the goods was only material for the purpose of deciding whether the sale took place in the course of inter-State trade or commerce or whether such a 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 CST Act, the transaction must be a "sale" as defined in Section 2(g) taking place in the course of inter-State trade or commerce in any of the manner provided for in clause (a) or clause (b) of Section 3 of the CST Act. [A&G Projects and Technologies Limited (2009) 2 SCC 326] 29. Section 3(a) of the CST Act covered sales in which the movement of goods from one State to another was the result of a covenant or incident of the contract of sale, and property in the goods passed in either State. [K.B. Saha and Sons Industries Pvt. Ltd. (2007) 7 VST 214 (SC); Commissioner of Sales Tax, U.P. & others vs. Bakhtawar Lal Kailash Chand Areti & others (1992) 3 SCC 750; Union of India & another vs. K.G. Khosla & Co. Ltd. & others AIR 1979 SC 1160; S.R. Sarkar AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly linked with the sale so that the bond could not be dissociated without a breach of the mutual understanding between the buyer and seller arising from the nature of the transaction, the sale must be held to be in the course of inter-State trade or commerce. Such a sale meant not only sales taking place during the activities directed to the end of transportation of the goods outside the territory of the State, but also as a part of or connected with such activities. [Bhag Singh Milkha Singh (1974) 34 STC 535 (Pat).; State of Travancore-Cochin & others vs. The Bombay Co. Ltd. AIR1952SC366; Ben Gorm Nilgiri Plantations Co. Coonoor (Nilgiris) & others vs. Sales Tax Officer, Special Circle, Ernakulam & others AIR 1964 SC 1752; and State of Travancore-Cochin & others vs. Shanmugha Vilas Cashew Nut Factory & others AIR 1953 SC 333; Shankerjee Raut Gopalji Raut vs. State of Bihar AIR 1968 Pat. 329]. 32. A sale would be an inter-State sale in case there was a stipulation, express or implied in the agreement of sale, or the movement of goods was incidental and as a necessary consequence of the sale or purchase. It must be a case of cause and effect; cause being the sale and purchase, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merce, as such a sale occasioned the movement of the goods from one State to another. [English Electric Co. of India Ltd. and another vs. The Deputy Commercial Tax Officer and others (1976) 4 SCC 460]. 35. It did not matter in which State the property in the goods passed. What was decisive was whether the sale was one which occasioned the movement of goods from one State to another. It was not necessary that the sale must have preceded the inter-State movement in order that the sale may be deemed to have occasioned such movement. [English Electric Co. of India Ltd. (1976) 4 SCC 460; National Thermal Power Corporation Ltd. (2002) 5 SCC 203; Karnataka Soaps and Detergents Ltd. (2005) 140 STC 112 (Mad)]. What was important is that the movement of goods and the sale must be inseparably connected. It was not necessary that there should be in existence a contract of sale incorporating the express or implied provision regarding inter-State movement of the goods. [K.B. Saha and Sons Industries Pvt. Ltd. (2007) 7 VST 214 (SC)]. 36. In order to make the sale, as one in the course of inter-State trade or commerce, there must be an obligation to transport the goods outside the State. [Shank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of movement; and (iii) such movement of goods must be from one State to another State where the sale concluded. It followed, as a necessary corollary, that a movement of goods, which took place independent of a contract of sale, would not fall within the meaning of an inter-State sale. In other words, if there was no contract of sale preceding the movement of goods, obviously the movement could not be attributed to the contract of sale. Similarly, if the transaction of sale stood completed within the State, and the movement of goods took place thereafter, it would obviously be independent of the contract of sale, and necessarily by or on behalf of the purchaser alone. The transaction, therefore, would not have an inter-State element. [National Thermal Power Corporation Ltd. (2002) 5 SCC 203; Karnataka Soaps and Detergents Ltd. (2005) 140 STC 112 (Mad); English Electric Co. of India Ltd. (1976) 4 SCC 460]. 40. The following conditions necessitated being satisfied before a sale could be said to take place in the course of inter-State trade or commerce (i) there was an agreement to sell which contained a stipulation express or implied regarding the movement of the goods from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the sale price; and the draft of the sale price should be in favour of the Managing Director, Uttarakhand Forest Development Corporation, payable at Dehradun. Thereafter, invoices were issued to the petitioner wherein their address was reflected as Kotwali Road, Nazibabad, Bijnor. Transit passes were also issued to the petitioner's vehicle, and the place, where the forest produce was to be transported, was shown therein as Nazibabad (which is in the State of Uttar Pradesh). V. IMPORTANT TERMS AND CONDITIONS OF AUCTION: 42. In order to determine whether the sale of khair wood by the Corporation to the petitioner is a inter-State sale or an intra-State sale, it is necessary to refer to the relevant terms and conditions of sale prescribed by the Corporation which culminated in the sale of khair wood by the Corporation, and its purchase by the petitioner. They are:- "Important Terms and Conditions of the Auction: 1. All intending purchaser have to deposit 5,000/- (Rupees five thousand only) as gate money. Only those persons / purchaser who will deposit Gate Money will be able to submit bid in their names. No relaxation will be permissible in this regard. 2. Although utmost c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice in the form of demand draft in favour of Managing Director, U.P. Forest Corporation payable in any nationalized bank. Even if the demand draft is received in the office after 3 days from the date mentioned in the demand draft, it will be deemed to be received on the date mentioned therein. Balance amount of the sale value will not be received either by cash or bank pay-in slips. 6. Once the bid is approved, the Purchaser will deposit the bid value along with consolidated amount of income tax, trade tax, Mandi Fee and transit fee charges applicable as per rules either at the time of transporting wood / forest produce or before. In future other Central, State and local taxes or revised taxes, if any, that may be levied shall be payable by the successful Purchaser. 6A. On presentation of certificate regarding trade tax exemption, by party or purchaser, clearance (Nikasi) will be permitted to the place where the business of the purchaser is registered. 7. In all cases of auction sale of the lots, maximum period of sanction / approval will be 40 days (excluding the date of Auction). In case the sanction is not declared within the prescribed 40 days and Approval letter is not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce shall thereupon become the property of the Van Nigam and the Van Nigam shall be at liberty to dispose of the property by way of either auction or other methods without giving any intimation / information to the purchaser and the purchaser shall not be entitled to claim any compensation or damages whatsoever. 13. The purchaser will be permitted to lift the wood from the depot between sunrise and sunset only. 14. Measurement of each item of each lot should be printed on the item. All the lots will be sold on the basis of volume and not on the basis of weight. 15. Disputes arising out of execution of these terms and conditions shall be referred to the Arbitration of concerned Regional Manager, U.P. Forest Corporation whose decision shall be final and binding on both parties." 43. For a sale to be an inter-State sale, falling within the ambit of Section 3(a) of the CST Act, the movement of goods from one State to another should be as a result of a covenant or incident of the contract of sale. The stipulation, for movement of goods from one State to another, need not be expressly stated in the contract of sale itself, and it would suffice if such movement is as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporation, was required to deposit 10% of the auctioned value in the form of security money, and his failure to deposit the security money was to result in cancelling the accepted bids for the lots, and in forfeiture of the Gate Money. Clause 5 stipulated that, once the competent Authority sanctioned the bid, the successful purchaser would be intimated by approval letter to be sent through registered post. The successful purchaser was required to deposit the payable amount, mentioned in the approval letter, within 24 days following receipt of the intimation letter. Clause 6 required the purchaser, once the bid was approved, to deposit the bid value along with the consolidated amount of income tax, trade tax, mandi fee, transit fee etc. either at the time of transporting wood or forest produce or before. Clause 10 stipulated that permission to lift the Timber (partly or wholly) would be given to the purchaser only on receipt of the balance payment, along with statutory taxes & duties, from the purchaser. Clause 11 provided that only receipts, duly signed and sealed by the Depot Officer / Depot Accountant, would be valid as proof of payment. Clause 12 obligated the purchaser to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Sale of Goods Act stipulates that the rules contained in Sections 20 to 24 (in the present case, Section 20) are the rules for ascertaining the intention of the parties at the time at which property in the goods is to pass to the buyer, unless a different intention appears. The exercise of examining whether there is anything, either in the terms of the contract or in the conduct of the parties or in the circumstances of the case, which indicates a contrary intention, must be undertaken to give effect to the opening words, namely, "Unless a different intention appears" occurring in Section 19(3). The intention of the parties is the decisive factor as to when the property in the goods passes to the purchaser. If the contract is silent, intention has to be gathered from the conduct and circumstances of the case. [Agricultural Produce Market Committee vs. Biotor Industries Ltd. & others (2014) 3 SCC 732; Hoe Kim Seing vs. Maung Ba Chit 1935 (37) BomLR 866; Agricultural Market Committee vs. Shalimar Chemical Works Limited AIR 1997 SC 2502]. 50. The auctioneer can prescribe terms and conditions on the basis of which the property is exposed to sale by auction. Acceptance of any bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation to the petitioner, and its transportation outside the State. The terms and conditions did not obligate the Corporation to sell the goods for it to be transported, outside the State of Uttarakhand, to the State of Uttar Pradesh. Transportation of Khair wood by the petitioner, from the depot of the Corporation to their manufacturing unit in Uttar Pradesh, is at their volition and not under the contract of sale. 53. On offers being made by dealers located both inside and outside the State of Uttarakhand, and on their expressing their interest in submitting bids for the purchase of Khair wood from the Corporation, letters were sent by the Corporation to their respective addresses, some of which were within the State of Uttar Pradesh (outside the State of Uttarakhand). Similarly, on the sale of Khair wood, invoices were raised on the highest bidder, and his address was shown as the place where he was carrying on business. The fact that letters were addressed to, and invoices were raised on, the petitioner at their address in the State of Uttar Pradesh would not, by itself and without anything more, make an intra-State sale an inter-State sale. As noted hereinabove, a sale w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying the doctrine of unjust enrichment. Learned counsel would rely on Bhadrachalam Paperboards Ltd. and another vs. Government of Andhra Pradesh and others (1998) 111 STC 657; M/s Vam Organic Chemicals Ltd. vs. State of U.P. and others (1999) U.P.T.C. 13; Mafatlal Industries Ltd. vs. Union of India and others (1998) STC 111 467; and Asstt. Commr., Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Ltd. 2008 (230) E.L.T. 385 (S.C.)]. 57. On the other hand Sri Mohit Maulekhi, learned Brief Holder, would further submit that the learned Single Judge had denied refund to the writ petitioner as there was a possibility of the khair wood being sold by the petitioner as it is, and in its not being used for the manufacture of another product; and the address of the dealer is reflected in the invoice as they had participated in the auction, the bid had been knocked down in their favour, the sale was complete, and their name and address is required to be reflected in the sales invoice. 58. The very collection and/or retention of tax, without authority of law, entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund can als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold as such, and was instead captively consumed for manufacturing some other goods; and what was sold was the new product. 61. We, therefore, find considerable force in the submission of Sri S.K. Posti, learned counsel for the petitioner, that 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. 62. This question is, however, academic since the question of refund of the arrears of tax, paid by the petitioner earlier under the Uttarakhand Sales Tax laws, would arise only if the sale of Khairwood by the Corporation to the petitioner is held to be an inter- State sale falling within the ambit of Section 3(a) of the CST Act. Since we have opined otherwise, and have held that 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. VIII. CONCLUSION: 63. As a result, Special Appeal No. 249 of 2013 preferred by the State of Uttarakhand is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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