Sale during movement, exemption limits, and restricted rectification power determined taxability and defeated the assessee's challenge.

A sale by the assessee that does not itself occasion inter-State movement of goods is treated as a sale during movement under section 3(b), not an inter-State sale under section 3(a), so the transaction remains taxable by the State authorities. Exemption under the Government Order issued under section 8(5) was unavailable because the assessee had not itself suffered the local sales tax levy, and payment by the mills did not satisfy that condition. Exemption under section 6(2) also failed because the statutory certificate requirements and proof of purchase by a registered dealer were not established. The Tribunal's purported rectification under section 55 exceeded its limited power and could not stand.

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Issues: (i) Whether the assessee's sales to the mills were inter-State sales under section 3(a) of the Central Sales Tax Act or second sales under section 3(b) of that Act; (ii) Whether the assessee was entitled to exemption under the Government Order issued under section 8(5) of the Central Sales Tax Act; (iii) Whether the assessee was entitled to exemption under section 6(2) of the Central Sales Tax Act; (iv) Whether the Tribunal could rectify its earlier order under section 55 of the Madras General Sales Tax Act, 1959.

Issue (i): Whether the assessee's sales to the mills were inter-State sales under section 3(a) of the Central Sales Tax Act or second sales under section 3(b) of that Act.

Analysis: The Bombay seller sold the goods to the assessee and sent the railway receipts to the assessee, who thereafter endorsed them in favour of the mills after receiving substantial payment. The inter-State movement had already been occasioned by the sale between the Bombay seller and the assessee. The assessee's later sale to the mills did not itself occasion the movement of the goods. On the facts, the assessee's transaction with the mills was a sale during movement by transfer of documents of title and fell under section 3(b).

Conclusion: The sale to the mills was not a sale under section 3(a) and was rightly treated as a sale under section 3(b), with the result that the State authorities had jurisdiction to assess it.

Issue (ii): Whether the assessee was entitled to exemption under the Government Order issued under section 8(5) of the Central Sales Tax Act.

Analysis: The exemption operated only where the claimant himself had suffered levy and collection of tax under section 4 of the Madras General Sales Tax Act, 1959 in respect of the relevant local sales. The assessee had not paid such tax. Payment, if any, by the mills on a mistaken view of their own liability did not entitle the assessee to the exemption.

Conclusion: The assessee was not entitled to the benefit of the Government Order.

Issue (iii): Whether the assessee was entitled to exemption under section 6(2) of the Central Sales Tax Act.

Analysis: Exemption under section 6(2) required proof of a subsequent sale during movement to a registered dealer and compliance with the prescribed certificate requirements. Although the assessee produced the E-1 forms from the out-of-State seller, it failed to establish that the purchasing mills were registered dealers in cotton.

Conclusion: The assessee failed to satisfy the statutory conditions for exemption under section 6(2).

Issue (iv): Whether the Tribunal could rectify its earlier order under section 55 of the Madras General Sales Tax Act, 1959.

Analysis: The Tribunal, while purporting to rectify an apparent error, in substance reviewed and reversed its earlier decision. Such a course was beyond the limited rectification power conferred by section 55. In any event, the revised view could not stand in light of the retrospective amendment to section 9 of the Central Sales Tax Act.

Conclusion: The rectification order was without jurisdiction and could not be sustained.

Final Conclusion: The challenge to assessment failed on all material grounds, and the assessee was held liable to tax on the disputed turnover while the State's revision succeeded.

Ratio Decidendi: Where the sale by the assessee does not itself occasion the inter-State movement of goods and the assessee cannot prove the statutory conditions for exemption, the transaction is taxable as a sale during movement and exemption is unavailable; a rectification power cannot be used to review an earlier decision.

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