1988 (4) TMI 378 - SC - VAT / Sales Tax

Inter-State trade and commerce: whether sales qualify as interState hinges on contractlinked movement and onus on revenue to disprove local sales.

InterState trade and commerce requires both a sale of goods and transportation of those goods from one State to another occasioned by the contract between ... Inter-State trade and commerce - Sale in the course of inter-State trade - Onus on revenue - Whether the sales effected by the respondent, were inter-State sales or not? - Held that:- The principles of inter-State sales were well-settled. In Bengal Immunity Co. v. State of Bihar [1955 (9) TMI 37 - SUPREME COURT] Justice Venkatarama Ayyar had held that sale could be said to be in the course of inter-State trade only if two conditions concur, namely, (1) a sale of goods and (2) a transport of those goods from one State to another. Unless both these conditions were satisfied, there could be no sale in the course of inter-State trade. There must be an evidence that the transportation was occasioned by the contract and as a result goods moved out of the bargain between the parties from one State to another. It is apparent from the facts found by the Tribunal that the assessee had since the very beginning been contending that he had effected only local sales. He had also filed an affidavit stating that he had not effected any sales of tendu leaves during the course of inter-State trade and commerce and that he had never applied to the Forest Department for issue of form T.P. IV and that no such form was ever issued to him and the tendu leaves in dispute were not booked by him through railways or trucks for places outside U.P. The Tribunal found nothing to discredit this version of the assessee. The onus lies on the Revenue to disprove the contention of the appellant. The Tribunal found no material to do so. The High Court addressed itself to the question whether the sales effected by the respondent, were inter-State sales or not. On an analysis of the findings of the Tribunal, the High Court found that the goods were (sic) moved out of U.P. in pursuance of an agreement for sale entered into between the assessees and their customers. The existence of T.P. form IV was taken note of but that did not conclude the matter. The condition precedent for imposing sales tax under the Central Sales Tax Act, is that the goods must move out of the State in pursuance of some contract entered into between the seller and the purchaser. If that is a correct principle in law, the Tribunal applied this correct principle of law to the facts of this case taking into cognizance the existence of T.P. form. Thus, the High Court found no material to interfere and dismissed the Revenue's contention. We are of the opinion that the High Court was right. In the premises this application for leave must fail and is accordingly dismissed. Petition dismissed. Issues:Interpretation of inter-State sales of tendu leaves under U.P. Sales Tax Act. Assessment of tax on inter-State sales. Application for leave to appeal under article 136 of the Constitution.Analysis:The case involved an application for leave to appeal under article 136 of the Constitution against the judgment and order of the High Court of Allahabad regarding the assessment of tax on inter-State sales of tendu leaves under the U.P. Sales Tax Act. The respondent contended that all sales of tendu leaves were conducted within Uttar Pradesh and not inter-State. The Tribunal, after thorough discussion of facts, found that the respondent had been assessed for inter-State sales, which the respondent disputed. The Tribunal considered evidence such as T.P. form IV issued by the Forest Department, but clarified that the mere issuance of this form does not establish inter-State sales. The Tribunal emphasized the necessity of both a sale of goods and their transport across state borders for a sale to qualify as inter-State trade, as per established legal principles.The Tribunal found that the respondent consistently maintained that only local sales were conducted, supported by an affidavit stating no inter-State sales were made. The Tribunal noted the absence of evidence contradicting the respondent's claims. Consequently, the Tribunal rejected the department's contentions, prompting the Revenue to appeal to the High Court. The High Court focused on determining whether the sales in question qualified as inter-State sales. After analyzing the Tribunal's findings, the High Court concluded that the goods had moved out of Uttar Pradesh based on sale agreements. The presence of T.P. form IV was considered but not deemed conclusive. The High Court upheld the Tribunal's decision, emphasizing the requirement that goods must move across state borders due to a contractual agreement between buyer and seller for sales tax under the Central Sales Tax Act.Ultimately, the Supreme Court agreed with the High Court's decision, stating that there was no basis for interference given the facts of the case. The application for leave to appeal was dismissed, affirming the High Court's ruling. The judgment highlighted the importance of proving both the sale of goods and their transport across state borders to establish inter-State sales for tax assessment purposes.