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

Supreme Court affirms inter-State sales tax ruling on tendu leaves under U.P. Sales Tax Act

Commissioner of Sales Tax, UP., Lucknow Versus Suresh Chand Jain

The Supreme Court dismissed the application for leave to appeal, affirming the High Court of Allahabad's decision regarding the assessment of tax on ... Wwhether the sales effected by the respondent, were inter-State sales or not? Held that:- Appeal dismissed. The High Court was correct to found that the goods were 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. 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.