2007 (4) TMI 362 - SC - VAT and Sales Tax

Court orders refund of excess sales tax on inter-State kendu leaf trade under Orissa Sales Tax Act, 1947

State of Orissa and another Versus KB. Saha and Sons Industries Pvt. Ltd. and others (and other appeals)

State of Orissa and another Versus KB. Saha and Sons Industries Pvt. Ltd. and others (and other appeals) - [2007] 7 VST 214 (SC), 2007 (9) SCC 97 Issues Involved:1. Whether the purchase of kendu leaves by the petitioners constitutes inter-State trade or intra-State trade.2. Whether the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, are unauthorized and without jurisdiction.3. Whether the excess amount collected under the guise of Orissa sales tax should be refunded to the petitioners.Issue-wise Detailed Analysis:1. Whether the purchase of kendu leaves by the petitioners constitutes inter-State trade or intra-State trade:The central issue revolves around the classification of the trade of kendu leaves as inter-State or intra-State. The petitioners argued that the sale/purchase of kendu leaves occasioned the movement of goods from Orissa to West Bengal, thus qualifying as inter-State trade under Section 3(a) of the Central Sales Tax Act, 1956. They relied on precedents like *Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti* and *Indian Explosives Limited v. State of Bihar* to support their claim that the transactions were inter-State sales.Conversely, the respondents, including the Commissioner of Commercial Taxes and OFDC, contended that the contract did not necessitate the movement of goods from one State to another, and the sale did not occasion such movement, thus constituting intra-State trade. They cited cases like *Commissioner of Sales Tax, U.P. v. Suresh Chand Jain* and *Similipahar Forest Development Corporation Limited v. State of Orissa* to argue that the transactions were intra-State sales.The court examined the contractual obligations, the issuance of transport permits, and the movement of goods. It was noted that the sale of kendu leaves was completed only after the issuance of transport permits specifying the destination, indicating that the movement of goods was a necessary incident of the sale. Thus, the court concluded that the sale occasioned the movement of goods from Orissa to West Bengal, satisfying the conditions for inter-State trade under Section 3(a) of the Central Sales Tax Act, 1956.2. Whether the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, are unauthorized and without jurisdiction:Given the court's conclusion that the transactions were inter-State sales, the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, were deemed unauthorized and without jurisdiction. The court emphasized that the transactions were exigible to Central sales tax under the Central Sales Tax Act, 1956, and not to local sales tax.3. Whether the excess amount collected under the guise of Orissa sales tax should be refunded to the petitioners:The court directed the opposite parties to refund the excess amount collected under the Orissa Sales Tax Act, 1947, to the petitioners within two months of receipt of the writ from the court. If the excess amount was not paid within the stipulated time, the petitioners would be entitled to receive interest at the rate of 16 percent per annum on the differential amount from the date of default.Conclusion:The court allowed the writ petitions, concluding that the transactions in question constituted inter-State sales, and thus, the levy and collection of sales tax under the Orissa Sales Tax Act, 1947, were unauthorized. The excess amount collected was ordered to be refunded to the petitioners.