1973 (8) TMI 144 - HC - VAT and Sales Tax

Inter-State Sales Tax: High Court Rules on Foodgrains & Oil-Seeds Sales

Mewa Lal Kewal Kishore Versus Commissioner of Sales Tax

The High Court determined that the sales of foodgrains and oil-seeds by a dealer to U.P. dealers were inter-State transactions under clause (a) of section ... - Issues:Interpretation of inter-State sales under Central Sales Tax Act, applicability of clauses (a) and (b) of section 3, determination of tax liability and rate of tax on disputed turnovers.Analysis:The judgment pertains to a reference under section 11(1) of the U.P. Sales Tax Act read with section 9 of the Central Sales Tax Act involving a dealer in oil-seeds and foodgrains. The Sales Tax Officer initially found the dealer liable for Central sales tax on sales of foodgrains and oil-seeds in the course of inter-State trade. The dealer contended that the sales were intra-State, but subsequent proceedings revealed that the sales were indeed inter-State. The appellate authority directed the dealer to provide evidence supporting his claim, but the dealer failed to do so, admitting that the sales were inter-State. The fresh assessment imposed tax at 7% on foodgrains and 3% on oil-seeds, leading to further appeals on the grounds of the transactions being bilticut transactions and disputing the tax rates. The revising authority ultimately dismissed the revision but referred specific questions to the High Court for opinion.The High Court analyzed the provisions of section 3 of the Central Sales Tax Act, which deems a sale to be in the course of inter-State trade if it occasions the movement of goods from one state to another or if it involves a transfer of documents of title during such movement. The Court observed that in this case, the dealer entered into contracts with U.P. dealers but dispatched goods outside U.P., with railway receipts initially in the dealer's name and later endorsed to purchasers. The Judge (Revisions) Sales Tax found that the movement of goods to destinations outside U.P. was integral to the contracts of sale, indicating inter-State sales under clause (b) of section 3. However, the High Court opined that the sales were inter-State but fell under clause (a) of section 3 as the contract itself occasioned the movement of goods from one state to another, irrespective of the subsequent transfer of documents.The Court clarified that clause (b) of section 3 applies when goods are sold by transfer of documents during transit without a prior contract of sale, which was not the scenario in this case. Emphasizing that inter-State sales can occur even between parties within the same state if goods move due to a contract of sale, the Court highlighted that the location of the buyer and seller or the transfer of property in goods are immaterial in determining inter-State sales. The High Court answered the referred question by confirming the sales as inter-State and subject to Central sales tax, with costs awarded to the Commissioner of Sales Tax. The judgment provides a detailed analysis of the factual and legal aspects surrounding the determination of inter-State sales and tax liability under the Central Sales Tax Act.