1975 (9) TMI 160 - HC - VAT and Sales Tax

Inter-State Sales Tax Ruling: Goods Location at Contract, Burden of Proof

The court upheld the Tribunal's decision that sales in the course of inter-State trade can be considered inside the State if the goods are within Orissa ... - Issues Involved:1. Whether sales in the course of inter-State trade and commerce can be considered sales inside the State if the goods are inside the State of Orissa.2. Interpretation of the definition of 'sale' under section 2(g) of the Orissa Sales Tax Act, 1947.3. Validity of additional tax and penalty imposed on the assessee for converting cereals into dal and selling goods in the course of inter-State trade.4. Burden of proof regarding the contravention of declarations furnished by the assessee.Issue-Wise Detailed Analysis:1. Whether sales in the course of inter-State trade and commerce can be considered sales inside the State if the goods are inside the State of Orissa:The Tribunal held that sales in the course of inter-State trade can be considered sales inside the State if the goods are inside the State of Orissa when the contract of sale takes place. This interpretation is based on the definition of 'sale' in section 2(g) of the Orissa Sales Tax Act, which includes an explanation that if the goods are within the State when the contract is made, the sales are deemed to be inside the State. The court agreed with this conclusion, stating that the situs of sale is fixed by the location of the goods at the time of the contract.2. Interpretation of the definition of 'sale' under section 2(g) of the Orissa Sales Tax Act, 1947:The definition of 'sale' in section 2(g) includes any transfer of property in goods for valuable consideration and specifies that a sale is deemed to take place inside the State if the goods are within the State when the contract of sale is made. This definition aligns with section 4 of the Central Sales Tax Act, which determines the location of a sale. The court upheld the Tribunal's interpretation that sales in the course of inter-State trade can still be considered inside the State if the goods are within Orissa at the time of the contract.3. Validity of additional tax and penalty imposed on the assessee for converting cereals into dal and selling goods in the course of inter-State trade:The Tribunal vacated the demand for additional tax and penalty related to the conversion of cereals into dal, relying on a previous decision (Ram Chandra Badrinarayan v. State of Orissa). Regarding the sale of goods in inter-State trade, the Tribunal found no contravention of declarations because there was no evidence that the goods were outside Orissa when the contracts were made. The court agreed, noting that the burden of proof was on the department to show that the sales took place outside the State.4. Burden of proof regarding the contravention of declarations furnished by the assessee:The Tribunal and the court emphasized that the burden of proof lies with the department to establish that goods purchased tax-free based on declarations were sold outside the State. The Tribunal found no specific evidence or findings that goods purchased from registered dealers were sold in inter-State trade. The court upheld this view, stating that without evidence from the department, the charge of contravention could not stand.Conclusion:The court concluded that the Tribunal was correct in holding that sales in the course of inter-State trade could be considered sales inside the State if the goods were inside Orissa when the contract was made. The Tribunal's reliance on the definition of 'sale' in section 2(g) was appropriate. The assessee's actions did not violate the declarations furnished, and thus, the additional tax and penalty were not justified. The court answered the reference in favor of the assessee and awarded costs.