Territorial jurisdiction under the CST Act failed where C forms were obtained in another State and the tax levy lacked authority.

Where subsequent sales were made during movement of goods and did not fall within section 6(2) of the Central Sales Tax Act, the proviso to section 9(1) governed territorial jurisdiction for levy and collection. As the registered dealer had obtained the prescribed C forms in Maharashtra in connection with the relevant purchases, Gujarat had no authority to assess the disputed turnover under that proviso. The tax levy on the subsequent sales was therefore without jurisdiction, and the penalty founded on that levy was equally unsustainable.

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Issues: Whether, on the facts and in the circumstances of the case, and having regard to the proviso to section 9(1) of the Central Sales Tax Act, 1956, the State of Gujarat had jurisdiction to levy and collect central sales tax on the assessee's subsequent sales, and to impose penalty under the linked sales tax provisions.

Analysis: The assessee was registered under the Central Sales Tax Act in both Gujarat and Maharashtra and had obtained the prescribed C forms in Maharashtra in connection with its inter-State purchases. The subsequent sales were effected while the goods were in movement and did not fall within section 6(2) of the Central Sales Tax Act, 1956, so the proviso to section 9(1) became applicable. That proviso directs levy and collection in the State from which the registered dealer obtained, or could have obtained, the prescribed form in connection with the purchase of the goods. On the admitted facts, the necessary forms had in fact been obtained from Maharashtra, and no valid objection to their use had been raised earlier. The Gujarat authorities therefore had no territorial authority under the proviso to assess the disputed turnover.

Conclusion: The levy and collection of tax by Gujarat on the disputed subsequent sales was without jurisdiction, and the penalty based on that levy was also unsustainable. The answer was in the affirmative, in favour of the assessee and against the revenue.

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