Statutory notice and inter-State sale tests determined the validity of assessment and tax treatment of works contract supplies.

A valid assessment under section 11(1) of the Tripura Sales Tax Act required prior service of the statutory notice calling for a return; without that notice, jurisdiction could not be assumed and the assessment was invalid. For works contract supplies, the character of the sale depended on whether movement of goods from one State to another was occasioned by the contract under section 3 of the Central Sales Tax Act, not on where property passed or where the materials were used. On that test, the transaction was an inter-State sale, not an intra-State sale in Tripura.

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Issues: (i) Whether an assessment under section 11(1) of the Tripura Sales Tax Act, 1976 could be validly initiated and sustained without service of the statutory notice calling for a return. (ii) Whether the supply of materials for execution of the works contract was an intra-State sale in Tripura or an inter-State sale liable to be governed by the Central Sales Tax Act, 1956.

Issue (i): Whether an assessment under section 11(1) of the Tripura Sales Tax Act, 1976 could be validly initiated and sustained without service of the statutory notice calling for a return.

Analysis: Section 11(1) contemplates a prior satisfaction on information, followed by initiation of proceedings by service of a notice requiring the dealer to furnish a return, and thereafter assessment in accordance with the regular assessment provisions. Service of a valid notice within the prescribed time was treated as a condition precedent to assumption of jurisdiction and commencement of proceedings. In the present case, no notice under section 11(1) was served, and the assessment was made straightway on the basis of the authority's satisfaction alone.

Conclusion: The assessment was invalid and unsustainable for want of the mandatory notice under section 11(1).

Issue (ii): Whether the supply of materials for execution of the works contract was an intra-State sale in Tripura or an inter-State sale liable to be governed by the Central Sales Tax Act, 1956.

Analysis: The nature of the sale had to be determined by the principles governing inter-State trade under section 3 of the Central Sales Tax Act, 1956. The decisive test was whether the movement of goods from one State to another was occasioned by the contract or was an incident of it. The place where property in the goods passed, or where the materials were used in the works contract, was not decisive. The constitutional restrictions under article 286 and the principles under article 366(29A) did not exclude the application of the inter-State sale test to works contract transactions.

Conclusion: The transaction was an inter-State sale and could not be taxed as an intra-State sale in Tripura.

Final Conclusion: The assessment and demand were quashed, and the writ petition succeeded with costs.

Ratio Decidendi: For an assessment under the escape or evasion provision to be valid, the statutory notice initiating proceedings is a condition precedent; and the character of a sale as inter-State depends on whether the movement of goods from one State to another is occasioned by the contract, not on the place where property passes or the goods are used.

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