Inter-State sales proof under CST law must be considered before enforcing provisional tax demands on the dealer.

Provisional sales tax demands under Rule 18(4) of the Tamil Nadu General Sales Tax Rules were examined in relation to sales claimed as inter-State transactions. The text explains that Government Order No. 423 dated 31.12.1993 prescribed a 40-day period from arrival of goods for transactions from 1.4.1993, but did not bar the dealer from proving that sales beyond that period were effected by transfer of documents of title during movement and therefore fell within section 6(2) read with section 3(b) of the Central Sales Tax Act, 1956. Assessing authorities were required to re-examine the matter and give the dealer an opportunity to establish the inter-State character before enforcing provisional demands or continuing proceedings.

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Issues: Whether provisional demands and provisional notices issued under Rule 18(4) of the Tamil Nadu General Sales Tax Rules, 1959 in relation to sales claimed as inter-State sales could be enforced without re-examination in the light of Government Order No. 423 dated 31.12.1993 and without affording the dealer an opportunity to prove that the transactions were covered by section 6(2) read with section 3(b) of the Central Sales Tax Act, 1956.

Analysis: The Government Order granted relief for earlier periods and, for transactions from 1.4.1993, prescribed a 40-day period from the date of arrival of goods, while also proceeding on the basis that sales after that period could be treated as local sales on an assumption of constructive delivery. The Court held that this did not exclude the dealer from proving, even for sales beyond 40 days, that the transactions were in truth effected by transfer of documents of title during movement and therefore fell within the scope of section 6(2) read with section 3(b) of the Central Sales Tax Act, 1956. The assessing authority was required to give an opportunity to the dealer to establish the character of the sales before enforcing the provisional demand or continuing proceedings pursuant to the provisional notices.

Conclusion: The provisional demands and consequential proceedings were not to be enforced or continued until the assessing authority re-examined the matter and afforded the dealers an opportunity of proof in accordance with the Government Order and the Court's interpretation.

Final Conclusion: The writ petitions were disposed of with directions for reconsideration of the provisional tax demands in the light of the Government Order and after granting the dealers an opportunity to establish the inter-State character of the transactions.

Ratio Decidendi: A transaction cannot be treated as local merely because it occurs after a prescribed time from arrival of goods if the dealer is still entitled to prove that the sale was effected during movement by transfer of documents of title; provisional tax action must await such determination.

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