2003 (3) TMI 692 - AT - VAT and Sales Tax

Inter-State Sale of News Magazines: Tax Exemption Ruling

The Tribunal held that the sale of newsprint converted into news magazines and transported to Kerala constituted an inter-State sale under the Central ... Sale in the course of inter-State trade or commerce - occasioning the movement of goods from one State to another - inter-State sale - movement of goods as an incident of the saleSale in the course of inter-State trade or commerce - occasioning the movement of goods from one State to another - movement of goods as an incident of the sale - Whether the sale of newsprint by the assessee to a Kerala dealer, which involved despatching the newsprint from Tamil Nadu and subsequent printing at Sivakasi before magazines were sent to Kerala, qualified as an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956. - HELD THAT: - The Court applied section 3(a) of the Central Sales Tax Act, 1956, which deems a sale to take place in the course of inter-State trade or commerce if it occasions movement of goods from one State to another. The intervening processing (conversion of newsprint into magazines at Sivakasi) does not break the character of the transaction where the movement from Tamil Nadu to Kerala was occasioned by the sale. The Tribunal relied on precedent establishing that movement implicit in or incident to the sale brings the transaction within section 3(a), including Union of India v. K.G. Khosla and Co. Ltd., the Kerala High Court decision in Deputy Commissioner of Sales Tax v. Sundaram Industries Ltd., and Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu, which hold that where movement of goods to another State is an incident of the sale/purchase, the transaction is an inter-State sale and not exigible to the State General Sales Tax Act. Applying these principles to the facts, the Court concluded that the contract and practical incidents show the movement to Kerala was occasioned by the sale and thus the sale is an inter-State sale under section 3(a). The Joint Commissioner's conclusion that the sale was taxable under the Tamil Nadu General Sales Tax Act was therefore erroneous and set aside. [Paras 5, 6, 7, 8]The sale was an inter-State sale within section 3(a) of the Central Sales Tax Act, 1956; the Joint Commissioner's order holding it exigible to Tamil Nadu sales tax was set aside and the appeal allowed.Final Conclusion: The Tribunal allowed the appeal, holding the transaction to be an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, and setting aside the Joint Commissioner's order that had subjected the sale to the Tamil Nadu General Sales Tax Act. Issues:1. Determination of whether a sale constitutes an inter-State sale under the Central Sales Tax Act, 1956.2. Interpretation of the movement of goods in the context of inter-State trade or commerce.3. Application of relevant legal precedents to ascertain the tax liability under the Tamil Nadu General Sales Tax Act, 1959.Analysis:The case involved a tax appeal against an order passed by the Joint Commissioner, challenging the decision of the Appellate Assistant Commissioner. The Joint Commissioner set aside the Appellate Assistant Commissioner's order, arguing that the sale of newsprint by the appellant to a Kerala dealer, which was later converted into news magazines and transported to Kerala, fell under the purview of the Tamil Nadu General Sales Tax Act, 1959. The appellant contended that since the newsprint was transported to Kerala, it constituted an inter-State sale.Upon review, the Tribunal examined Section 3(a) of the Central Sales Tax Act, 1956, which deems a sale to occur in the course of inter-State trade if it occasions the movement of goods from one State to another. The Tribunal referred to legal precedents, including the case of Union of India v. K.G. Khosla and Co. Ltd., emphasizing that the movement of goods from Tamil Nadu to Kerala constituted an inter-State sale, irrespective of the intermediate processing in Sivakasi. The Tribunal also cited the judgment of the Kerala High Court in Deputy Commissioner of Sales Tax v. Sundaram Industries Ltd., supporting the view that such transactions are inter-State sales.Further, the Tribunal referenced the Supreme Court's decision in Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu, highlighting that the movement of goods in connection with the sale constitutes an inter-State sale, even if the contract does not expressly mention the movement. The Tribunal concluded that the sale in question was an inter-State sale under the Central Sales Tax Act, 1956, and not subject to taxation under the Tamil Nadu General Sales Tax Act, 1959.In contrast to the Joint Commissioner's decision, the Tribunal found that the Appellate Assistant Commissioner's analysis, supported by legal precedents, was correct. Consequently, the appeal was allowed, and the Tribunal ordered the observance of its decision. The judgment emphasized the importance of the movement of goods in determining the nature of a sale for inter-State taxation purposes, in line with established legal principles and precedents.Conclusion:The Tribunal's detailed analysis focused on the interpretation of inter-State sales under the Central Sales Tax Act, 1956, and the application of legal precedents to determine the tax liability in the case. By emphasizing the significance of the movement of goods in inter-State transactions and citing relevant judgments, the Tribunal concluded that the sale of newsprint converting into news magazines and transported to Kerala constituted an inter-State sale, not subject to taxation under the Tamil Nadu General Sales Tax Act, 1959.