2006 (3) TMI 710 - HC - VAT and Sales Tax

Court upholds decision on sales tax exemption eligibility post-destination, emphasizing document transfer.

PU. Usha Versus State of Kerala

PU. Usha Versus State of Kerala - [2007] 5 VST 484 (Ker) Issues:1. Interpretation of section 35 of the Kerala General Sales Tax Act, 1963 regarding accommodation sale.2. Application of Explanation 1 to clause (b) of section 3 of the Central Sales Tax Act, 1956 in determining liability to tax on inter-State sales.3. Assessment of whether subsequent sales effected after goods reach their destination qualify for exemption under section 6(2) of the Central Sales Tax Act.The judgment pertains to an appeal by an assessee challenging the Deputy Commissioner's order under section 35 of the Kerala General Sales Tax Act, 1963, which set aside the assessment order due to an accommodation sale. The Deputy Commissioner found the exemption granted for the sale not in order, leading to an appeal by the assessee before the Tribunal. The assessee argued for the benefit of Explanation 1 to clause (b) of section 3 of the Central Sales Tax Act, 1956, emphasizing the use of E1 and C declarations as proof. The Tribunal upheld the Deputy Commissioner's decision, prompting the tax revision case.The key issue revolves around whether subsequent sales by the assessee after goods reach their destination qualify for exemption under section 6(2) of the Central Sales Tax Act. The assessee contended that sales effected during transit are eligible for exemption, citing the need for transfer of documents of title during movement from one State to another. The Deputy Commissioner, supported by the Special Government Pleader, argued that the goods reached their destination without proof of title transfer during transit, justifying the invocation of powers under section 35 of the Act.The court analyzed the relevant sections of the Central Sales Tax Act, emphasizing the requirement for the transfer of documents of title during the movement of goods for exemption eligibility. Explanation 1 to clause (b) of section 3 clarifies that the movement of goods commences and terminates based on delivery to and from a carrier or bailee. The court distinguished precedents where sales were deemed inter-State during transit, unlike the present case where sales occurred after goods reached their destination, not during transit.Referring to previous judgments, the court highlighted the importance of document transfer during the movement of goods for inter-State sale classification. The court concluded that since the sale in question took place after goods reached their destination, it did not qualify as an inter-State sale eligible for exemption under section 6(2) of the Act. Consequently, the court found no error in the Deputy Commissioner's decision to set aside the assessment order under section 35 and dismissed the revision appeal for lacking merit.