2011 (4) TMI 1235 - HC - VAT and Sales Tax

Court rules tendu leaves purchase as intra-State sale, directs payment of state taxes, dismisses writ appeals

The court held that the purchase of tendu leaves by the appellants is an intra-State sale, not inter-State. It found that the movement of goods from ... Whether purchase of tendu leaves by the appellants, who are registered exporters of tendu leaves in the State of Chhattisgarh, is inter-State or intra-State sale? Held that:- We are in entire agreement with the reasonings of the learned single judges in holding the sale transaction of tendu leaves as intra-State sale, and not inter-State sale. We find no substance in this batch of writ appeals, the same deserve to be and are, accordingly, dismissed Issues Involved:1. Whether the purchase of tendu leaves by the appellants is an inter-State or intra-State sale.2. Whether the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 and the Niyamawali, 1966 form part of the purchase agreement.3. Whether the movement of tendu leaves occasioned by the sale is inseparably connected with the sale.Detailed Analysis:1. Whether the purchase of tendu leaves by the appellants is an inter-State or intra-State sale:The appellants argued that their purchase of tendu leaves should be considered an inter-State sale. They contended that the sale of tendu leaves to registered exporters in Chhattisgarh is for the purpose of exporting them outside the state, thus making it an inter-State sale. They relied on the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, and the Niyamawali, 1966, which regulate the trade and transport of tendu leaves. The appellants emphasized that the movement of goods from Chhattisgarh to other states is an integral part of the sale, facilitated by transport permits issued under the Adhiniyam and Niyamawali. They cited several Supreme Court judgments to support their claim that the movement of goods and the sale must be inseparably connected to qualify as an inter-State sale.2. Whether the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 and the Niyamawali, 1966 form part of the purchase agreement:The appellants argued that the provisions of the Adhiniyam, 1964, and the Niyamawali, 1966, are incorporated into the purchase agreements by reference, making them part of the contract. They highlighted specific clauses in the tender notice and purchase agreement that reference these statutory provisions, asserting that compliance with these provisions is mandatory for the execution of the contract. The appellants contended that the learned single judge erred in concluding that these provisions do not form part of the agreement.3. Whether the movement of tendu leaves occasioned by the sale is inseparably connected with the sale:The appellants maintained that the movement of tendu leaves from Chhattisgarh to other states is an essential part of the sale transaction. They argued that the transport permits issued under the Adhiniyam, 1964, and the Niyamawali, 1966, are necessary for the movement of goods and that failure to comply with these terms renders the transaction incomplete. They contended that the learned single judge's observation that the movement of goods is independent of the sale is erroneous. The appellants cited several judgments to support their claim that the movement of goods and the sale must be inseparably connected to qualify as an inter-State sale.Court's Findings:The court examined the relevant statutory provisions, the terms of the tender notice, and the purchase agreements. It concluded that the movement of tendu leaves from Chhattisgarh to other states is not occasioned by the sale but is a separate and independent transaction. The court held that the provisions of the Adhiniyam, 1964, and the Niyamawali, 1966, do not form part of the purchase agreement but are conditions for compliance. The court found that the sale of tendu leaves is complete within the state of Chhattisgarh, and the movement of goods outside the state is not a consequence of the sale.The court relied on previous judgments to support its conclusion that the movement of goods must be a direct result of the sale to qualify as an inter-State sale. It distinguished the present case from other judgments cited by the appellants, noting that in those cases, the movement of goods was an integral part of the sale transaction.Conclusion:The court dismissed the appellants' writ appeals, holding that the purchase of tendu leaves by the appellants is an intra-State sale and not an inter-State sale. The court affirmed the learned single judge's decision that the appellants are liable to pay all applicable taxes under the state laws. The court vacated all interim reliefs granted earlier and directed the appellants to make the payment of the balance amount of taxes to the respondent state.