2015 (12) TMI 468 - HC - VAT and Sales Tax

High Court rules cotton sale interstate based on contract terms, ownership transfer, and goods movement

The High Court of Madras determined that the purchase of cotton between a mill and a cooperative federation constituted an interstate sale based on ... Classification of sale - Inter state sale or local sale - whether the transaction of purchase of cotton between the respondent Mill and one Maharashtra State Co-opertive Cotton Growers Marketing Federation Ltd., Bombay is inter state sale or local sale by reason of delivery of goods, after payment of entire sale consideration within Tamil Nadu - Held that:- Tamil Nadu Sales Tax Appellate Tribunal, after verifying the facts stated by the assessee, in the light of the documents referred to above and by applying the principles laid down by the Hon'ble Supreme Court in South India Viscose Ltd v. State of Tamil Nadu, reported in [1981 (7) TMI 204 - SUPREME COURT OF INDIA] and also by applying the view of the TNTST, Chennai in the cases, was of the firm view that the transaction cannot be considered as local sale, but only as inter state purchase and the same was not liable to tax under the TNGST Act 1959 at the point of last purchase in the State and accordingly allowed all the five appeals. - As the findings rendered by the Tribunal are based on material facts and supportive documents and sustained by sufficient reasoning, we find no reason to interfere with the same. - Decided against Revenue. Issues:Interstate sale or local sale of cotton between two parties.Analysis:The High Court of Madras, in this case, dealt with the issue of whether the transaction of purchase of cotton between a mill and a cooperative federation constitutes an interstate sale or a local sale. The Assessing Officer and the Appellate Assistant Commissioner considered it a local sale, imposing levies accordingly. However, the Tamil Nadu Sales Tax Appellate Tribunal reversed these findings, treating the transaction as an interstate purchase. The Tribunal based its decision on the contract, delivery order, sales bills, and transport invoices, concluding that the movement of goods was in pursuance of an interstate contract. The Tribunal applied the principles laid down by the Supreme Court and previous decisions of the TNTST, Chennai, to determine the nature of the transaction.The Tribunal examined whether the transaction fell under Section 3(a) of the CST Act, 1956, which deems a sale to be in the course of interstate trade if it occasions the movement of goods from one state to another. The Tribunal found that the movement of goods from Maharashtra to Tamil Nadu was in pursuance of the contract between the parties. It noted that the ownership of the goods remained with the seller until payment was made, and delivery occurred in Tamil Nadu after payment. The Tribunal also considered the transit insurance paid by the seller, concluding that it did not affect the interstate nature of the transaction.Based on the documentary evidence and the legal principles applied, the Tribunal held that the transaction was an interstate purchase and not liable to tax under the TNGST Act, 1959. The High Court upheld the Tribunal's findings, stating that they were based on material facts, supportive documents, and sufficient reasoning. Consequently, the Tax Case Revision was dismissed, with no costs awarded.In conclusion, the judgment clarified the nature of the transaction as an interstate purchase, emphasizing the importance of contractual obligations, ownership transfer, and the movement of goods in determining the tax liability under relevant statutes.