Inter-State sale character preserved despite later Punjab delivery, defeating penalty for alleged tax evasion.

Goods moving from Maharashtra to Punjab under invoices and goods receipts retained their inter-State character, because the origin of the movement was outside Punjab and a later delivery to another purchaser in Punjab did not convert it into an intra-State sale. The detaining authority had to assess the transaction on the statutory test for inter-State movement rather than on the subsequent delivery arrangement. As the transaction remained inter-State, the allegation of non-genuine documents and attempted tax evasion could not stand, and the penalty under the Punjab VAT Act was held unsustainable.

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Issues: (i) Whether the movement of goods from Nasik to Amritsar, followed by delivery to a purchaser in Punjab, constituted an inter-State sale or a taxable intra-State transaction for the purpose of penalty under the Punjab VAT Act, 2005. (ii) Whether the penalty imposed for alleged use of non-genuine documents and attempted tax evasion could be sustained.

Issue (i): Whether the movement of goods from Nasik to Amritsar, followed by delivery to a purchaser in Punjab, constituted an inter-State sale or a taxable intra-State transaction for the purpose of penalty under the Punjab VAT Act, 2005.

Analysis: The goods admittedly moved from Maharashtra to Punjab under invoices and goods receipts accompanying the vehicle. The transaction originated outside Punjab, and the mere circumstance that the goods were later delivered to another purchaser in Punjab did not alter the inter-State character of the movement. The detaining authority was required to examine the nature of the movement on the basis of the documents and the statutory test of inter-State sale, rather than treating the subsequent delivery arrangement as decisive.

Conclusion: The transaction was held to be an inter-State sale and not an intra-State sale in Punjab.

Issue (ii): Whether the penalty imposed for alleged use of non-genuine documents and attempted tax evasion could be sustained.

Analysis: Since the movement of goods from Nasik to Punjab was established and the essential inter-State nature of the transaction was not displaced, the basis for treating the documents as fraudulent or for inferring an attempt to evade tax did not survive. The existence of a transit arrangement or delivery to another purchaser did not, by itself, justify penalty in the absence of a valid finding that the transaction lost its inter-State character.

Conclusion: The penalty under Section 51(7)(b) of the Punjab VAT Act, 2005 was not sustainable.

Final Conclusion: The appeal succeeded, and the impugned order imposing penalty was set aside.

Ratio Decidendi: Where goods move from one State to another under supporting documents, the transaction retains its inter-State character, and penalty for alleged tax evasion cannot be sustained merely because the goods are later delivered to another purchaser within the destination State without proper inter se endorsement.

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