TaxTMI 
TaxTMI 
2005 (2) TMI 786
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....e Principal Chief Conservator of Forests, Saidapet, Chennai in the State of Tamil Nadu. The State of Tamil Nadu is insisting on charging general sales tax under the Tamil Nadu General Sales Tax Act, 1959 in respect of the auction sales to the petitioners. The petitioner/appellant alleges that these sales are in the course of inter-State trade and commerce, and hence only chargeable to tax under section 8 of the Central Sales Tax Act, 1956 and not under the Tamil Nadu Act. 3.. It is alleged that the stand of the respondents is illegal and contrary to the decisions of the Supreme Court in Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196 and Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu [1993] 90 STC 1. It is alleged that the third respondent-Principal Commissioner and Commissioner of Commercial Taxes, Chennai, having initially and correctly taken the view that the petitioner is only eligible to pay Central sales tax has subsequently without notice directed the first respondent-District Forest Officer, Sathyamangalam to charge sales tax on the petitioner under the Tamil Nadu General Sales Tax Act, 1959 placing reliance on the judgme....
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.... be undergone as soon as the sandalwood is notified, and the sale, possession and transit of sandalwood is strictly controlled under the Tamil Nadu Forest Act, as well as the Karnataka Forest Act. Under rule 3 of the Tamil Nadu Sandalwood Transit Rules, 1967 no person can import or export sandalwood into or from Tamil Nadu unless the wood is accompanied by a permit referred to in rule 4 or by a permit referred to in rule 6 and unless the sandalwood bears the mark of the Government of origin with property mark. It is alleged by the petitioner that the moment the sale is confirmed, the proceeds are remitted whereupon the proceedings are issued for delivery to be effected by the first respondent-District Forest Officer, Sathyamangalam for onward movement as contemplated by the cumulative circumstances referred to above. It is alleged that at all material times the first respondent-District Forest Officer, Sathyamangalam was instructed by the third respondent-Principal Commissioner and Commissioner of Commercial Taxes, Chennai to charge Central sales tax. Accordingly, the petitioner was issuing C forms and transporting the goods immediately on delivery into the State of Karnataka. Howe....
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....tation into the State of Karnataka are part and parcel of the same transaction and arise out of the compulsion in the course of transaction: (i) the petitioner, who is an auction buyer, has its factory for use and consumption of sandalwood only in the State of Karnataka. The petitioner has no place of business in the State of Tamil Nadu; (ii) the petitioner even while participating in the auction obtained and submitted an income-tax certificate under the proviso to section 206(1) of the Income-tax Act, 1961 from its income-tax authority and submitted the same to the District Forrest Officer, so that a 15 per cent debit on the purchase consideration is avoided. That certificate submitted in form 27C read with rule 37C certifies that the products are purchased for the purpose of manufacture and authorising the District Forest Officer not to collect tax at source. Non-recovery of income-tax at source while effecting full payment to secure a delivery order of the seller impresses a requisite obligation on the petitioner to transport the goods to its factory in Karnataka for manufacture; (iii) Sections 35 and 36 of the Tamil Nadu Forest Act and the Tamil Nadu Sandalwood Tran....
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....nsel for the petitioner/appellant then relied on the decision of the Supreme Court in Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu [1993] 90 STC 1. In our opinion that decision is also distinguishable. The said decision related to the purchase of sugarcane in Tamil Nadu by the appellant therein who had a sugar factory in Kerala. It may be mentioned that under the Sugarcane Control Order, 1966, ordinarily sugarcane cannot be transported except to the factory lying within the reserved area. The system of supply of sugarcane to the sugar factories, which is prevalent in most parts of the country, is that the Government declares a certain area lying within a certain radius of a sugar factory as a reserved area. The sugarcane growers within that reserved area can sell sugarcane only to that factory which is inside the reserved area, and the sugar factory can only purchase cane from the cane growers within that reserved area. However, it appears that sugarcane was not available in Kerala State. Hence, the Governments of Kerala and Tamil Nadu entered into an agreement pursuant to which the Government of Tamil Nadu issued a G.O. permitting the appellant therein to purchase sug....
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....obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an inter-State element. Precedents are legion; we may briefly refer to some of them. In English Electric Co. of India Ltd. v. Deputy Commercial Tax Officer [1976] 38 STC 475 (SC); (1976) 4 SCC 460 this Court held that when the movement of the goods from one State to another is an incident of the contract, it is a sale in the course of inter-State trade and it does not matter which is the State in which the property passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. In Union of India v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC); (1979) 2 SCC 242 it was observed that a sale would be an inter-State sale even if the contract of sale does not itself provide for the movement of goods from one State to another provided, however, that such movement was the result o....
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....auction sale. 11.. It may be noted that the auction sale of sandalwood in the State of Tamil Nadu was done by the State of Tamil Nadu. The State Government would only be interested in getting the highest price for the sandalwood, and it would hardly be concerned with the question whether the sandalwood after the auction sale is consumed within the State of Tamil Nadu or goes to some other State. Hence, it cannot be said even by implication that the State of Tamil Nadu had entered into any covenant with the petitioner/appellant for transportation of the sandalwood to Karnataka after the sale. The movement of goods from Tamil Nadu to Karnataka can also not be said to be in incidence of the auction sale, rather the auction sale had nothing to do with the transport of the goods to Karnataka. In the auction sales (for all we know) there may have been bidders who wanted to purchase the sandalwood for use within the State of Tamil Nadu and not for transport outside the State. The State Government authorities would hardly be interested in the question whether the sandalwood after purchase in the auction sale is sent to Karnataka or U.P. or some other State, or remains within Tamil Nadu.....
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.... the petitioner were to sell to Indian Explosives the entire quantity of naphtha required for the fertilizer factory. Under Clause-4 of the said agreement, the seller was to make supply of naphtha to the buyer from its refinery at Barauni. Thus the source of supply was the refinery at Barauni in Bihar and the destination was the buyer's factory at Kanpur. This one clause alone was sufficient to prove that the sales in question were inter-State sales. 15.. It was contended by the petitioner in the above case that the sales were local sales and not inter-State sales, because the sales were made on the buyer's indents in writing addressed to the seller (the petitioner) at its Kanpur branch and not at its refinery at Barauni. It was alleged that the supplies were made from the petitioner's storage at Kanpur to the fifth respondent's factory also at Kanpur. However, this contention of the petitioner was rejected and it was held by the Supreme Court that the sales under the agreement are not possible without inter-State movement of naphtha. The arrangement regarding the storage facility was only for operational convenience and it was only a mechanism devised to facilitate the transfer....