IMPORTANT POINT
• Sale in the course of inter-state trade has got 3 ingredients such as (i) a contract of sale incorporating a stipulation, express or implied, regarding interstate movement of goods (ii) the goods must actually move from one state to another pursuant to such contract of sale and (iii) such movement of goods from one state to another where the sale concludes
• The State is entitled to get appropriate extent of tax as in any other instance of sale, if the transaction is covered by any taxable event. Therefore the contention raised by the appellants in that case, that they have to be exempted from payment of tax because they are transporting it to a SEZ Unit, was negated.

JUDGMENT :

C.K. ABDUL REHIM, J.

1. Both the above writ appeals arise out of a common judgment of the Single Judge, dated 03.09.2019. Officials of the State Government in the Forest Department and in the Goods and Services Tax Department, who were the respondents in the writ petitions, are the appellants herein. The respondent in both these appeals is the writ petitioner.

2. Issue involved is as to whether the respondent is liable to pay 18% tax under the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’ for short) with respect to the goods of Sandal Wood purchased by them in the auction conducted at the Forest Depot, they being units situated in the Special Economic Zone (SEZ) in the State of Tamil Nadu.

3. The tender notification in question contained a clause that the successful bidder should remit 35% of the bid amount - within 7 days of issuance of the acceptance letter. Further stipulation is that, the balance amount along with applicable VAT, FDT and other taxes if any, has to be remitted within 14 days from the issuance of the acceptance letter. In another part of the notification it is stated that, the successful bidder should remit VAT at 14.5%. It is also evident from the sale confirmation letters issued to the writ petitioners, that the total amount required to be remitted included IGST @ 18%. The respondent/writ petitioner challenged the demand for remittance of 18% IGST. Inter-alia, they sought for a direction to the appellants to accept the purchase value, excluding the amount of IGST demanded.

4. The writ petitions were allowed by holding that, the transactions in question involves tax liability only at zero-rate. The writ petitioner was given permission to deposit the amounts demanded, excluding the 18% IGST. The writ petitioner was also directed to keep all statutory obligations in the movement of the goods in question to its destination, without any diversion. The appellants are directed to make delivery of the goods within one week from the date on which communication is received from the writ petitioner with respect to remittance of the amounts liable. The above finding is challenged on the basis that, the transaction in question will attract IGST liability not at zero rate.

5. The writ petitioner in both these cases is a unit situated at the Madras Export Processing Zone (SEZ), Phase-II, Plot B-25, Chennai-45. Documents evidencing registration of the unit as a SEZ Unit is produced along the writ petitions. The writ petitioner was required to pay 18% IGST on the value of the goods supplied, by treating the transaction as an inter-State supply of goods, which is leviable with tax as provided under Section 5 of the IGST Act. Contention raised was that, the supply of goods is to a SEZ unit, which can be considered only as a zero-rated supply, by virtue of provisions contained in Section 16 of the IGST Act. The appellants disputed that, since the location of the supplier and the place of supply are within the State, the transaction will attract payment of tax. In this regard, a scanning of the relevant provisions contained in Sections 7 and 8, in Chapter-IV as well as Section 10 in Chapter-V of the IGST Act will be beneficial.

6. Chapter-IV deals with the nature of supply. Sections 7 and 8 contained therein are extracted here under:-

“7. Inter-State supply

(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in:-

(a) two different States.

(b) two different Union territories.

(c) a State and a Union territory.

Shall be treated as a supply of goods in the course of inter-State trade or commerce.

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in:-

(a) two different States.

(b) two di