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1997 Supreme(Mad) 1282
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE JANARTHANAM AND THE HONOURABLE MR. JUSTICE K. P. SIVASUBRAMANIAM
State of Tamil Nadu - Appellant
Versus
Trade International - Respondents
Tax Case (Revision) No. 1041 of 1990
Decided On : 12 November 1997
The exemption under section 6(2) of the CST Act is available only if the subsequent sale is effected to the Government or to a registered dealer other than the Government and the sale of the goods effected must be of the description referred to in sub-section (3) of section 8.
Headnote:
CENTRAL SALES TAX ACT, 1956 - SECTION 6(2) - EXEMPTION FROM TAX - SUBSEQUENT SALE OF GOODS DURING MOVEMENT - CONDITIONS - REGISTRATION OF DEALER - CERTIFICATE OF REGISTRATION - REQUIREMENT - INTERPRETATION.
Fact of the Case:
The assessee-dealers purchased plywoods from a registered dealer in Arunachal Pradesh and effected a subsequent sale of the goods while they were in transit to another registered dealer in Madras. The assessing officer taxed the inter-State sale at 4% since the assessee-dealers failed to file an E1 form certificate. The Appellate Assistant Commissioner confirmed the order of the assessing officer. The Tribunal allowed the appeal of the assessee-dealers and set aside the orders of the assessing officer and the Appellate Assistant Commissioner.
Finding of the Court:
The court held that the assessee-dealers could not be expected to furnish relevant materials for getting exemption under section 6(2) of the CST Act since there was no enquiry as to whether the goods dealt by them in subsequent sale were covered by a certificate of registration for the purpose of resale or for use in the manufacture or processing of goods for sale, as prescribed by sub-section (3) of section 8. The court remitted the case back to the assessing officer to consider the matter afresh.
Issues: Whether the subsequent sale of goods during movement, while in transit, is exempt from tax under the CST Act falling under section 6(2)(a) of the CST Act, on the facts and in the circumstances of the case.
Ratio Decidendi: The court held that the exemption under section 6(2) of the CST Act is available only if the subsequent sale is effected to the Government or to a registered dealer other than the Government and the sale of the goods effected must be of the description referred to in sub-section (3) of section 8. The court further held that the assessee-dealers could not have the benefit of exemption under section 6(2) of the CST Act unless and until the certificate of registration of the assessee-dealers covers the item of goods he purchased on inter-State sale, viz., plywoods, for the purpose of resale.
Final Decision: The court set aside the orders of all the authorities below, inclusive of the Tribunal, and remitted the case back to the assessing officer to consider the matter afresh in light of the court's observations.
JANARTHANAM, J.
This revision, at the instance of the Revenue, is directed against the order dated October 11, 1988 of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madras-104 (for short, "the Tribunal") and made in T.A. No. 1465 of 1986 relatable to the assessment year 1984-85 under the Central Sales Tax Act, 1956 (for short, "the CST Act").
2. The assessee, Tvl. Trade International, having their place of business at 347. Mint Street, Madras-79, are dealers in paper and plywoods, coming within the jurisdiction of Deputy Commercial Tax Officer, Peddunaickenpet (South) Assessment Circle, Madras-1. The total and taxable turnover of the assessee-dealers were determined at Rs. 5, 54, 219 and Rs. 3, 85, 000 respectively by the assessing officer. In respect of the taxable turnover to the tune of Rs. 3, 85, 000, it is said, the assessee-dealers purchased plywoods from a registered dealer at Arunachala Pradesh, wherein the goods, viz., plywood is stated to be exempt from tax. It appears, the assessee-dealers effected further sales, while the goods were in transit to another registered dealer at Madras. The assessing officer taxed the inter-State sale to the tune of Rs. 3, 85, 000 at the hands of the assessee-dealers at 4 per cent, since they failed to file E1 form certificate.
3. The assessee-dealers filed an appeal in C.S.T. 156/86 before the Appellate Assistant Commissioner (C.T.)-II, Madras City and he, in turn, after taking into consideration the relevant materials in the file, dismissed the appeal by order dated November 24, 1986 and thereby confirmed the order of the assessing officer.
4. The assessee-dealers further agitated the matter before the Tribunal, as stated above, and the Tribunal, in turn, after taking into consideration the relevant materials in the file, however, allowed the appeal by its order dated October 11, 1988, by setting aside the orders of both the assessing officer, as well as the Appellate Assistant Commissioner, giving rise to the present action - T.C. (R) No. 1041 of 1990.
5. From the pith and submissions of Mr. R. Mahadevan, learned Government Advocate, representing the Revenue and Mr. D. Trilokchand Chopda, learned counsel appearing for the assessee-dealers, the point, as below, emerges for consideration :
Whether the order of the Tribunal giving relief to the assessee-dealers on the ground of the sale falling under section6(2) of the CST Act, on the facts and in the circumstances of the case, is sustainable in law ?
6. There is no pale of controversy that the assessee-dealers approached a registered dealers at Arunachala Pradesh for the despatch of goods, viz., plywoods from Arunachala Pradesh to Madras, pursuant to a contract of sale. It is also not in dispute that the said Arunachala Pradesh dealer effected the despatch of the said goods as requested for by the assessee-dealers. Equally, it is also not in dispute that the assessee-dealers effected a subsequent sale of the said goods, while they were in transit to another registered dealer at Madras. The moot issue covering the question as framed above is as to whether such a subsequent sale, on the facts and in the circumstances of the case, is exempt from tax under C.S.T. Act falling under the sanguine and statutory provisions adumbrated under section 6(2)(a) of the CST Act.
7. For answering the ticklish issue so posed, better it is, for us to understand the scheme of taxation in CST Act, relatable to inter-State sale or purchase of goods.
(a) Section 3 deals with, when is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.
(b) Section 4 prescribes the parameters as to when is a sale or purchase of goods said to take place outside a State.
(c) Similarly, section 5 incorporates the relevant provisions as to when is a sale or purchase of goods said to take place in the course of import or export.(d)(i) Section 6 determines the liability to tax on inter-State sales. Subject to the paramete
