2008 (7) TMI 906 - HC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the Trade Tax Tribunal is legally justified to accept the alleged stock transfers and exempt them from tax though it is evident from the account books seized in the survey dated August 5 1991 that the assessee has made direct sales from its Noida office to outside U.P. which are clearly Central sales? Whether the Trade Tax Tribunal has properly appreciated the material available on record? Held that - It is difficult to agree with the Tribunal that it was a case of stock transfer. It is held that it was a case of stock transfer from Noida to Delhi and ultimate sale from Delhi to purchasing dealer. The Tribunal was thus not justified in interfering with the order of the first appellate authority rejecting the claim of stock transfer in respect of Rs. 2, 35, 093.08. The first appellate authority was fully conscious and has found that in respect of forwarding notes Nos. 101 106 107 129 (Sanket No. 4) challan No. 58 (Sanket No. 8) and challan Nos. 16 17 and 26 (Sanket No. 9) the movement of goods was made in pursuance of prior agreement of sale from the State of U.P. to the outside State of U.P. It has been found that with a view to avoid liability of inter-State sales tax an attempt was made by manipulating the entries in the account books to show that it was a stock transfer.As regards other seized challans no adverse material was found after thorough examination and therefore in the absence of any adverse material the claim of the dealer-opposite party with regard to the stock transfer was rightly accepted. Revision succeeds and is allowed. The order of the Tribunal is set aside

Summary

Issues:

1. Interpretation of stock transfer vs. inter-State sales under the Central Sales Tax Act, 1956.
2. Justification of the Trade Tax Tribunal's decision regarding the acceptance of alleged stock transfers and exemption from tax.
3. Proper appreciation of the material available on record by the Trade Tax Tribunal.

Interpretation of Stock Transfer vs. Inter-State Sales:

The case involved a revision by the Department against the Trade Tax Tribunal's order related to the assessment year 1991-92 under the Central Sales Tax Act. The dealer disclosed a net turnover but faced scrutiny regarding stock transfer claims. The assessing authority rejected part of the claims based on a survey, leading to an appeal where some transactions were accepted as stock transfer and others as inter-State sales. The Tribunal later accepted all claims of stock transfer, prompting the Department's revision. The key legal question revolved around whether the transactions constituted inter-State sales or stock transfers.

Trade Tax Tribunal's Decision and Material Appreciation:

The Department argued that certain transactions were Central sales based on evidence from a survey, highlighting movements of goods to outside U.P. The Tribunal, however, focused on the goods reaching the ultimate customer and deemed it as stock transfer from Noida to Delhi, thus deleting the inter-State sales tax. The dealer contended that the movement was from the factory to the head office and then to the customer, justifying the Tribunal's decision. The Tribunal's reliance on the movement of goods and the nature of the transactions was central to its decision.

Analysis and Conclusion:

The Court analyzed the legal definition of inter-State sales under the Central Sales Tax Act, emphasizing the need for both sale and movement of goods across states. Referring to a precedent, the Court established that the presence of an agreement leading to the movement of goods indicated inter-State sales. Despite attempts to show the transactions as stock transfers, the evidence pointed towards prior sale agreements, thus attracting inter-State sales tax liability. The Court found that the Tribunal erred in considering the transactions as stock transfers and upheld the first appellate authority's decision regarding the tax liability.

In summary, the judgment delved into the distinction between stock transfers and inter-State sales, scrutinizing the movement of goods and the nature of transactions. The Court's detailed analysis reaffirmed the legal principles governing such transactions and upheld the tax liability based on the evidence presented. The decision clarified the legal interpretation of the Central Sales Tax Act in the context of the specific case, setting aside the Tribunal's order and restoring the first appellate authority's decision.