1997 (9) TMI 596 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Whether the cement transported from the Port of Tuticorin to Kerala constitutes inter-State sales.
2. Burden of proof regarding the nature of the transaction.
3. Compliance with procedural fairness in the assessment process.

Detailed Analysis

Issue 1: Whether the Cement Transported from the Port of Tuticorin to Kerala Constitutes Inter-State Sales
The petitioner, assessed to Central sales tax for the assessment years 1982-83 and 1983-84 on cement transported from the Port of Tuticorin to Kerala, challenged the Tribunal's decision upholding the levy. The petitioner, a State of Kerala undertaking, imported cement under a licence for Kerala's requirements. The cement, meant for Kerala, was unloaded at Tuticorin due to congestion at Cochin port. The petitioner argued that the movement of cement from Tuticorin to Kerala was incidental to the import process and not an inter-State sale. The Tribunal held that the petitioner had a place of business in Tuticorin and conducted inter-State sales from there.

The court found that the cement was imported specifically for Kerala's requirements and the unloading at Tuticorin was a fortuitous event. The movement of cement into Kerala was unavoidable and did not constitute an inter-State sale. The contract for sale was made in Kerala, and the goods were appropriated to the contract upon delivery in Kerala. The court concluded that the movement was not occasioned by an inter-State sale but was incidental to the import process.

Issue 2: Burden of Proof Regarding the Nature of the Transaction
The petitioner contended that the burden of proof to establish an inter-State sale lies with the Revenue, citing the Supreme Court's decisions in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar and Commissioner of Sales Tax, U.P., Lucknow v. Suresh Chand Jain. However, the court noted that Section 6A of the Central Sales Tax Act places the burden on the dealer to prove that the movement of goods was not due to a sale but a transfer to another place of business or to an agent. The court emphasized that the movement of goods must be occasioned by or incidental to the sale to be taxable as an inter-State sale. In this case, the movement was incidental to the import process, not a sale.

Issue 3: Compliance with Procedural Fairness in the Assessment Process
The petitioner argued that the assessment was made without a reasonable opportunity to respond to the claims, as statements and records from the transporter were not made available despite requests. The court acknowledged this procedural lapse but focused on the substantive issue of whether the transactions constituted inter-State sales. Given the special facts of the case, the court found that the assessments were not justified and set them aside.

Conclusion
The court concluded that the cement transported from Tuticorin to Kerala did not constitute inter-State sales. The movement of the goods was incidental to the import process, and the sale was local, occurring in Kerala. The assessments and penalties imposed under the Central Sales Tax Act were set aside, and the revisions were allowed.