TMI Blog2008 (12) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 - - - Dated:- 11-12-2008 - KAPADIA S.H. AND AFTAB ALAM JJ. Ms. Anitha Shenoy, Advocate, for the respondent. Joseph Vellapalli, Senior Advocate (Ragvesh Singh, Devendra Kumar Singh and Rajesh Mahale, Advocates, with him) for the appellant. -------------------------------------------------- The judgment of the court was delivered by S.H. KAPADIA J. Leave granted. This civil appeal filed by the appellant (assessee) is directed against the judgment and order dated August 14, 2007 delivered by the Karnataka High Court in S. T.R.P. No. 85 of 2005 Reported as State of Karnataka v. A G Projects and Technologies Ltd. [2008] 13 VST 177 (Karn). The appellant is a company incorporated under the Companies Act, 1956 and engaged in execution of electrical works contracts. The appellant is a registered dealer both under the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act, 1956 ("the CST Act, 1956", for short). The appellant was awarded three independent contracts towards (i) supply of capacitor banks, (ii) execution of civil works and (iii) erection and commissioning of capacitor banks at various sub-stations of the Karnataka Power Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood dismissed. However, relying on the proviso to section 9(1) of the CST Act, 1956, the Assessing Officer held that the State of Karnataka was competent to levy the tax. Aggrieved by the decision of the Assessing Officer, the appellant herein preferred appeals before the Joint Commissioner of Commercial Taxes (Appeals), Bangalore (hereinafter referred to as, "the FAA"). That authority took the view that the Assessing Officer had erred in holding that the goods stood appropriated by KPTCL at the premises of the manufacturers. However, the FAA proceeded to hold that the subsequent sale stood concluded before the movement of the goods and, therefore, there was no first inter-State sale and thus section 6(2) of the CST Act, 1956 was not applicable. Accordingly for different reasons, the FAA upheld the levy of tax under the CST Act, 1956. The matter was carried in appeal to the Karnataka Appellate Tribunal, Bangalore, by the appellant. It was held that mere failure of the appellant to prove its case for exemption under section 6(2) of the CST Act, 1956 did not make the tax leviable by the State of Karnataka. The Tribunal observed that the dealer in this case was located in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer came to the conclusion that all the three contracts came under section 3(a) and, therefore, the appellant was not entitled to claim exemption under section 6(2) of the CST Act, 1956. We have to proceed in this case on the above basis that all the three contracts came under section 3(a) of the CST Act, 1956, as held by the Assessing Officer. What is urged on behalf of the appellant is that if all the three contracts stood covered as inter-State sales under section 3(a) then in that event the proviso to section 9(1) would not stand attracted. It is this argument which arises for determination in this civil appeal and for that purpose we are required to quote the relevant provisions of the CST Act, 1956 which have to be analysed in the context of the controversy. Accordingly, we quote hereinbelow the following provisions of the CST Act, 1956 which read as under: "Section 3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase, (a) occasions the movement of goods from one State to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sufficient cause, permit, (a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and (b) if the subsequent sale is made, (i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or (ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of sub-section (4) of section 8: Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if, (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State, exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name); and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section. . . . Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovement from one State to another. In this case, it has been held that all the three sales fell under section 3(a) of the CST Act, 1956. In fact, the appellant's case for exemption under section 6(2) stood rejected by the Assessing Officer specifically on the ground that all the three sales stood covered under section 3(a). Within section 3(b) fall sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto whereas section 3(a) covers sales, other than those included in clause (b), in which the movement of goods from one State to another is under the contract of sale and property in the goods passes in either State [see: Tata Iron Steel Co. Limited v. S.R. Sarkar [1960] 11 STC 655 (SC) at page 667]. The dividing line between sales or purchases under section 3(a) and those falling under section 3(b) is that in the former case the movement is under the contract whereas in the latter case the contract comes into existence only after the commencement and before termination of the inter-State movement of the goods. Therefore, it follows that an inter-State sale can either be governed under section 3(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g effect of multiple taxation. A subsequent sale falling under sub- section (2), which satisfies the conditions mentioned in the proviso thereto, is exempt from tax as the first sale has been subjected to tax under sub-section (1) of section 6 of the CST Act, 1956. Thus, in order to attract section 6(2), it is essential that the concerned sale must be a subsequent inter-State sale effected by transfer of documents of title to the goods during the movement of the goods from one State to another and it must be preceded by a prior inter-State sale. It is only then that section 6(2) may be attracted in order to make such subsequent sale exempt from levy of sales tax. However, the proviso to sub-section (2) of section 6 prescribes further conditions and it is only on fulfilment of those conditions that the subsequent sale stands exempted. If those conditions are not satisfied then, notwithstanding the fact that the sale is a subsequent sale, the exemption would not be admissible to such subsequent sales. This is the scheme of section 6 of the CST Act, 1956. In the present case, according to the Assessing Officer, the second and the third sales were not subsequent sales. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has categorically held that all the three sales fell under section 3(a) of the CST Act, 1956. Once the said sales fall under section 3(a) then under section 9(1) the tax has got to be collected by the State of Tamil Nadu from which the movement of the goods commenced. The case of the appellant regarding subsequent sales effected during the movement of the goods stood specifically rejected both by the Assessing Officer and the FAA and, therefore, the question of taxing such sales under the proviso to section 9(1) of the CST Act, 1956 did not arise. Our above view is fortified by the judgment of this court in the case of Bharat Heavy Electrical Ltd. v. Union of India [1996] 102 STC 373 (SC); [1996] 4 SCC 230. We quote hereinbelow paras 17 and 18 of the said judgment which read as under (at page 382 of 102 STC): "17. The aforesaid survey of the relevant provisions of the Act clearly shows that sections 3, 4, 5, 9(1), 14 and 15 pertain to and deal with distinct topics and different aspects of articles 286 and 269. It follows that if a question arises whether a sale is an inter-State sale or not, it has to be answered with reference to and on the basis of section 3 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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