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M/s D.P. Saw Mill Versus State of U.P. & Others

2015 (7) TMI 1004 - ALLAHABAD HIGH COURT

Classification of sale - Inter state sale or intra state sale - timber sold through auction by the forest corporation - validity of Circular No. 1251, dated 5.10.1993 issued by the Commissioner of Sales Tax , U.P. Lucknow - Held that:- A sale of goods can be said to have taken place in the course of inter-State Trade or commerce under Clause (a) of Section 3 of the Act if it can be shown that the sale has occasioned the movement of goods from one State to another. - The word "occasions" is used .....

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me transaction. There must exist a direct nexus between the sale and movement of goods from one State to another. - A movement of goods which takes place independently of a contract of sale would not fall within the ambit of the above clause (a) of Section 3 of the Act

Clause 3 of the approval specifically provides that if the timber is not removed by the auction purchaser within the specified time or within a further period of 15 days on payment of late fees then the amount deposited .....

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wala And Hon'ble Surya Prakash Kesarwani,JJ. For the Petitioner : Ashok Kumar, Praveen Kumar For the Respondent : C. S. C.,Balwant Singh,S. Shekhar ORDER (Delivered by Hon'ble Surya Prakash Kesarwani, J) 1. Heard Sri Praveen Kumar, learned counsel for the petitioner and Sri C.B. Tripathi, learned Standing Counsel for the respondents. 2. Sri Praveen Kumar, learned counsel for the petitioner submits that the Circular No. 1251, dated 5.10.1993 issued by the Commissioner of Sales Tax , U.P. .....

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e by the petitioner is an inter-state sale and, therefore, a direction in the nature of mandamus may be issued to the respondent no. 5 to accept Form-C from the petitioner against the auction purchases of timber by the petitioner. He submits that the amount of value added tax realized by the respondent no. 5 from the petitioner is refundable, inasmuch as the auction sale in question is an inter-state sale and, therefore, it would fall out side the purview of out of the U.P. VAT Act. 4. In suppor .....

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he State of U.P. and as such the sale was an intra-state sale and, therefore, no illegality has been committed by the respondent no. 5 to realize VAT. He, further submits that the auction sale in question was made by the respondent no. 5 in June/ July pertaining to Assessment Year -2011-12 and the assessment for the said assessment year must have been completed, inasmuch as, the limitation provided under the U.P. VAT Act for completion of the assessment has expired. He submits that the assessmen .....

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nasmuch as it merely reiterates the principles of law as laid down by Hon'ble Supreme Court in various judgments that the sale by auction is complete on acceptance of bid. He drew the attention of this Court to the provisions of Section 64 of the Sales of Goods Act, the provisions of Section 3 of the Central Sales Tax Act and the law laid down by Hon'ble Supreme Court in the case of Union of India and another Vs. M/s K.G. Khosla & Company Ltd. and others, (1979) 2 SCC 242, Kelvinator .....

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r the parties and perused the record of the writ petition. 7. Briefly stated, the facts of the present case are that the petitioner deals in timber and other goods and is registered under the Bihar VAT Act and the Central Sales Tax Act. U.P. Forest Corporation, respondent no. 5 is also a dealer who invited tender for sale of timber by auction . It appears that the petitioner was a successful bidder and thus, purchased certain quantity of timber from the U.P. Forest Corporation. Neither copy of t .....

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period of 15 days on payment of late fees then the amount deposited by the purchaser shall be forfeited and the Forest Corporation shall also become the owner of the timber of the lots, kept in the depot. This indicates that the delivery to the petitioner of the timber auctioned was complete at the depot of the Forest Corporation on payment of the agreed amount of consideration. 8. The question whether a particular sale is an intra-state sale or inter-state sale is basically a question of fact w .....

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se of Gail India Litd. Vs. Sales Tax Officer, Gujrat, (2005) 10 SCC 192 para 12, Hon'ble Supreme Court held that the issue whether the transactions were inter-state sale or intra-state sale and if so, whether the sale had taken place in Andhra Pradesh, are issues which should be decided as a question of fact initially by a fact finding Tribunal. Thus, the question that auction sale effected by the U.P. Forest Corporation was inter-state sale or intra-state sale are basically questions of fac .....

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emed 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 another ; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1. Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the tim .....

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ns and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,- (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) a delivery of goods on hire-purchase or any sys .....

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r any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods; 12. In the present set of facts, we are concerned only with Clause (a) of Section 3 of the Act. A sale of goods can be said to have taken place in the course of inter-State Trade or commerce under Clause (a) of Section 3 of the Act if it can be shown that the sale has occasioned .....

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be exigible to tax under the Act, it must be shown to have occasioned the movement of goods from one State to another and the movement must be the result of a covenant or incident of the contract of sale. Thus, the sale of goods is in the course of inter-State Trade if the sale and movement of goods from one State to another are integral part of the same transaction. There must exist a direct nexus between the sale and movement of goods from one State to another. 14. A movement of goods which ta .....

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above clause. Perusal of section 3(a) further makes it manifest that there must a contract of sale preceding the movement of the goods from one State to another, and the movement of goods should have been caused and be the result of that contract of sale. If there was no contract of sale preceding the movement of goods, the movement can obviously be not ascribed to a contract of sale nor can it be said that the sale has occasioned the movement of goods from one State to the other. " 15. In .....

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of Union of India and another Vs. M/s K.G. Khosla & Company Ltd. and others, (1979) 2 SCC 242 para 15, the three judges Bench of Hon'ble Supreme Court explained the provisions of Section 3(a) of the Act, as under :- "It is true that in the instant case the contracts of sales did not require or provide that goods should be moved from Faridabad to Delhi. But it is not true to say that for the purposes of section 3(a) of the Act it is necessary that the contract of sale must itself pro .....

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t;is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State" (page 391). Sarkar, J. speaking for himself and on behalf of Das Gupta, J. agreed with the majority that clauses (a) and (b) of section 3 are mutually exclusive but differed from it and held that "a sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods would be moved; in other words, a sale occasions a movement of goods w .....

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Court declined to do so. In a recent decision of this Court in Oil India Ltd. v. The Superintendent of Taxes & others, (1975) 3SCR 797, it was observed by Mathew, J., who spoke for the Court, that: (1) a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in the goods passes; (2) it is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have .....

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of a covenant or an incident of the contract of sale, then the sale is an inter-State sale." 17. In the case of A. V. Thomas & Company Ltd. vs Deputy Commissioner of Agricultural Income Tax and Sales Tax, AIR (1964) 569, a constitution Bench of Hon'ble Supreme Court considered the controversy relating to passing of the title in the goods to the buyer and held in para 7 as under : - "7. In the present case as soon as the hammer fell the title in the goods passed to the buyer as .....

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itle passed as soon as the hammer fell but not so in regard to the latter and therefore the sale of "full lots' was held to have taken place outside the State of Travancore Cochin and of portions of lots inside that State. The case was consequently remanded to the Sales tax Officer for determining the amount of the tax. " (Emphasis supplied by me) 18. In the case of Consolidated Coffee Ltd. and another Vs. Coffee Board, Bangalore, (1980) 3 SCC 358, a three judges Bench of Hon'b .....

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of the contract of sale which takes place at the fall of the hammer or at the announcement of the close of the sale in other customary manner by the auctioneer. It would also be correct to say that if the auction sale of chattels is unconditional and is in respect of specific ascertained goods and nothing remains to be done to the goods for putting them in a condition ready for delivery, the property in the goods would pass to the purchaser upon the acceptance of the bid but that would not be be .....

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ned goods and held that in regard to the former the property in the goods passed when the contract was accepted at the fall of hammer and not in the latter case. That was a case where the teas were stored in the godowns in the Willingdon Island which was in the State of Travancore Cochin and samples of those teas were taken to Fort Cochin which at the relevant time was in the State of Madras. At Fort Cochin by the samples the teas were sold by public auction in lots, some of the lots were purcha .....

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ax Act depended upon whether the sales could be held to have taken place at Willingdon Island. i.e., within the territory of Travancore Cochin State and were liable to sales tax under the Act or whether the sales were 'outside sales' and, therefore, not subject to sales tax in the State of Travancore Cochin in view of Article 286(1) (a) read with the Explanation. This Court after referring to Section 64(2) and the definition of 'specific goods' in Section 2(14) of our Sale of Goo .....

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this Court observed thus: "In the present case as soon as the hammer fell the title in the goods passed to the buyer as the goods were specific goods i.e. goods which were auctioned in full lots and this event took place at Fort Cochin which was in the State of Madras. But in the case of unascertained goods the title in the goods does not pass to the buyer unless and until the goods are ascertained. It was for this reason that a distinction was drawn by the Sales Tax Appellate Tribunal betw .....

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of sales tax. Thus Section 64(2) has nothing to do with the aspect of the passing of the property at an auction sale and it is by virtue of goods being specific and in a deliverable state that under Section 20 the property in such goods passes to the buyer at the completion of the contract at the fall of hammer at such sale." 19. In a recent judgment of Hon'ble Supreme Court in the case of Commissioner of Commercial Taxes, Hyderabad Vs. Desai Beedi Company, Andhra Pradesh considered the .....

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r shall not be responsible for any deteroration in the quality of 'Beedi' leaves during the storage in godown. Based on the aforementioned stipulations, it is clear that the delivery of the goods is complete at the godown of the seller on payment of the amount of the agreed consideration. 32. Taking into consideration the abovementioned factors it becomes clear that the delivery of the goods takes place at the godown of the seller in the State of Andhra Pradesh. The movement of goods fro .....

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