TMI Blog2015 (4) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... m the sale transaction that the buyer has purchased the goods in one State with the intention of using/consuming them in another State. The movement of goods from one State to another should be incidental to the sale/purchase of those goods. - sale/supply of goods viz. the Tetra Pack Milk by petitioner Nos. 2 and 3 from their manufacturing units in the States of Gujarat and Rajasthan to Army locations of the Northern Command in the State of Jammu and Kashmir is a sale in the course of inter-state trade and, therefore, not subject to levy and collection of VAT under the Act in the State of Jammu and Kashmir. As per the petitioners, which is not disputed, rates quoted by the petitioner Nos. 2 and 3 in response to the tenders floated by the Northern Command of the Army were accepted and pursuant thereto supply orders were issued in their favour. The identical supply orders dated 04.10.2013 issued by the Offg. MG Northern Command for an on behalf of the President of India were addressed to the petitioners in the States of Gujarat and Rajasthan respectively. Petitioner No. 2 is required to make supply worth ₹ 2,26,82,294/ of Tetra Pack Milk at Field Supply Depot, ASC Narian in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jammu and Kashmir. We also hold that petitioners are not required to get registered as dealers under the Act for aforementioned sales. - Decided in favour of assessee. - OWP No. 526 of 2014 - - - Dated:- 30-4-2015 - Hon ble Mr. Justice Bansi Lal Bhat And Hon ble Mr. Justice Janak Raj Kotwal, JJ. For the Petitioner : Mr. Pranav Kohli, Adv For the Respondent : Mr. M. A. Bhat, Adv JUDGMENT Per Kotwal, J 1. Petitioner No. 1 is the National Cooperative Dairy Federation of India Ltd. (hereinafter to be referred as the petitioner-Federation). It has been registered under the Multi-State Cooperative Societies Act, 2002 with the object inter alia to promote the dairy industry and the oil seeds, vegetable/edible oils and Vanaspati Industry in the Country and to coordinate, help, develop and facilitate the working of the dairy, vegetable/edible seeds, fruits and vegetable growers cooperatives and affiliated organizations. Petitioner-Federation claims that it has sixteen regular members, eleven associate members and National Dairy Development Board as Institutional member. Petitioner No. 2 is a Cooperative Society registered in the State of Gujarat and likewise p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners are asked to procure registration with Commercial Taxes Department of the State of Jammu and Kashmir and route the stocks through local offices for further supplies to different depots of the Defence Forces so that manufactures become liable to pay the local tax and sales are routed through the State of Jammu and Kashmir. Petitioners have produced copies of communications No. CTL/2506 dated 29.12.2013 and No. CTL/2381 dated 20.12.2013, whereby the Deputy Commissioner, Commercial Taxes Check Post, Lakhanpur directed Kolar Chikkaballapur Milk Union Ltd. and the Punjab State Cooperative Milk Producers Federation Ltd. respectively to get registered with the Commercial Taxes Department of Jammu and Kashmir State for further supply to different depots of Defence Forces. It is stated that petitioner No. 3 even has been forced to furnish a bank guarantee for the tax liability even though no tax under J K Value Added Tax Act, 2005 is leviable. Contextually, it is averred by the petitioners that in view of the communications of respondent No. 3, petitioner Nos. 2 and 3 in order to avoid threat of detaining their vehicles containing perishable goods had no option but to seek regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Gujarat and Rajasthan but exemption has been granted by both the states. Contextually, it is contended that the coercive registration foisted on petitioner Nos. 2 and 3 by respondent Nos. 1 and 3 would not make them liable to pay the VAT in the State of Jammu and Kashmir as the transaction basically is an inter-state trade transaction. 9. Respondent Nos. 1, 2 and 3 have opposed the writ petition. They have admitted that consignments imported by respondent No. 3 were intercepted at Lakhanpur as they were found liable to furnish security in terms of section 67(10) of the Act. While denying that movement of the goods was in the course of inter-state trade, respondents 1 to 3 have contended that entire transaction takes place in the State of Jammu and Kashmir and supplies to Army Units are made in the State of Jammu and Kashmir so the petitioners are required to get themselves registered as dealers in the State of Jammu and Kashmir under the Act and are liable to furnish security in terms of section 67(10) until they get themselves do registered. It is, however, important to note and needs to be emphasized that respondents in their reply, while contending more than once that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on sale of goods in the course of inter-state trade or commerce. Having regard to the question raised for determination in this writ petition, we may first refer to relevant provisions of the two Acts: 13(a) Under section 13 read with section 12 of the Act every dealer is liable to pay VAT on his taxable turnover of sales. Section 27 of the Act mandates registration for a dealer leviable to pay tax under the Act by imposing restriction on carrying on the business as a dealer unless he has been registered and possesses a certificate of registration. Section 47, however, exempts certain sales from levy of VAT. It reads: 47. Sales not liable to tax (1) Notwithstanding anything contained in the Act, a value added tax shall not be imposed under the Act- (i) where such sale or purchase takes place outside the State; (ii) where such sale or purchase takes place in the course of inter-state trade and commerce; or (iii) where such sale or purchase takes place in the course of import of goods into the territory of India or export of foods out of the territory of India. (2) For the purpose of this section whether a sale or purchase takes place,- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommerce and tax on such sale shall be governed by the CST Act. On plain reading of section 3 (a) of the CST Act, a sale or purchase can be said to have taken place in the course of inter-state trade if two conditions are fulfilled viz (i) a transaction of sale or purchase of goods and (ii) movement/transportation of those goods from one State to another pursuant to the sale or purchase. It should be evident from the sale transaction that the buyer has purchased the goods in one State with the intention of using/consuming them in another State. The movement of goods from one State to another should be incidental to the sale/purchase of those goods. 15. In Tata Iron and Steel Co. v S. R. Sarkar, AIR 1961 SC 65, Their Lordships of the Constitution Bench of the Supreme Court have held that clause (a) of section 3 of the CST Act includes those sales in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale between the seller and the buyer. 16. In Union of India and another v M/S. K. G. Khosla and Co. Ltd. and others (1979) 2 SCC 242 contracts of sale were finalized at head office of the seller at Delhi and in pursuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case can be said to be similar to the fact situation of the case on hand. Petitioner in that case was a registered dealer under Haryana Value Added Tax Act, 2003 having its factory at Amballa (Haryana) and was registered under the CST Act. Petitioner s quotation for supply of Agrosaw Specific Gravity Separator to Punjab Agriculture University, Ludhiana was accepted and petitioner was asked for supply of the machines. Accordingly, petitioner sold the machines to the University and pursuant to section 3 of the CST Act petitioner paid Central Sales Tax. The goods were loaded in a truck for delivery from Amballa to Ludhiana. The truck was detained by the Excise and Taxation Officer/Detaining Officer and it was alleged that petitioner since is not registered under Punjab Value Added Tax Act, 2005 and therefore, violated section 21(1) thereof. Petitioner took the plea that it was inter-state sale and the CST Act has been charged as per law. Learned Division Bench of the Punjab and Haryana High Court relied upon K.G. Khosla (supra) and National Thermal Power Corporation Limited (supra) and held that all the ingredients of inter-state sale stand fulfilled in the present case and the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal background of the tax regime in relation to inter-state sale or purchase in this country. 23. India is a union of States. Structure of the Government is federal in nature. Article 265 of our Constitution prohibits levying or collection of any tax except by authority of law. Tax can be levied and collected only in accordance with law enacted by the Parliament or a State Legislature. Article 246 of the Constitution indicates bifurcation of powers to make laws, between Union Government and State Government. Parliament has exclusive power to make laws in relation to matters given in List-I of Seventh Schedule of the Constitution (Called Union List). List-II (State List) contains entries under jurisdiction of States. List-III (Concurrent List) contains entries where both Union and State Governments can exercise power. As per the scheme of taxation envisaged under the Constitution, levy and collection of tax on the sale or purchase of goods where such sale or purchase takes place in the course of inter-state trade or commerce is in the domain of the Central Government. This aspect is mentioned at Entry No. 92 A of List-I. Besides, Article 269 empowers the Government of India (Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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