RAJESWARI AND COMPANY Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE petitioners are dealers in cotton yarn at Salem in the State of Tamil Nadu. In their return under the central Sales Tax Act for the assessment year 1963-64, they claimed exemption among others on a turnover of Rs. 2, 50, 439. 17 on the ground that they were second inter-State sales effected by them by transfer of documents of title to the goods during their movement from one State to another in pursuance of the earlier sales falling under section 6 (2) of the Central Sales Tax Act, hereinafter referred to as the Act. In respect of another turnover of Rs. 4, 47, 911. 75, which also related to second inter-State sales by transfer of documents of title to such goods during their movement from one State to another, the petitioners claimed that in view of section 15 of the Act, they were not liable for Central sales tax. Since these two items were alone disputed in this revision petition, it would be enough if we note the facts relating to these two items and the findings of the assessing authority, the appellate Assistant Commissioner and the Tribunal.

(2.) THE first item of transaction took place in the following circumstances : THE petitioners purchased cotton yarn which is one of the items of declared goods falling under section 14 (ii-b) of the Act from a manufacturing mill at Mysore. THEy obtained certificates from the manufacturing mill in form e-I and also issued the declaration in form C to the mills. THE delivery of the goods in all these cases was to be effected by the mills in the States of gujarat, Maharashtra and West Bengal. When the goods were on their movement from Mysore State to the other States, the petitioners sold the goods by transfer of documents of title to such goods to certain out-of-State purchasers who were not registered dealers. THE petitioners claimed exemption in respect of these second inter-State sales under section 6 (2 ). THEy also contended that, in any case, the proviso to section 9 (1) is not applicable in respect of these transactions and that, therefore, the State of Tamil Nadu could not assess them for Central sales tax under that provision. THE assessing officer held that since the second inter-State sales by the petitioners were to purchasers outside the State, who are not registered dealers, section 6 (2) was not applicable. THE assessing officer also held that the proviso to section 9 (1) is applicable in respect of this turnover and it is the State of Tamil Nadu which has to levy and collect the tax. Local sales of cotton yarn, which comes under declared goods, is taxable under section 4 of the Tamil Nadu General Sales Tax act, 1959, hereinafter referred to as the State law, at the rate of one per cent in the relevant assessment year 1963-64, at the point of first sale in the state. Under section 8 (1) of the Act, the rate prescribed for inter-State sales at the relevant period was 2 per cent. As the rate for local sales of such goods under the State law was lower than that prescribed for declared goods under the Act, the assessing officer also held that this turnover is liable to be taxed at one per cent under section 8 (2a) of the Act. This view was confirmed by both the Appellate Assistant Commissioner and the Sales Tax appellate Tribunal. THE second disputed item of turnover took place in the following manner. THE petitioners purchased cotton yarn from a manufacturing mills in this State but the delivery of the goods was to be effected either in gujarat, Maharashtra or West Bengal. THEy had obtained certificates from the selling mills in form E-I and had also issued declarations in form C to the selling mills. When the goods were on their movement from this State to other states, the petitioners effected sales by transfer of documents of title to such goods to out-of-State purchasers who were not registered dealers. In respect of this turnover, the contention of the petitioners was that the tax on the first sale in their favour was levied and collected by the State of Tamil nadu and under the proviso to section 9 (1) even in respect of the second transaction of sale by them to the out-of-State purchasers, this State became entitled to levy and collect the tax. Cotton yarn being declared goods, this state was not entitled to levy tax at more than one stage under section 15 of the Act. THErefore, the turnover was not liable to be taxed. This contention was also rejected by the assessing officer and the tax at one per cent was levied under section 8 (1) read with section 8 (2a) of the Act. THE learned counsel for the petitioners in support of this contention also relied on the decision of this court reported in Madura South India Corporation Private limited v. Joint Commercial Tax Officer which was affirmed by the Supreme Court in State of Tamil Nadu v. Madurai South India Corporation (P.) Ltd. This assessment order was confirmed by the Appellate Assistant Commissioner and the tribunal.

(3.) WE are unable to see how the learned counsel is invoking this provision at all. The provision deals with imposition or authorising the imposition of a tax on sale or purchase under a State law, at more than one stage and at a rate exceeding three per cent. It does not prohibit the imposition of Central sales tax more than once. In fact section 6, as originally stood prior to its amendment by Central Act 31 of 1958, provided for the levying of tax on every sale that took place in the course of inter-State trade or commerce. Those inter-State sales were subjected to multiple levy of tax. It is only by amending Act 31 of 1958 certain second or subsequent inter-State sales were exempted from tax if the conditions prescribed by sub-section (2) of section 6 were satisfied. That was the position even in respect of declared goods. What the learned counsel for the petitioners contended was that though the first inter-State sale is taxed under the Central Sales Tax Act, since the goods moved from this State, the assessment was factually made by the State government authorities under section 9 (2 ). In respect of the second inter-State sales also, by virtue of the proviso to sub-section (1) of section 9, this state became entitled to assess second inter-State sales and that, therefore, they are subjecting the same declared goods at more than one stage. This contention is merely to be stated for rejection. What is contemplated in the prohibition contained in section 15 is the levy at the second or subsequent sale under the State law. The decision in Madura South India Corporation private Ltd. v. Joint Commercial Tax Officer also related to a case where the levy was attempted to be made under the local law after the goods had suffered levy under the Central Sales Tax Act by the same State. That is not the case here. Both the first transaction of inter-State sale and the second transaction of inter-State sale are subjected to levy only under the Central Sales Tax Act and not under the State law. In fact, article 269 and article 286 of the constitution prohibit the State from levying tax on inter-State sales. Therefore, the second inter-State sales could not have been subjected to tax under the State law. Though the learned counsel referred to section 4 in the course of his arguments, we are unable to agree with the learned counsel that that provision in any way assists him in support of his argument. As held in larsen and Toubro Ltd. v. Joint Commercial Tax Officer the inter-State character of the transaction is to be determined under section 3 (a) and (b) and section 4 is relevant to decide the situs of such inter-State sale or the appropriate State which could bring it to tax. By determining the situs, the inter-State sale is not converted into a local sale which could have been assessed under the State law. WE are, therefore, unable to agree with the learned counsel that the second item of transaction is not liable to tax. In the result, the revision petition is dismissed with costs. Counsel's fee Rs. 250.