THE COMMNR. OF SALES TAX, U.P. vs. M/S BAKHTAWAR LAL KAILASH CHAND ARHTI

C.A. No.-004560-004562 - 1990Supreme Court05 August 1992Bench: JEEVAN REDDY B.P. (J)10 pages
For Respondent: P. K. CHAKRAVARTY
AI SummaryDismissed

What were the facts?

The Commissioner of Sales Tax, U.P. (appellant) challenged the High Court's decision regarding the levy of purchase tax. The respondent-assessee, a registered dealer in Uttar Pradesh, purchased goods like foodgrains and oils, both for himself and on behalf of principals located outside U.P. The assessee contended that purchases made for ex-U.P. principals, which were then dispatched to them, constituted inter-State purchases under Section 3(a) of the Central Sales Tax Act, 1956, and were thus not liable to purchase tax under Section 3-D of the U.P. Sales Tax Act, 1948. The State argued that these were intra-State purchases exigible to purchase tax under the U.P. Act, as the purchase itself was completed within the State. In a connected appeal, the issue was whether a dealer who wrongly issued a declaration form for inter-State transactions as intra-State purchases, and subsequently obtained a refund, could be proceeded against under Section 3-B of the U.P. Sales Tax Act.

What did the Supreme Court hold?

The Supreme Court held that the purchases made by the respondent-dealer were indeed inter-State purchases. The Court reasoned that the purchase of goods and their dispatch to ex-State principals were part of the same transaction, with the movement of goods being a necessary incident or consequence of the purchase. It clarified that if the movement of goods from one State to another is occasioned by the sale/purchase, it becomes an inter-State sale/purchase and cannot be taxed by the State Legislature, but only under the Central Sales Tax Act, 1956. The Court distinguished this from a situation where the agent first purchases goods and then awaits further instructions for dispatch, which would break the chain and make it an intra-State purchase. Regarding the second issue, the Court held that Section 3-B of the U.P. Sales Tax Act is not applicable. The reasoning was that Section 3-B applies only when a tax "leviable under this Act" (i.e., the State Act) is evaded. It does not apply to situations where the tax payable under the Central enactment is evaded. Therefore, the dealer could not be proceeded against under Section 3-B for evading Central tax.

What were the issues?

1. Whether purchases made by a commission agent in Uttar Pradesh on behalf of principals outside the State, where the goods are subsequently dispatched to those principals, constitute inter-State purchases under Section 3(a) of the Central Sales Tax Act, 1956, and are therefore not exigible to purchase tax under Section 3-D of the U.P. Sales Tax Act, 1948? The assessee argued that these purchases were inter-State as they were made for ex-State principals and dispatched forthwith, falling squarely under Section 3(a) of the Central Act. The revenue contended that once a purchase is completed within U.P., it is an intra-State purchase, irrespective of subsequent movement, and thus exigible to purchase tax under the State Act. 2. In a connected appeal, whether a dealer who wrongly issued a declaration form (Form III-C-1) for inter-State transactions as intra-State purchases, paid tax under the State Act, and later obtained a refund based on the High Court's decision, can be proceeded against under Section 3-B of the U.P. Sales Tax Act for issuing a false declaration and preventing taxation under the Central Act? The revenue argued that the dealer's actions prevented the authorities from taxing the transaction under the Central Act, making him liable under Section 3-B. The assessee's contention, as understood from the judgment, is that Section 3-B is not applicable in this scenario.

Which sections of the Income-tax Act were involved?

Section 2(e),Section 3-D,Section 3-B,Section 3(c)

AI-generated summary — verify with the full judgment below

http://JUDIS.NIC.IN SUPREME COURT OF INDIA PETITIONER: COMMISSIONER OF SALES TAX, U.P. AND ORS. ETC. ETC.

Vs. RESPONDENT: BAKHTAWAR LAL KAILASH CHAND ARETI AND ORS. ETC. ETC. DATE OF JUDGMENT05/08/1992 BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) RANGNATHAN, S. RAMASWAMI, V. (J) II CITATION: 1992 AIR 1952 1992 SCR (3) 733 1992 SCC (3) 750 JT 1992 (4) 388 1992 SCALE (2)138 ACT: U.P. Sales Tax Act, 1948/U.P. Sales Tax Rules, 1948: Sections 2(e) and 3-D Purchase Tax-Levy of-Commission agent/Dealer purchasing goods on behalf of ex-state principals and despatching them to places outside State- Whether an inter-State purchase-Whether liable to pay purchase Tax under the State Act.

Section 3-B, Form III-C-1: Purchase Tax-recovery of-Dealer wrongly issuing Declaration form for inter-State transaction as intra-State purchase-Whether can be proceeded against for tax leviable under Central Sales Tax Act-Provision applicable only to tax leviable under State Act evaded.

Central Sales Tax Act 1956: Section 3(c)-Purchase of goods by dealer on behalf of ex-State pri

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