[2008] 17 S.C.R. 321 _...

M/S. A & G PROJECTS & TECHNOLOGIES LTD.

A 'r . ...... v.

STATE OF KARNATAKA (Civil Appeal No. 7233 of 2008)

DECEMBER 11, 2008 B

[S.H. KAPADIA AND AFTAB ALAM, JJ.]

>-~ Central Sales Tax Act, 1956: s.3(a), s.9(1) and its proviso - Inter-state sales - If sales are covered under s.3(a) and the assessee is held not entitled c to exemption under s. 6(2) then the State from which the movement of the goods commenced is 'Appropriate State' entitled to collect tax in respect of goods sold - Question of taxing such sales under the proviso to s.9(1) would not arise

- Kamataka Sales Tax Act, 1957.

D Appellant-Company was engaged in execution of

ct electrical works contracts and was registered dealer under the Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956. It was awarded three independent contracts towards the supply of capacitor banks E (equipment), execution of civil works and erection nd commissioning of equipments on various such stations of KPTCL in the State of Karnataka. Pursuant to the contracts, appellant appointed EPC contractor located outside the State of Karnataka for procuring the F equipments because these EPC contractors had prior arrangement with the manufacturers of said equipment.

In that transaction, four parties were involved namely, the appellant, the EPC contractor, the manufacturers of the equipment and KPTCL, being the ultimate consumer.

For the assessment year 2000-01, the appellant filed G

its return and turnover under the Central Sales Tax Act.

~ Before the A.O., appellant contended that the goods

~ originated from the manufacturers and ultimately reached

321 H

...

322 SUPREME COURT REtPORTS

[2008) 17 S.C.R.

A KPTCL though the title to the goods vested originally with EPC contractor but in tutn transferred the title to the goods to the appellant when they were in transit and in turn the appellant transferred the title by endorsing the lorry receipt in favour of KPTCL. According to the B . appellant, the second and the third sales were the subsequent sales, and hence appellant was entitled to exemption from tax for such sales under s.6(2) of 1956 Act. The A.O. held that all the three contracts came under s.3A and therefore appellant was not entitled to claim C exemption under s.6(2) of 1956 Act.

The Tribunal held that the dealer was located in the State of Karnataka and the purchaser was also in the State of Karnataka. The movement of goods under the contract was not from State of Karnataka but into the State of Karnataka and, therefore, there was no inter-State D sale in the State of Karnataka and, therefore, levy of tax

. on the value of goods supplied was totally unjustified. . ' The Department filed revision .petition before High Court, wherein it was held ithat sale of goods in favour of KPTCL. was completed when the goods were E appropriated by KPTCL before the commencement of movement of goods from the place of manufacturers in Tamil Nadu to KPTCL in the State of Karnataka and, therefore, the inter-State sale of goods fell under s.3A and appellant was not entitled 'to exemption under s.6(2) of F the Act. Further it held that since sale did not comply with the conditions in s.6(2), matter came under first proviso to s.9(1) and consequently the State of Karnataka was the "Appropriate State" entitled to collect tax in respect of the goods sold by the appellant to KPTCL under the CST G Act, 1956~ Aggrieved appellant filed the instant appeal.

I Allowing the appeal, the Court HELD: 1.1. The question whether a particular sale is an inter-State sale or an intra-State sale, though

essentially one of fact, is' not the pure question of fact H inasmuch as the facts of a given case have to be

M/S. A & G PROJECTS & TECHNOLOGIES LTD. v . 323

.3TATE OF KARNATAKA

and, therefore, it is a mixed question of fact and law. S.3 A ;.-- of the CST Act 1956 formulates the principles fQr ... determining when a sale or purchase takes place in th~ course of inter-State trade or commerce. Two tests ae applied, one of which is that a sale or purchase take$ place in the course of inter-State trade if it occasion$ movement of the goods from one State to another, anti B

the other test is that a sale or purchase takes place by

~"t transfer of documents of title, during the movement of the goods from one State to another. A sale (transfer of property) becomes inter-State sale under s.3(a) of the c CST Act 1956 If the movement of goods from one State to another is under the contract of sale, and the property in the goods passes to the purchaser otherwise than by transfer of documents of title when the goods are in movement from one State to another. Within s.3(b) are sales in which property in the goods passes during the D movement of the goods from one State to another by ,..,

J. transfer of documents of title thereto. [Para 11] [333-C-H;

334-A-D]

Tata Iron & Steel Co. Ltd. v. S.R. Sarkar(1960) 11 STC 655 (SC), relied on .

E 1.2. The dividing line between sales or purchases under s.3(a) and those falling under s.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 F , . inter-State movement of the goods. Therefore, it follows .... ..... that an inter-State sale can either be governed under s.3(a) - if it occasions movement of goods from one State to another - or under s.3(b) - if it is effected by transfer of documents of title after such movement has started G and before the goods are actually delivered. By s. 3, it was intended to define the class of sales which shall be .,.. deemed to be sales in the course .of inter-State trade or -

commerce. Under the CST Act 1956, tax is leviable on the sale of goods and not because of the movement of the goods. The movement of the goods is only material for H

A the purpose of deciding whether the sale took place in the course of inter-State trade or commerce or whether such sale was purely an intra-State transaction. The name given to a transaction by the parties concerned, does not decide the nature of the transactioni In order to make a

I 8 transaction taxable under the C

1ST Act, 1956, the transaction must be a "sale" as defined in s.2(g) taking place in the course of inter-State tr*de or commerce in any of the manner provided for in cl8iuse (a) or clau_se (b) of s.3. S.6(1) of the CST Act 1956 imposes a liability to pay tax on sale of goods other than electrical energy C effected by a dealer in the case of inter-State trade or commerce during a year. Sub-section (1) of s.6 provide for multi-point tax but this is subject to the other provisions of the Act. This qualification which is reflected in the other provisions of the Act restricts the levy to a D single point subject to certain conditions, restrictions and circumstances: Sub-Section (2) of s.6 exempts from levy a subsequent inter-State sale. to a registered dealer of goods [described in s.8(3)] and also to Government, provided conditions of the proviso to sub-section (2) are E fulfilled. However, a subsequent sale not falling within s.6(2) will, however, attract tax because of s.9(1 ), notwithstanding the fact that the first sale has been subjected to tax under s.6(1) of the CST Act 1956.

Analysing s.6(2), it is clear that sub-section (2) has been F introduced in s.6 in order to avoid cascading effect of

multiple taxation. A subsequent sale falling under subsection (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 s.6 of the CST Act 1956. Thus, in order to attract s. 6(2), it is G 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 interstate sale. It is only then that s.6(2) may be attracted in H .. order to make such subsequent sale exempt from levy

M/S. A & G PROJECTS & TECHNOLOGIES LTD. v. 325

STATE OF KARNATAKA

of sales' tax. However, the proviso to $Uh-section (2) of A

- 'i s.6 prescribes further conditions a'nd it is only on - fulfillment 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 B to such subsequent sales. [Para 11] [334-D-H; 335-A-E}

2.1. The object of s. 9(1) is two-fold. Firstly, it provides .,._-.. that the tax on inter-State sales under s.3(a) shall be levied by G.0.1. and collected by the State Government from which the movement of goods commenced. , C Secondly, it specifies the Appropriate State competent to

levy tax on second and subsequent sales made during the movement of goods from one State to another as also the authority, where such second and subsequent sales are exigible. to tax. S.6(2) of the CST Act 1956 provides b for subsequent sales to be exempt from tax on the

....

J conditions prescribed therein. However, if and where those conditions are not satisfied, even such subsequent sales would attract tax and only in such circumstances the proviso to s.9(1) which specifies the State, which is E competent to levy the tax, would come in .. [Para 13] [336- I

A-F]

=" Jadhavjee Laljee v. State of Andhra Pradesh (1989) 74 STC 201 (AP), relied on.

2.2. The proviso to s.9(1) contemplates two situations, F :.. namely, (a) where such subsequent sale is made by a

- ... ./,. registered dealer and (b) where such subsequent sale is made by unregistered dealer. In respect of situation (a), the proviso to s.9(1) prescribes that the Appropriate State competent to levy tax on such subsequent sale shall be G the State from which the registered dealer obtains a declaration in C-Form whereas in the case falling in

-4 situation (b), it provides that the Appropriate State competent to levy the tax shall be the State from which such subsequent sale has been effected. However, the entire proviso to s.9(1) applies only to "subsequent H

A sales" covered by s. 3(b) and not to sales under .s.3(a)

CST Act 1956. [Para 13] [336-D-F]

I 2.3. The proviso to s.9(1) of the CST Act 1956 is not applicable to the facts of the present case as the AO ha~ categorically held that all the three sales fell under s.3(a) B of the CST Act 1956. Once the said sales fall under s.3(a) then under s.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 C goods stood specifically rejected both by the AO and the FAA and, therefore, the question of taxing such sales under the proviso to s.9(1) of CST Act 1956 did not arise. [Para 14] [336-G-H; 337-A] ' ' .

Bharat Heavy Electrical Ltd. and Ors. v. Union of India

0 and Ors. (1996) 4 sec 230, relied on.

 Case Law Rfrence:

(1960) 11 STC 655 (SC) relied on Para 11

(1989) 74 _STC 201 (AP) relied on Para 13

(1996) 4 SCC 230 relied on Para 15 E CIVIL APPELLATE. JURISDICTION : G.fvil Appeal No.

7233 of 2008.

From the final Judgment and Order dated 14.8.2007 of the High Court of Karnataka at Bangalore in S.T.R.P. No. 85 of 2005.

Joseph Vellapalli, Ragvesh Singh, Devendra Kumar Singh and Rajesh Mahale for the Appella'nt.

Anitha Shenoy for the Respondent.

The Judgment of.the Court was delivered by

S.H. KAPADIA, J. 1. Leave ranted.

2. This civil appeal filed b9 the appellant (assessee) is

I . directed against the judgment and order dated August 14, 2007 delivered by the Karnataka High Court in STRP No.85 of 2005.

3. Appellant is a company incorporated under the A

...-- Companies Act, 1956 and engaged in execution of electrical works contracts. Appellant is a registered dealer both under the

~ Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act, 1956 ("CST ACT 1956", for short). Appellant was awarded three independent contracts towards - (i) supply of capacitor B banks, (ii) execution of civil works and (iii) erection and commissioning of capacitor banks at various sub-stations of the Karnataka Power Transmissions Corporation Limited .,. ("KPTCL", for short) in the State of Karnataka. Pursuant to the contracts, appellant appointed M/s. Bay West Power and c Energy Pvt. Ltd. ("Mis. Bay West", for short) as EPC contractor located outside the State of Karnataka for procuring the capacitor banks ("equipment", for short) because the said EPC contractor had a prior arrangement with the manufacturers of the said equipment. In that transaction four parties were involved, namely, the appellant, M/s. Bay West, manufacturers D, of the equipment and KPTCL being the ultimate consumer. ,,.

Although four parties had intervened, in substance, there were

-J. three independent contracts involved in the transaction. The first contract was between the appellant and KPTCL for supply of the equipment. The second was between the appellant and M/ E s. Bay West. It was a procurement contract. The third contract was between Mis. Bay West and the manufacturers.

4. For the assessment year 2000-01, the appellant filed its return of turnover under the CST ACT 1956. Before the AO, appellant contended that the goods originated from the F ... manufacturers and ultimately reached KPTCL though the title . ),. to the goods vested originally with M/s. Bay West as the EPC contractor who in turn transferred the title to the goods to the appellant when they were in transit and in turn the appellant transferred the title by endorsing the lorry receipt in favour of G, KPTCL. According to the appellant, there were three sales.

According to the appellant, the second and the third sales were

-.4 subsequent sales, hence, the appellant claimed exemption from tax for such sales under Section 6(2) of the CST ACT 1956.

This argument of the appellant stood rejected by the AO holding that the appellant's turnover fell under Section 3(a) of the CST H

A ACT 1956. According to the AO, the first sale by the manufacturers to M/s. Bay West was , a Section 3(a) sale; that,

~~ the second sale by Mis. Bay West to1the appellant was also a Section 3(a) sale and not a sale under Section 3(b) and that even the subsequent sale by the appellant to KPTCL (ultimate

B purchaser) was also a sale under Section 3(a) and not under Section 3(b) and consequently it was held that the appellant was not entitled to exemption under Section 6(2) of the C$T ACT 1956. Consequently, the claim for exemption made by the appellant stood dismissed. However, relying on the proviso to ...,, ... c Section 9( 1) of the CST ACT 1956, the AO held that the State of Karnataka was competent to levy the tax.

5. Aggrieved by the decision 'of the AO, the appellant herein preferred appeals before tt1e Joint Commissioner of Commercial Taxes (Appeals), Bangalore (hereinafter referred

D to as "FAA"). That Authority took the view that the AO had erred in holding that the goods stood appropriated by KPTCL _at the premises of the manufacturers. However, 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) df the CST ACT 1956 was E not applicable. Accordingly for different reasons, the FAA

uphld the levy of tax under the C$T ACT 1956.

_6. The matter was carried in appeal to the Karnataka Appellate Tribunal, Bangalore by th~ appellant. It was held that mere failure of the appellant to prove its case for exemption F undr Section 6(2) of the CST AC"( 1956 did not make the tax leviable by the State of Karnataka. 1The Tribunal observed that .; the dealer in this case was located in the State of Karnataka

-, I_

and the purchaser was also in, the State of Karnataka.

According to the Tribunal, the movement of goods under the

G contract was not from the State of Karnataka but into the State of Karnataka and, therefore, there was no inter-State sale in the St?1te of Karnataka and, therefore, the levy of tax on the value _of the goods supplied was totally unjustified. ).-

7. Aggrieved by the said decision of the Tribunal, the

H Department preferred Sals Tax' Revision Petition No.85 of

... i -

2005 under Section 23(1) of the Karnataka Sales Tax Act, A

1957. By the impugned judgment the High Court held that the sate of goods in favour of KPTCL was completed when the goods were appropriated by KPTCL before commencement of movement of goods from the place of manufacturers in Chennai (Tamil Nadu) to KPTCL in the State of Karnataka and, B therefore, the inter-State sale of goods fell under Section 3(a) 1 of the CST ACT 1956 and, therefore, was not entitled to1 exemption under Section 6(2) of the 1956 Act. According to the High Court since the sale in question did not comply with the conditions under Section 6(2), the matter came under first c proviso to Section 9(1) of the CST ACT 1956. hi this connection it was observed that the appellant had not obtained C-Form from the State Department in respect of sale of goods sold on the basis of contract entered into by the appellant with KPTCL and, therefore, the proviso to Section 9(1) of the CST ACT 1956

1 stood attracted and consequently the State of Karnataka was D the "Appropriate State" entitled to collect tax in respect of the goods sold by the appellant to KPTCL under the CST ACT

1956. Hence this civil appeal is filed by the appellant seeking to challenge the impugned judgment dated August 14, 2007.

8. At the outset, it maybe noted that in this case there is E no dispute regarding the nature of the transaction being inter-

Sate sale. As stated above, before the AO the appellant had i contended that in all there were three independent contracts in the entire transaction. The appellant claimed exemption under Section 6(2) in respect of the second and third contracts. They F contended that the said contracts were "subsequent sales" falling under Section 3(b) and consequently they were entitled to exemption under Section 6(2) of the CST ACT 1956. This argument was rejected. The AO came to the conclusion that all the three contracts came under Section 3(a) and, therefore,

1 G the appellant was not entitled to claim exemption under Section 6(2) of the CST ACT 1956 ..

9. 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 AO. What is urged on behalf of the H

A appellant is that if all the three contracts stood covered as interstate sales under Section 3(a) then ir'I that event 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

8 ACT 1956 which have to be analysed in the context of the controversy.

10. 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 C 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 another; or

(b) is effected by a transfer bf documents of title to the goods during their movetnent 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 comm, ence at the time of such delivery and terminate at the time when delivery is taken from such barrier or bailee.

Explanation 2--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a <movement of goods from one State to another by reason me(ely 9f the fact that in the course of such movement the goods pass through the territory of any other State."

I "SECTION 6. Liability to tax on iriter-State sa/es.-

(1) Subject to the other provisions contained_ in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette,

l--

appoint, not being earlier than thirty days from the date of A )' .. such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified:

PROVIDED that a dealer shall not be liable to pay B tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) ,._ 'f of section 5, is a sale in the course of export of those goods out of the territory of India.

(2) Notwithstanding anything contained in sub-section (1) c

r' or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement D ... ) effected by a transfer of documents of title to such goods,-

(a) to the Government, or

(b) to a registered dealer other than the Government, if the goods are of the description E referred to in sub-section (3) of section 8, shall be exempt frpm tax under this Act:

--( PROVIDED that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed F -< authority in the prescribed manner and within the ;.._

prescribed time or within such further time as that authority may, for sufficient cause, permit, -

(a) a certificate duly filled and signed by the registered dealer from whom the goods were G

-I purchased containing the prescribed particulars in

-.i. . a prescribed form obtained from the prescribed authority; and ......_

(b) if the subsequent sale is made- H

r==

(i) to a registered dealer, a declaration referred to in clause (a) of sub-seqtion (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: B 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, - c

(a) the sale or purchast;! 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 fo4r per cent (whether called a tax or fee or by any other name); and D

(b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred

to in the preceding prc;>viso that such sale is of the y ...

nature referred to in clause (a) or clause (b) of this sub-section.".

E "SECTION 9. Levy and collection of tax and penalties -

(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade ,'-

or commerce, whether such

1sales fall within clause (a) or

clause (b) of section 3, shall be levied by the Government of India and the tax so levid shall be collected by that Government in accordance with the provisions of sub- ..._

section (2), in the State from which the movement of the

I ' goods commenced:

PROVIDED that, in the ca$e of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale 'in respect of the same goods and being also a sale which poes not fall within sub-section r-

(2) of section 6, the tax shaU be levied and collected- ~

,; I

(a) where such subsequent sale has been effected by a

registered dealer, in the State from which the registered A

>- dealer obtained or, as the case may be, could have obtained, the form prescribed for the purposes of clause

(a) of sub-section (4) of section 8 in connection with the purchase of such goods; and

(b) where such subsequent sale has been effected by an s' unregistered dealer, in the State from which such subsequent sale has been effected."

.,,...~

11. Section 3 of the CST ACT 1956 formulates the principles for determining when a sale or purchase takes place in the course of inter-State trade or commerce. The question c whether a particular sale is an inter-State sale or an intra-State - sale, though essentially one of fact, is not the pure question of I r fact inasmuch as the facts of a given case have to be examined in the light of Section 3 and, therefore, it is a mixed question of fact and law. Section 3 defines when a sale or purchase of D goods takes .place in the course of inter-State trade or commerce. Two tests are applied, one of which is that a sale ..

J or purchase takes place in the course of inter-State trade if it occasions movement of the goods from one State to another, and the other test is that a sale or purchase takes place by E transfer of documents of title, during the movement of the goods from one State to another. A sale (transfer of property) becomes inter-State sale under Section 3(a) of the CST ACT 1956 if the movement of goods from one State to another is under the contract of sale, and the property in the goods passes to the purchaser otherwise than by transfer of documents of title when F the goods are in movement from one State to another. In this case, it hc:s 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 AO specifically on the ground that all the three sales stood covered G under Section' 3(a). Within Section 3(b) are 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 H

A one State to another is under the contract of sale and property in the goods passes in either States [SEE: Tata Iron & Steel Co. Ltd. v. S.R. Sarkar- (1960) 11 $TC 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

8 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) - if it occasions movement of goods from one Stpte to another - or under C Section 3(b) - if it is effected by transfer of documents of title after such movement has started, and before the goods are actually delivered. ln_other words, a sale which takes place under Section 3(a) shall stand excluded from the purview of Section 3(b) and vice versa. By Section 3, it was intended to D define the class of sales which shll be deemed to be sales in the course of inter-State trade or commerce. Under the CST ACT 1956, tax is leviable on the sale of goods and not because of the movement of the goods. The movement of the goods is only material for the purpose of debidihg whether the sale took E place in the course of inter-State trde or commerce or whether such sale was purely an intra-State transaction. The name given to a transaction by the parties concerned, does not decide the nature of the transaction. In order to make a transaction taxable under the CST ACT 1956, the transaction must be a "sale" as F defined in Section 2(g) taking place in the course of inter-State trade or commerce in any of the manner provided for in clause

(a) or clause (b) of Section 3. Sction 6(1) of the CST ACT

1956 imposes a liability to pay tax' on sale of goods other than electrical energy effected by a dealer in the case of inter-State trade or commerce during a yegr'\

1Sub-section (1) of Section 6 G appears to provide for multi-point

1tax but this is subject to the other provisions of the Act. This qualification which is reflected in the other provisions of the Act rrestricts the levy to a single point subject to certain conditions, restrictions and circumstances. Sub-Section (2) ofiSetction 6 exempts from levy H a subsequent inter-State sale to a registered dealer of goods

[described in Section 8(3)] and also to Government, provided A "' conditions of the proviso to sub-section (2) are fulfilled. However, ~·

a subsequent sale not falling within Section 6(2) will, however, attract tax because of Section 9(1 ), notwithstanding the fact that the first sale has been subjected to tax under Section 6(1) of the CST ACT 1956. Thus Section 6 makes every dealer liable BI to pay tax under the 1956 Act on all sales of goods other than electrical energy effected by him in the course of inter:--State

.,..-'> trade. Analysing Section 6(2), it is clear that sub-section (2) has been introduced in Section 6 in order to avoid cascading effect of multiple taxation. A subsequent sale falling under sub-section c. (2), which satisfies the conditions mentioned in the proviso I

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 D movement of the goods from one State to, another and it must

i be preceded by a prior inter-State sate:;· 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 E conditions and it is only on fulfillment 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 F

CST ACT 1956.

...._

12. In the present case, according to the AO, the second and the third sales were not subsequent sales. According to the AO, all the three sales are inter~State sales falling under Section 3(a) and consequently Section 6(2) (which deals with the exem, ptiorl} never stood attracte.d and, therefore, the G

appellant was not entitled to xemption,

.....

13. The question before us is : if the sales stood covered unde'r Section 3(a) and if they were not entitle~ to Jemption under Section 6(2), whether the appellant could have be.en H

A taxed by the Department by invoking the proviso to Section 9(1) of the CST ACT 1956? The object' of Section 9( 1) is two-fold.

Firstly, it provides that the tax on inter-State sales under Section 3(a) shall be levied by G.0.1. and collected by the State Government from which the movement of go9ds commenced.

8 Secondly, it specifies the Appropriate State competent to levy tax on second and subsequent sales made during the movement of goods from one State to another as also the authority, where such second and subsequent sales are exigible to tax. As state above, Section 6(2) of the CST ACT 1956 provides for subsequent sales to be exempt from tax on the C conditions prescribed therein. However, if and where those conditions are not satisfied, even such subsequent sales would attract tax and only in such circumstances the proviso to Section 9(1) which specifies the State, which is competent to levy the tax, would come in. [SEE: Jadhavjee Laljee v. State of Andhra D Pradesh- (1989) 74 STC 201 (AP) at page 204]. The proviso to Section 9(1) contemplates two situations, namely, (a) where such subsequent sale is made by a registered dealer and (b) where such subsequent sale is mde by unregistered dealer.

In respect of situation (a), the proviso to Section 9(1) prescribes E that the Appropriate State competent to levy tax on such subsequent sale shall be the State from which the registered dealer obtains a declaration in C-Form whereas in the case falling in situation (b), it provides that the Appropriate State competent to levy the tax shall be the State from which such subsequent sale has been effected. However, the entire proviso F to Section 9(1) applies only to "sybsequent sales" covered by .

Section 3(b) and not to sales under Section 3(a) CST Act 1956.

14. Applying the above analyses to the facts of the case, we are of the view that the provisb to Section 9( 1) of the CST ACT 1956 is not applicable to the facts of the present case as G th~ AO has categorically held tha' 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 T

1amil Nadu from which the movement of the goods commenced. The case of the appellant H

regarding subsequent sales effected during the movement of A

;... ,., the goods stood specifically rejected both by the AO and the FAA and; therefore, the question of taxing such sales under the proviso to Section 9(1) of CST ACT 1956 did not arise.

15. Our above view is fortified by the judgment of this Court in the case of Bharat Heavy Electrical Ltd. and Others v. Union B of India and Others -

(1996) 4 SCC 230. We quote hereinbelow paras 17 and 18 of the said judgment which read

.._,.. as under:

"17. The aforesaid survey of the relevant provisions of the Act clearly shows that Sections 3, 4, 5, 9(1), 14 and 15 c 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 Section 3 alone. Section 4, or for that matter D Section 5, is not relevant on the said question - see the Constitution Bench decision in TISCO v. S.R. Sarkar-

(1960) 11 STC 655 and the decisions in Manganese Ore (India) Ltd. v. Regional Asstt. Commr. of Sales Tax -

(1976) 4 SCC 124 and Union oflndia v. K.G. Khosla & E Co. Ltd. -(1979) 2 SCC 242. Similarly, where the question arises, in' which State is the tax leviable, one must look to and apply the test in Section 9(1); no other provision is relevant on this question."

"18. We may, at this stage refer to the decision of the FI Bombay High Court in CST v. Barium Chemicals Ltd . ...:

.Jo_ ( 1981 ) 48 STC 121. A particular transaction of inter-State sale was subjected to Central sales tax in Andhra Pradesh.

--{ The same sale was again sought to be taxed under Central Sales Tax Act in Maharashtra, which was questioned. The High Court adopted the following approach: Central sales G tax is levied and collected by the Central Government; it is immaterial in whi.ch State it is collected; it cannot be ... levied or collected twice over; the State Governments are merely agents of the Central Government in the matter of levy and collectibn of .Centralsales tax; if so, once tevied H

and collected in one State, rightly or wrongly, it cannot be levied and collected in ariother State. In our opinion, this may be an oversimplification of the matter. Maybe, from the point bf view of the assesse. this approach is sound enough but from the point of view of the States (keeping Article 269 in mind) and the proyisions of the Central Sales Tax Act, this may not be correct. Section 9(1) specifies the

State wherein Central sales tax shall be levied and collected and the Central sales tax has to be levied and collected in that State and in no other State. The approach of the Bombay High Court makes Section 9(1) [which is enacted pursuant to Section 269(2), as pointed out hereinabove] otiose and superfluous. It would not be proper to say, in the lighfof the above constitutional and statutory provisions, that the di.spute as to in which State a particular inter-State sale is to be taxed is a matter between the States and that so far as the assessee is concerned, it is enough if he pays the tax at one place, whether it is really leviable in that State as per Section 9(1) or not. The law requires that it should be levied and collected in the State from which the movement of goods commences [Section 9(1) read with Section 3(a)]."

16. For the aforestated reasons, we set aside the impugned judgment of the High Court and accordingly allow the civil appeal filed by the appellant with no order as to costs.

D.G.

Appeal allowed.