SC over-rides decision of AP HC, holds transfer of "auction purchased goods " by branch to HO in another State not to be an inter-state trade

 


 

This Tax Alert summarizes the decision of the Supreme Court in the case of Commissioner of Commercial Taxes, Hyderabad v. Desai Beedi Company.

 

The Supreme Court in its judgment over-ruled the decision of the High Court of Andhra Pradesh. The issue in question before the Apex Court was whether transfer of ‘beedi’ leaves, purchased by assessee’s branch office in the State of Andhra Pradesh (AP) in the auction conducted by the Forest Department and subsequently transferred to its head office in the State of Maharashtra, can be treated as inter-state sale. The Court, after referring to plethora of judicial precedents, answered the question in the negative and held that the sale concludes within the state of AP between the seller (i.e. the Forest Department) and the purchaser (i.e. assessee’s branch office) on the payment of purchase consideration and delivery thereof at the seller’s godown. Such sale will be liable to local sales tax as per the provisions of erstwhile Andhra Pradesh General Sales Tax Act, 1957 and not an inter-state sale in terms of Section 3(a) of the Central Sales Tax Act, 1956.

 

Earlier, AP High Court had noted that the goods were purchased for transfer and their use to head office in another state. Hence, the High Court had held that the sale was in the course of inter-state trade occasioning the movement of goods in another state and therefore not liable to tax in the State of AP.