Interstate Sales Tax Is Leviable In State Where Goods Are Manufactured For Specific Purpose & Also From Where Movement Of Goods Takes Place: Punjab & Haryana HC

The Punjab and Haryana High Court reiterated that the interstate Sales Tax is leviable in the State where goods are manufactured for specific purpose and also from where movement of goods takes place. 

The Court reiterated thus in a batch of four writ petitions preferred against the orders of the Sales Tax Tribunal, Haryana by which it upheld the orders of the Joint Excise and Taxation Commissioner.

A Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth said, “It has been held by the Supreme Court in M/s Bharat Electric Limited vs Union of India (1996) 8 PRT 424 (SC) that interstate sales Tax is leviable in the state where goods are manufactured for specific purpose and also from where movement of goods takes place. As movement of goods took place from Faridabad to Patna, Madras and Kanpur branches for specific purpose in pursuance of a prior contract and specific formulation hence it being an inter-State sales, inter-State sales sales tax is leviable at Faridabad. In view of the facts noted above, the branch transfer as claimed by the petitioner firm from Faridabad were rejected and the same are treated as inter-State sales."

Advocate Sandeep Goyal represented the petitioners while Deputy Advocate General (DAG) Tanisha Peshawaria represented the respondents.

Brief Facts -

The petitions assailed the same aspects relating to assessments of different years. The petitioner company was a public sector undertaking of the Government of India engaged in the business of manufacturing and sale of food products. It had set up manufacturing plants at several places in the country and one amongst these was located in Haryana. One MOU (Memorandum of Understanding) was signed between the petitioner and Bihar Government for supply of Poshahar for distribution amongst the vulnerable sections of the society under the Social Welfare Programmes of the Government.

As per the agreement terms, they were required to supply products with the concerned specification as laid down in MOU. The supply was treated as a sale of Poshahar from the petitioner to Bihar State in the course of inter-State trade originating from Haryana by the Excise & Taxation Officer-cum-Assessing Authority assessed as inter-State sales, calculated tax on the sale, and imposed tax. It also issued demand for payment of outstanding tax along with penalty. In appeal, the Joint Commissioner & Taxation Commissioner upheld the order and the Appellate Authority also upheld the order. Hence, the petitions were filed before the High Court.

The High Court after hearing the contentions of the counsel noted, “The petitioner firm has transferred energy Food of specific formulation of its branches at Patna, Madras and Kanpur in pursuance of a prior contract and orders for supply from branch were already contracted and orders for supply from branch were already in hand and goods were supplied as per agreement.”

The Court further observed that only the goods rejected, being of inferior quality, could be returned or not paid for and there is no stock kept at Patna which could be said to be over and above the requirements of Government of Bihar. It added that so far as the sales tax is concerned, the same was appropriately imposed by creating a demand of Rs. 1,93,73,877/-.

It emphasised that merely because the petitioner has been assessed by the concerned respective States for the local sales, it cannot absolve itself from the claim raised by the State of Bihar and the petitioner was required to pay the same. 

“In the ordinary course, the present case ought to have been transferred to the Central Sales Tax Appellate Authority, however, this Court finds that a corporate guarantee has been furnished by M/s Hindustan Level Limited for and on behalf of the petitioner in terms of the directions issued on 30.05.2005, wherein this Court directed that the guarantor shall be bound by the terms of both the affidavits which have been filed by and on behalf of the petitioner”, it added.

The Court, therefore, left it open to the petitioner to claim refund of the amount already paid to the concerned States and said that the respondents will also be entitled to the interest in terms of the interim order.

Accordingly, the High Court dismissed the writ petitions.

Cause Title- M/s Modern Food Industries (India) Limited v. State of Haryana and Others (Neutral Citation: 2024:PHHC:113298-DB)

Appearance:

Petitioners: Advocates Sandeep Goyal, Shifali Bahia, and Arjun Pratap Atma Ram.

Respondents: DAG Tanisha Peshawaria, Advocates Virish Dahiya, and R.D. Gupta.

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