TATA MOTORS LIMITED versus CENTRAL SALES TAX APPELLATE AUTHORITY & OTHERS

Summary

Tata Motors sold buses to APSRTC through its regional sales office at Vijayawada. Treating the sales as stock transfers, it paid tax on them to Andhra Pradesh. The Central Sales Tax Appellate Authority held the sales to be inter-State, so central sales tax was due to Jharkhand, but it gave no direction for adjusting the tax already paid. The Supreme Court held that the Authority made no error, since its power to direct refunds or inter-State transfers came only with Section 22(1B), inserted by the Finance Act, 2010, after the transactions and the order. Even so, Andhra Pradesh could not keep tax that was not due to it. In line with Section 22(1B), the Court directed Andhra Pradesh to transfer the amount to Jharkhand on proof and verification, and Jharkhand to adjust it against Tata Motors' liability, within three months.

Issues

1. Whether the Central Sales Tax Appellate Authority erred in not directing transfer of tax wrongly collected by one State to the State to which central sales tax was due, before Section 22(1B) was inserted
2. Whether a State may retain central sales tax paid to it on a transaction held to be an inter-State sale taxable by another State

Provisions considered

• Section 22(1B) (inserted by the Finance Act, 2010), Central Sales Tax Act, 1956Before its insertion the Authority had no power to direct refunds or inter-State transfers, so its order was not erroneous. The Court nevertheless issued a direction in line with the provision for transfer from Andhra Pradesh to Jharkhand and adjustment against the assessee's liability. (¶¶ 4, 4.1, 5)

Held

• The transactions and the Authority's order predated Section 22(1B), so the Authority committed no error in not issuing a refund or transfer direction that only that provision later permitted. (¶¶ 4, 4.1)
• Once the sales through the Vijayawada office were held to be inter-State sales on which central sales tax was payable to Jharkhand, Andhra Pradesh could not retain the tax the assessee had paid to it. On proof of payment and verification, Andhra Pradesh must transfer that amount to Jharkhand, which must adjust it towards the assessee's central sales tax liability on the same transactions. (¶¶ 3, 5)

Result

Appeal disposed of with directions for Andhra Pradesh to transfer the tax paid to it to Jharkhand on verification, and for Jharkhand to adjust it, within three months.