Leyland asked to move high court in sales tax case

The question whether a particular transaction is an inter-state sale or a local sale for the purpose of central and state sales tax again came up before the Supreme Court in the case of large companies with several regional offices.

The court regretted that despite its call, Parliament had not set up a forum for determining the issue.

The issue came up in the Ashok Leyland Ltd vs State of Tamil Nadu case last week. There were other companies also manufacturing goods and selling them in other states through regional offices.

In the Leyland case, the company has factories in Rajasthan and Maharashtra. They are registered under the Tamil Nadu General Sales Tax Act as also the Central Sales Tax Act.

The company also has regional offices throughout the country for receiving, warehousing and selling its vehicles.

The regional sales offices are registered under the sales tax laws governing the state in question. Local sales tax is paid by the regional sales offices.

Earlier, the assessing authority in Tamil Nadu allowed transfer of vehicles without tax. But later it revised its decision and issued a show cause notice as to why the vehicles sent to the regional offices and sold to state transport undertakings should not be taxed as inter-state sales taxable in Tamil Nadu.

Leyland challenged the assessing authority's jurisdiction of reopening the assessment. After receiving the reply, it imposed penalty on the company. Leyland moved the Madras High Court.

It argued that since it had paid tax to other states, the order was illegal. The other states, where the tax had been paid, also joined issue in the Madras High Court and challenged the jurisdiction of the authorities in Tamil Nadu to enquire into the matter.

The high court dismissed the company's petition and held that it had no jurisdiction to grant relief. The company moved the Supreme Court.

The apex court Bench headed by Chief Justice VN Khare held that the company would be entitled to move the high court to ventilate its grievances.

If the central government created a new forum, it would be open to the company to approach it. But because there was no such forum, the company would have to move the high court again.

The apex court said because more than one state were involved in all these cases, as they had collected local sales tax from the companies, they could also be impleaded in the high court, if felt necessary. Thus the high court has to go through the exercise once again.