STATE OF UTTAR PRADESH & ORS. versus KASTURI LAL HAR LAL

Citation: [1987] 3 S.C.R. 756 · Decided: 03-08-1987 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Judgment (excerpt)

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B 
c 
STATE OF UTTAR PRADESH & ORS. 
v. 
KASTURI LAL HAR LAL 
AUGUST 3, 1987 
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.) 
Central Sales Tax Act, 1956-Sub-ss. (1) and (2) of s. 9-Read 
with s. 3(b)-'Appropriate State' having jurisdiction to impose and 
collect Central Sales Tax on sale of goods effected by transfer of docu-
ments of title to goods during their movement from one State to another .. 
Section 3 of the Central Sales Tax Act, 1956 stipulates that a sale 
Y 
or purchase of goods shall he 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 of documents of title to the goods during their movement from 
D one State to another. Sub-s. (1) of s. 9 provides that the tax payable by 
any dealer under this Act on sales of goods effected by him in the course r 
of inter-State trade or commerce, whether such sales fall within clause (a) 
or clause (b) of section 3, shall be levied by the Government of India and 
the tax so levied shall be collected by that Government in accordance 
with the provisions of sub-section (2), in the State from which the 
E movement of the goods commenced and sub-s. (2) thereof provides 
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that the authorities for the time being empowered to assess, re-assess, ~ 
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collect and enforce payment of any tax under general sales tax law of 
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the appropriate State shall, on behalf' of the Government of India, 
assess, re-assess, collect and enforce payment of tax, including any 
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penalty, etc. 
The respondent, a dealer in coal, had effected certain transactions 
by endorsing Bi/ties (Railway Receipts made out in its name to various 
parties in Uttar Pradesh while the goods relating to the Bi/ties were in a 
state of movement from Bihar to Uttar Pradesh. The bills connected 
with such Bi/ties had also been prepared by the respondent which had 
G realised the money from the purchasing parties. The Sales Tax Officer,~­
Lucknow was of the view that the sale of coal effected in this manner 
came under inter-State sale and as such was liable under section 3(b) of 
the Central Sales Tax Act, 1956. Disagreeing with the contention of the 
respondent that the goods having been sold to an unregistered dealer, 
the respondent too being not a registered dealer during the particular 
H year, there was no question of imposition of any sales tax, the Sales Tax 
756 
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; 
STATE OF U.P. v. KASTURI LAL 
757 
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Officer imposed the liability under that provision which was challenged · A 
by the respondent by a writ petition. The High Court, allowing the 
petition, set'aside the order of assessment. 
Dismissing the appeal, 
HELD: The Sales Tax Officer in Uttar Pradesh was not the B 
appropriate authority either to impose or collect the duty on inter-State 
sale. [764GJ 
(i) Sub-s.(1) of s. 9 confers jurisdiction to make the levy and 
collect the tax on the State where the movement of the goods 
commences, and so the determinative test for discovering the juris- c 
diction of a particular State, in an inter-State sale, is the place where 
the movement of the goods commences. The words "appropriate 
Government" given in sub-s. (2) of that section must necessarily refer 
to the State which by s. 9(1) has been conferred jurisdiction to levy and 
collect the tax. [763D-E] 
(ii) lt is clear from an analysis of the scheme of the Central Sales 
Tax Act, 1956 that it is the Central Government which imposes tax on 
inter-State sale but it is collected by th~ Government in accordance with 
the provisions of sub-s. (2) of s. 9 of the Act in the State. It is clear from 
sub-s. (2) ot s. 9 that the "appropriate State" Imposes and collects the 
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tax on behalf of the Government of India. In order to be a sale or E 
inter-State transaction the sale must occasion the movement ~f goods. 
In the instant case, there were Railway receipts which were endor~ed in 
favour of the parties in U.P. It is by that endorsement that title was 
transferred to the purchasers and that transaction occasioned the move-
n'lent of the goods, in other words, caused inter-State sales to take place, 
namely, the sale which occasions the movement of goods from one State F 
to another, from the State ofBiharto the State ofU.P. [762E-Gl 
(iii) The proviso to s. 9(1) can apply only if the sale is by a regis-
tered dealer. Here the admitted position is' that the dealer Is not a 
registered one. It was urged on behalf of 

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