IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2222 OF 2012 (@ SPECIAL LEAVE PETITION(C)NO.25637 OF 2010)

M/S.ZUNAID ENTERPRISES & ORS. ... APPELLANTS

VERSUS

STATE OF M.P. & ORS. ... RESPONDENTS

WITH

C.A.NO.2223 OF 2012 (@ SLP(C)NO.26619/2010)

WITH

C.A.NO.2224 OF 2012 (@ SLP(C)NO.26622/2010)

WITH

C.A.NO.2225 OF 2012 (@ SLP(C)NO.26798/2010)

O R D E R

1.    Leave granted.

2. Since we intend to direct the appellants/assessees  

in  these  matters  to  subject  themselves  for  

appropriate  adjudication  before  the  Assessing  

Authority, we have taken up these appeals for early  

hearing.

3.  The appellants are dealers, registered both under  

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the provisions of the Madhya Pradesh Commercial Taxes  

Act/VAT  Act  and  Central  Sales  Tax  Act,  1956  (for  

short  `the  Act’).  They  have  also  registered  as  

exporters of Tendu leaves (Tendu Pattas) and Bamboos.  

Some of the assessees are dealers in Tendu leaves and  

some of them are dealers in Bamboo.

4.  The  Madhya  Pradesh  State  Minor  Forest  Product  

(Trading  &  Development)  Co-operative  Federation  

Limited ('the Federation' for short) had initiated  

the tender process for sale of Tendu leaves and the  

bamboos, which are minor forest produce.  One of the  

condition that was stipulated in the tender documents  

was that the highest bidder whose bid is accepted,  

has to remit the taxes under the VAT Act to the State  

Government.

5.  The  appellants  herein  are  successful  bidders.  

Immediately  after  their  tender  documents  were  

accepted,  the  appellants  had  approached  the  High  

Court by filing a petition under Article 226 of the  

Constitution,  inter  alia,  seeking  a  writ  in  the  

nature  of  mandamus  to  the  respondents/revenue  to  

treat the sales, made by the Federation in favour of  

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the  appellants,  as  purely  inter-state  sale  and,  

therefore, not exigible for the levy of tax under the  

VAT Act.  They had also sought for incidental and  

ancillary prayers in the writ petition.

6. The High Court, after hearing the learned counsel  

for the parties to the  lis,  merely relying upon  

certain  clauses  in  the  tender  documents,  has  

proceeded to hold that the purchase of tendu leaves  

and  bamboos  by  the  appellants  is  pursuant  to  the  

tender  process  initiated  by  the  Federation  and  in  

view of a particular clause in the tender documents,  

the assessees are liable for payment of tax under the  

VAT Act.  The reasoning and the conclusions reached  

by the High Court is flawed by the appellants in  

these Civil Appeals.

7.  We have heard Shri Ravindra Shrivastava, learned  

senior counsel appearing for the appellants and other  

learned  counsel  appearing  for  other  appellants  in  

these  appeals  and  also  Shri  Vivek  Tankha,  learned  

Additional Solicitor General for the State of Madhya  

Pradesh and other learned counsel appearing for the  

authorities under the VAT Act.

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8.  At the outset, we intend to note that in these  

type  of  cases,  the  High  Court  ought  not  to  have  

entertained the writ petitions filed under Article  

226 of the Constitution. We say so for the reason,  

that, whether a sale originating in a State is an  

inter-state sale or not is essentially a question of  

fact to be determined by the authorities under the  

Act,  since  it  involves  the  application  of  the  

provisions of Sections 3, 5, 6 and 9(i) of the Act to  

the facts established and hence, it will be a mixed  

question of law and fact.  The facts requires to be  

brought to the notice of the Assessing Authority by  

the appellants and it is for the assessing authority  

to come to a conclusion, based on those facts whether  

a particular transaction is intra-state sales which  

is exigible to the taxes under the VAT Act or inter-

state sales, as envisaged under Section 3 of the Act  

read  with  Section  6  of  the  charging  provisions  

therein.  It is after such adjudication, the matter  

can travel from one stage to the other as provided  

under the Act.

9.  In the instant case, as we have already stated,  

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the relevant facts were not before the Court nor the  

finding of the assessing authority to decide whether  

the transactions in question are intra-state sales or  

inter-state which are exigible to taxes under the VAT  

Act  or  taxes  under  the  provisions  of  the  Central  

Sales Tax Act.  Merely based on certain clauses in  

the agreement, in our opinion, the High Court ought  

not  to  have  decided  and  declared  that  the  

transactions in question would be purely and simply  

intra-state sales and not inter-state sales.  In our  

view, whenever a question arises as to whether a sale  

is inter-state sale or not, it has to be answered  

with reference to Section 3 and Section 3 alone.  See  

Constitution Bench judgment in Tata Iron and Steel  

Co.  Limited  v.  S.R.  Sarkar  (1960)  11  STC  655.  

Similarly, when the question arises, in which State  

is the tax leviable, one must look to and apply the  

test in Section 9(i); no other provision is relevant  

on this question :  See Bharat Heavy Electricals Ltd.  

v. Union of India (1996) 102 STC 373. In that view of  

the matter, we cannot sustain the orders passed by  

the High Court.

10.  In view of the above, we set aside the orders  

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passed  by  the  High  Court  and  direct  the  

appellants/assessees  in  these  cases  to  file  their  

monthly/annual returns before the assessing authority  

within a month's time   from   today, if not already  

filed.   We also direct the assessing authority to  

adjudicate upon the returns so filed in accordance  

with law after affording opportunity of hearing to  

the appellants/assessees within two months' time from  

the date of filing of the returns by the assessees,  

uninfluenced  by  the  observations  made  by  the  High  

Court.   Till  such  proceedings  are  completed,  the  

assessing  authority(s)  are  restrained  from  issuing  

further demand notices to the appellants/assesses for  

recovery of taxes either under the VAT Act or under  

Central Sales Tax Act.  We also make it clear that  

the  amounts  deposited  by  the  appellants/assesses,  

during the pendency of the writ petitions before the  

High Court or during the pendency of the Special  

Leave  Petitions  before  this  Court,  shall  not  be  

demanded to be refunded to them.   

11.  The appeals are disposed of accordingly, with no  

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order as to costs.

Ordered accordingly.   

...................J. (H.L. DATTU)

...................J. (ANIL R. DAVE)

NEW DELHI; FEBRUARY 22, 2012  

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