TMI Blog2010 (4) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, be open to the Department to examine the nature of the transactions between the petitioner-company and its consignment agents in the light of the observations made in this judgment and thereafter proceed in accordance with law if it comes to the conclusion that the transactions between them constitute "sale" within the meaning of the Delhi Value Added Tax Act, 2004. - S.T.A. Nos. 3 to 7 of 2008, W.P. (C) No. 5430 of 2008 - - - Dated:- 19-4-2010 - BADAR DURREZ AHMED AND JAIN V.K. , JJ. The judgment of the court was delivered by V. K. JAIN J. By this common judgment, we will dispose of all the six matters referred above. STA. Nos. 3 of 2008 to 7 of 2008 are directed against a common order passed by the Appellate Tribunal, Value Added Tax, Delhi, whereby it upheld the order passed by the appellate authority. The following substantial questions of law were framed for consideration in these appeals: (i) Whether the Tribunal was correct in law in holding that an agent to whom the goods are transferred on consignment basis, is covered under the definition of 'dealer' under section 2(j) of the Delhi Value Added Tax Act, 2004 and the transfer of goods to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is provision for transfer of goods by the dealer to his branch or his agent otherwise than by way of sale, in the Delhi Value Added Tax Act, 2004 there is no similar provision for intra-State transfer of goods to the branch or an agent without payment of tax. Under the DVAT Act, even an agent to whom goods are transferred on consignment basis are covered under the definition of 'dealer' and transfer of goods to an agent for consideration, whether received in advance or subsequently on conclusion of sale of goods shall amount to sale and shall be taxed accordingly. However, the agent shall be eligible to claim input tax credit for taxes paid to the principal. To sum up all intra-State transfer of goods to an agent within Delhi on consignment without payment of tax is not allowed under the provisions of the DVAT Act, 2004 and such intra-State transfers are covered under the definition of 'sale' and are liable to tax as per provision contained in the DVAT Act, 2004 from the day the DVAT Act came into force. (2) Transfer of goods by a dealer from his one place of business to another place of business within Delhi is not sale and is not to be taxed provided all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of 2008. This is also the case of the petitioner that any demand of value added tax, on supply of goods by the petitioner to its consignment agents, would be unconstitutional being beyond the legislative competence of the State, under entry 54 of List II of the Seventh Schedule to the Constitution, which empowers the State to levy tax only on sale and not on such stock transfers by the principal to his agent. The petitioners have, therefore, sought quashing of the demand notices as well as the impugned advance ruling, published vide notification dated December 2, 2005. The petitioners have also prayed that the provisions of section 3(2), 2(1)(zc) and 2(1)(j) of the DVAT Act be declared unconstitutional and beyond the legislative competence of the State if they purport to levy tax in respect of transaction which does not amount to sale of goods. The respondent has contested the petition and has taken a preliminary objection that the writ petition is not maintainable since it is open to the petitioner to file objections under section 74 of the DVAT Act against the default assessment orders passed by the VAT Officer. On the merits, it has been alleged that transfer of property ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (v) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (vi) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (vii) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration; A careful analysis of the above referred definition would show that the following are the essential ingredients of sale as defined in the Act: (i) There should be transfer of property in goods by one person to another. (ii) The transfer should be for cash or for deferred payment or for some other valuable consideration. What is noteworthy is that it is transfer of property in goods and not transfer of goods , which constitutes sale within the meaning of section 2(zc) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cator of the fact that title in the goods continued to vest in the appellant-company and that is why the tax was deposited by the agent on its behalf and not on his own behalf. There is absolutely no finding by the Tribunal to the effect that property or title or ownership in the goods got transferred by the appellant to its agent either before or at the time of delivery of the goods to the agent or at any time thereafter. Even the Revenue did not contend before the Tribunal that in fact the title or ownership in the goods was transferred to the agent along with physical transfer of the goods. Since there was no transfer of property in the goods from the appellant to its agent, the transaction between the parties cannot be said to be a transaction of sale within the meaning of section 2(zc) of the Act. In our view, the Tribunal was wrong in saying that value added tax is payable on every transfer till the goods reach the ultimate consumer. If that were to be so then mere physical transfer of goods from the place of the principal, to the place of the agent, without being coupled with transfer of ownership in those goods, would constitute what the Tribunal termed as transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by third of next month. The agent shall also provide the infor- mation/report as required by the principal for any shorter period. 2.16 Shall provide facilities for monthly authentication of the stocks in the presence of at least one direction/authorized person of the principal and the agent. Such authentication shall have to be signed by the respective directors/authorized persons. 2.17 Shall allow the persons authorized by the principal to inspect and verify the stocks at any time with or without prior notice to the agent. 3.. That the agent shall not: 3.05 Effect any change in the constitution of their organization without the written consent of the principal. 4.. Insurance: 4.01 That principal shall insure at its own cost the stocks held by the agent at the agent's godown for the value of the stock for fire, theft, riot, earthquake, floods, damage, etc., as well as transit insurance. For this, agent shall keep the principal informed about any expected or otherwise increase/decrease in stocks. 5.. Consideration: 5.01 In consideration of the services provided by the agent, the agent shall be entitled to receive a commission as follows which wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant to the consignment agent and kept in his premises did not get transferred to the agent. As regards Notification No. F.4(3)/P-II/ VAT/2005/1158 dated December 2, 2005, a perusal of the document would show that this is an advance ruling given by the Commissioner of Value Added Tax under section 85 of the Act, which provides that the Commissioner may by notification in the official gazette, publish his ruling on the answer to any question involving the interpretation of the Act or application of the Act to a class of persons or a class of transactions. Obviously, the ruling of the Commissioner needs to be based upon a correct interpretation of the provisions of the Act and it cannot either substitute or supplement the provisions of the Act. It is not open to the Commissioner, while publishing a ruling in terms of section 85 of the Act to take a view contrary to the provision of the Act or to add to its provisions. Hence, the Commissioner cannot classify a transaction as sale if such a transaction otherwise does not constitute sale within the purview of the Act. The Commissioner cannot, by way of advance ruling, say that a transaction between the principal and his agent will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of sale for the purpose of the Constitution in general and for the purpose of entry 54 of List II in particular except to the extent that the clauses in article 366(29A) operate. In Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer [1968] 21 STC 312 (SC), Explanation III to the Andhra Pradesh General Sales Tax Act, 1957 was under consideration. The said Explanation III read as under (at page 314 of STC): Explanation III. Notwithstanding anything contained in this Act or in the Indian Sale of Goods Act, 1930 (Central Act 3 of 1930), two independent sales or purchases shall, for the purposes of this Act, be deemed to have taken place (1) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser, or (2) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid, (i) to have sold the goods at one rate and to have passed on the sale proceeds to his principal at another rate; or (ii) to have purchased the goods at one rate and to have passed them on to his principal at another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and directions. Since the agent is not the owner of goods, if any loss is suffered by the agent, he is to be indemnified by the principal. For the reasons given in the preceding paragraphs, we are of the view that the Tribunal was not correct in law in holding that the appellantcompany was liable to pay value added tax in respect of the goods physically transferred by it to its consignment agent. The question of law is therefore answered in the negative. The impugned order is, accordingly, liable to be set aside. Coming to WP (C) No. 5430 of 2008, admittedly, the respondents raised demand in respect of the supplies made by petitioner No. 1 to its consignment agents without going into the question as to whether property in the goods supplied by petitioner No. 1 to its consignment agents stood transferred to the agents or not and whether the transactions between petitioner No. 1 and its consignment agents amounted to sale under the provisions of the Act, or not. The demand has been raised on the strength of Notification No. F.4(3)/P-II/ VAT/2005/1158 dated December 2, 2005 published by the Commissioner of Value Added Tax, on the assumption that every supply made by the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an order under section 84 or section 85 of the Act, if the Commissioner has not delegated his power under the said section to other value added tax authorities. Therefore, we cannot say that the petitioner instead of filing writ petition should file objections under section 74(1) of the Act before the Commissioner against his own ruling. So long as the advance ruling published by the Commissioner stands in its present form, no useful purpose would be served by directing the petitioners to file objections before the Commissioner, who, in view of his own ruling, is bound to dismiss such objections. Since we have come to the conclusion that a transaction involving mere physical transfer of goods by the principal to its consignment agent unless coupled by transfer of title or property in the goods to the agent, does not constitute sale under the provisions of the Delhi Value Added Tax Act, we need not examine the contention that the State Legislature is not competent to levy tax on a transaction where the goods are physically transferred from the principal to the consignment agent but the property or title in the goods continues to vest in the principal. The Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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