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2025 (5) TMI 396 - HC - VAT / Sales TaxDisallowance of exemption towards inter-State consignment transfers - levy of penalty u/s 12(3)(b)(v) of the Tamil Nadu General Sales Tax Act - HELD THAT - It is appropriate to refer the judgment of the Hon ble Supreme Court in Deputy General Manager (Appellate Authority) Vs. Ajai Kumar Srivastava 2021 (1) TMI 1312 - SUPREME COURT wherein the Hon ble Supreme Court dealt the contours of powers of the Court under Article 226 of the Constitution of India. It was held by The Apex Court that The Constitutional Court while exercising its jurisdiction of judicial review Under Article 226 or Article 136 of the Constitution would not interfere with the findings of fact arrived at in the departmental enquiry proceedings except in a case of malafides or perversity i.e. where there is no evidence to support a finding or where a finding is such that no man acting reasonably and with objectivity could have arrived at that findings and so long as there is some evidence to support the conclusion arrived at by the departmental authority the same has to be sustained. It is well settled principle of law that whenever any factual finding is rendered by the authorities the Writ Court normally will not interfere unless the same is perverse or contrary to law. Therefore there is a duty cast upon this Court to find out whether the factual findings rendered by the Sales Tax Appellate Tribunal is in accordance with law. On harmonious reading of the impugned orders the very reasoning for rejection the assessee s claim under Section 6A of Central Sales Tax Act is on three folds. (i) The agent sold the goods on the cost value (ii) that the agent did not split the sale in a smaller quantity and (iii) receipt of sale price in advance. In order to substantiate the same the Sales Tax Appellate Tribunal has extracted certain transactions of assessee s agents. No doubt in some invoices the gross sale amount at the hands of the agent and net amount received by the assessee are one and the same. Therefore we need to consider whether such thing by itself is an indication of direct inter-State sale. At this juncture it is relevant to refer the judgment relied by the Revenue. In Andaman Timber Industries Ltd s case 1997 (11) TMI 500 - MADRAS HIGH COURT the dealer has directly sent the goods in the name of ultimate buyer of the other State whereas in the case in hand admittedly the agent is available at the relevant place and the stocks were transferred by the agent to the buyer on the same day. Conclusion - The transactions qualify as inter-State consignment transfers eligible for exemption under Section 6A. The impugned order is set aside - petition allowed.
The core legal questions considered in the judgment revolve around the applicability of exemption under Section 6A of the Central Sales Tax Act, 1956, to inter-State consignment transfers effected by the assessee through its agents. Specifically, the issues include:
Issue-wise detailed analysis: 1. Applicability of Exemption under Section 6A of the Central Sales Tax Act The relevant legal framework is Section 6A of the CST Act, which exempts inter-State consignment transfers from tax, provided the goods are consigned to an agent or principal in another State for sale on behalf of the dealer. The controversy arises when the Revenue contends that the transactions are direct inter-State sales, not consignment transfers, thus not eligible for exemption. The Court examined the factual findings of the Commercial Tax Officer and the Sales Tax Appellate Tribunal, which denied exemption on three main grounds: (i) the agent sold goods at the same value as received from the assessee, (ii) the agent did not split the sale into smaller quantities, and (iii) receipt of sale price in advance. However, the Court referred to binding precedents, notably the Division Bench judgments in Kumaran Mills Limited and P.M.P. Iron and Steel India Limited, which held that the mere fact that the agent sells goods at the same price as the dealer or sells on the day of arrival does not ipso facto convert the transaction into a direct inter-State sale. Similarly, receipt of advance payment was held in Vijendra Engineering to be insufficient to conclude a prior contract of sale that would negate the consignment transfer. Applying these precedents, the Court found the factual findings of the Sales Tax Appellate Tribunal contrary to established legal principles. The Revenue did not dispute the existence of agency or the transfer of goods to the agent, which is a critical element for exemption under Section 6A. 2. Interpretation of Factual Findings and Judicial Review The Court extensively relied on the Supreme Court's ruling in Deputy General Manager (Appellate Authority) vs. Ajai Kumar Srivastava, which clarified the scope of judicial review under Article 226. The Court emphasized that judicial review is confined to examining the decision-making process for fairness and legality, not the correctness of factual conclusions. Interference is permissible only if findings are perverse, based on no evidence, or suffer from patent errors. In the present case, the Court found that the factual findings of the Sales Tax Appellate Tribunal were supported by evidence but were contrary to binding precedents interpreting similar factual scenarios. The Court concluded that the Tribunal's reliance on the pattern of transactions to deny exemption was legally unsustainable and amounted to a misapplication of law to facts. 3. Treatment of Competing Judgments and Precedents The Revenue relied on judgments such as Govindan Engineering Foundry, Andaman Timber Industries Ltd., and Sharp Industries to support the denial of exemption. However, the Court distinguished these cases on their facts:
Thus, the Court found these precedents inapplicable to the facts before it. 4. Application of Law to Facts and Final Conclusions The Court applied the legal principles from binding precedents to the facts and found that the Sales Tax Appellate Tribunal erred in denying exemption under Section 6A based on the pattern of transactions. The existence of agency was undisputed, and the mere receipt of advance payment or same-day delivery by the same vehicle could not be construed as evidence of direct inter-State sale. The Court held that these factual findings were insufficient and contrary to law to justify denial of exemption. Consequently, the Court set aside the impugned orders of the Sales Tax Appellate Tribunal and allowed the writ petitions. Significant holdings include the following verbatim excerpt from the Supreme Court's ruling on judicial review, which the Court adopted: "25. It is thus settled that the power of judicial review, of the Constitutional Courts, is an evaluation of the decision-making process and not the merits of the decision itself. It is to ensure fairness in treatment and not to ensure fairness of conclusion. The Court/Tribunal may interfere in the proceedings held against the delinquent if it is, in any manner, inconsistent with the Rules of natural justice or in violation of the statutory Rules prescribing the mode of enquiry or where the conclusion or finding reached by the disciplinary authority if based on no evidence. If the conclusion or finding be such as no reasonable person would have ever reached or where the conclusions upon consideration of the evidence reached by the disciplinary authority is perverse or suffers from patent error on the face of record or based on no evidence at all, a writ of certiorari could be issued. To sum up, the scope of judicial review cannot be extended to the examination of correctness or reasonableness of a decision of authority as a matter of fact." The core principle established is that exemption under Section 6A of the CST Act cannot be denied solely on the basis of the agent selling goods at the same price, receipt of advance payment, or same-day delivery by the same vehicle, absent other evidence negating the agency relationship or consignment transfer. Final determinations on each issue are:
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