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TMI Blog1996 (4) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 18397, W.P. Nos. 18398, W.P. Nos. 18399, W.P. Nos. 18400 of 1989, W.P. Nos. 108, W.P. Nos. 110, W.P. Nos. 116 of 1990, T.R.C. Nos. 195, T.R.C. Nos. 196, T.R.C. Nos. 197, T.R.C. Nos. 198, T.R.C. Nos. 199, T.R.C. Nos. 200, T.R.C. Nos. 201 of 1989, S.A. No. 986, S.A. No. 987, S.A. No. 988, S.A. No. 989 of 1989, O.J.C. No. 6773 of 1993 V.A. Mohta, Senior Advocate (P.N. Misra, Advocate, with him), for respondent (State of Orissa) in C.A. Nos. 7353 to 7356 of 1996. V.R. Reddy, Additional Solicitor-General (Sunil Kumar Jain, Advocate, with him), for the appellant in C.A. Nos. 7343 to 7356 of 1996. B.A. Mohanty, Senior Advocate (Mrs. Kirti Misra, Advocate, with him), for the respondent (State of Orissa) in C.A. Nos. 7343 to 7352 of 1996. V.R. Reddy, Additional Solicitior-General (Sunil K. Jain, Advocate, with him), for the appellant (BHEL) in C.A. Nos. 5362 to 5375 of 1996 and petitioner in the writ petition. Mrs. K. Amareshwanri, Senior Advocate (Mrs. Asha Nair and K. Ram Kumar, Advocates, with her), for the respondent (State of Andhra Pradesh) in C.A. Nos. 5362 to 5375 of 1996. -------------------------------------------------- The jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce". Clause (2) of article 269 provides that the net proceeds in any financial year of any such duty or tax "shall be assigned to the States within which that duty or tax is leviable in that year and shall be distributed among those States in accordance with such principles of distribution, as may be formulated by Parliament by law". Clause (3) empowers Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. By the Constitution (Forty-sixth Amendment) Act, the words "or consignment of" were added in clause (3). Clause (3) now reads: "Parliament may by law formulate principles for determining when a sale or purchase of, or consignment of goods takes place in the course of inter-State trade or commerce." Soon after the commencement of the Sixth Amendment Act, Parliament enacted the Central Sales Tax Act, 1956 ("the Act") to effectuate the provisions of articles 286 and 269. The preamble to the Act reads: "An Act to formulate principles for determining when a sale or purchase of goods takes p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation." Section 5 specifies when shall a sale or purchase of goods be deemed to take place in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India, as the case may be. Section 5, it is equally evident, has been enacted to give effect to article 286(1)(b) read with clause (2) of the said article. Though we are not concerned herein with sub-section (3) of section 5, we may yet set out section 5 in full: "5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act giving effect to the said provision in article 269(2) of the Constitution is sub-section (1) of section 9, as it stands now. The sub-section reads: "9. Levy and collection of tax and penalties.-(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course 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 movement of the goods commenced: Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected- (a) where such subsequent sale has been effected by a registered dealer, in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed for the purposes of clause (a) of sub- section (4) of section 8 in connection with the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced: Provided that in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within sub-section (2) of section 6, be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods." (Emphasis added). Then again by the Central Sales Tax (Amendment) Act, 1969, section 9 was substituted with retrospective effect. It is this substituted section 9 which is in force now. Sub-section (1) of section 9 as it stands now has already been set out by us hereinabove. Thus, notwithstanding the legislative changes, the idea has remained the same, viz., that the State from which the goods have moved by reason of the sale is the State in which the Central sales tax is leviable, within the meaning of article 269(2). We must make it clear that what we have said with respect to section 9 is in the context of clause (a) of section 3 of the Act which alone falls for consideration in these appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out hereinabove] otiose and superfluous. It would not be proper to say, in the light of above constitutional and statutory provisions, that the dispute as to in which State is a particular inter-State sale is to be taxed is a matter between the States and that so far as the assessee is concerned, it is enough if he pays the tax at one place, whether it is really leviable in that State as per section 9(1) or not. The law requires that it should be levied and collected in the State from which the movement of goods commences [section 9(1) read with section 3(a)]. If a dispute arises in which State is the tax lawfully leviable, the authorities under the Act have got to decide it. If, in a given case, an assessee says that the par- ticular transaction which is sought to be taxed in State "A" has already been taxed in State "B", nothing prevents him from impleading the State "B" in proceedings in State "A" and have the matter decided in the presence of all parties. It must be remembered that while acting under the Central Sales Tax Act, the State machinery acts as the machinery of the Central Government and not as the machinery of the State Government; in law, it is as if it bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the manner in which the contracted price was payable by NALCO. Now, what happened is this: Tiruchi unit, it appears, is engaged mainly in the manufacture of boiler systems. It was designated as the executing agency for the job at Angul including the responsibility of manufacturing and supplying the boiler systems required for setting up the power plants at Angul. The boiler system comprises innumerable parts and components, some of which are manufactured at the Hyderabad unit. The Tiruchi unit accordingly called upon the Hyderabad unit to manufacture those components/parts. The Hyderabad unit manufactured them and sent some of those parts/components to Tiruchi for being incorporated into the boiler system and sent the remaining directly to Angul (Orissa) to be incorporated into the boiler system at the work-site. According to the practice uniformly followed by BHEL, and accepted by the Andhra Pradesh Government, the parts/components manufactured by the Hyderabad unit for incorporation in the boiler systems were treated as branch transfers, not involving an element of sale, irrespective of the fact whether such parts/components were sent to Tiruchi or to Angul. Conversely, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal had taken the view that in so far as the parts and components manufactured in the Andhra Pradesh unit and despatched to work-site at Angul were concerned, they must be treated as inter-State sales taxable in Andhra Pradesh State inasmuch as the said goods moved from Andhra Pradesh pursuant to the supply contract which was indeed a contract of sale. So far as the parts and components which were sent to Tiruchi are concerned, the Tribunal held that they cannot be treated to have been sold in the course of inter-State trade or commerce but that they represent merely branch transfers. While the State of Andhra Pradesh did not prefer any tax revisions against the judgment of the Tribunal, BHEL did, which meant that the decision of the Tribunal in so far as it held that the despatch of parts/components to Tiruchi constituted branch transfers became final. The only question in the said tax revision cases before the Andhra Pradesh High Court, therefore, was whether the Tribunal was right in holding that the despatch of parts/components from the Andhra Pradesh unit to Angul for incorporation into the boiler system at the work-site represented inter-State sales and whether they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly to the executing unit for being incorporated into the main machinery/system while some parts and components are despatched directly to the work-site. To revert to NALCO project aforementioned, referred to hereinbefore, this is exactly what had happened. Tiruchi unit was supposed to be the executing unit. But some parts and components required for the boiler system and other equipment (which was the responsibility of the Tiruchi unit to manufacture) were being manufactured at the Hyderabad unit. At the request of the Tiruchi unit-or on the instructions of the head office, as the case may be-the Hyderabad unit manufactured those parts and components and despatched some of them to Tiruchi and some of them directly to Angul in Orissa (work-site). The consideration stipulated in the supply contract was payable in the manner provided therein. The following factual position found recorded in the judgment of the High Court is of crucial relevance and may, therefore, be set out in full: "Copies of invoices and photo copy of R.R./L.R. or bill of lading, pre-despatch clearance certificate/inspection report and test certificate, if any, shall be submitted to the bank and various depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the head office of the petitioner. But, the reasonable presumption that should be drawn in the light of correspondence and despatch documents, that NTPC must be well aware of the division of responsibility as regards steam generator and turbo generator packages between the various units. The documents relating to despatch of boiler/steam generator equipment such as bowl mills by Hyderabad unit as per the request of the Trichy unit are filed. They include loading advice, packing list, debit note raised by the Hyderabad unit on Trichy unit and the invoice raised by Trichy unit on NTPC which covers the components/ equipment sent by Hyderabad unit directly to Farakka. The name of the consignee as per the railway receipt is Chief Erection Manager, NTPC, Farakka and the freight is pre-paid. The certificate regarding payment of Central sales tax confirms the payment of Central sales tax on the invoice value by the Trichy unit in respect of the components despatched by Hyderabad unit." Coming back to the findings recorded by the Andhra Pradesh Tribunal, it held, so far as the parts and components sent to Tiruchi that they do not constitute inter-State sales inasmuch as there was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court that in the facts and circumstances concerning NALCO and NTPC (Farakka) contracts and the terms thereof, the direct despatch of goods by the Hyderabad unit to Angul or Farakka constitutes an inter-State sale within the meaning of section 3(a) and that tax thereon is leviable in the State of Andhra Pradesh according to section 9(1) of the Act. The Andhra Pradesh Tribunal and High Court have stated that there are as many as forty-eight contracts during the relevant assessment years and that though the contracts and other documents relating to these contracts have not been filed or have not been filed in full, the parties before them did not dispute that "the salient features of the contracts and the pattern of transactions.......are substantially similar to the two contracts, i.e., NALCO and NTPC contracts". The correctness of this statement has not been challenged by either party before us. So far as Civil Appeals Nos. 5362 to 5368 of 1996 are concerned, the issues raised therein are identical to the issues raised in Civil Appeals Nos. 5369 to 5375 of 1996 except the direction asked for by BHEL for adjustment of tax amounts between the concerned States in such a manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment made by the Orissa authorities under the Orissa Sales Tax Act and against certain notices issued under the said Act. The controversy between the State of Orissa and BHEL arises in the following circumstances: BHEL has undertaken a number of works in the State of Orissa for setting up power generation plants. In each case, there are two contracts, viz., a supply contract and a service contract. The pattern of all these contracts is practically the same as the NALCO contract, referred to hereinabove. The stand of the State of Orissa is that the sale of the machinery and equipment stipulated under the supply contracts is a sale within the State of Orissa and, therefore, exigible to tax under the Orissa Sales Tax Act. The learned counsel for the State of Orissa says that there is many a reason in support of the said stand-which he indeed wanted us to consider. According to the learned counsel, the terms and conditions of the supply contracts and other attendant circumstances do establish that the sale of the machinery and equipment (specified in the supply contracts) has taken place within the State of Orissa and not in the course of inter-State trade or commerce. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items agreed to be purchased have been enumerated in annexures 1 and 2 as stated above whereas the goods to be sold are not the DUs as claimed by the assessee. So there cannot be a sale of inter-State, i.e., the goods which actually moved in the instant case, i.e., with regard to the DUs (despatchable units). The contention of the learned Standing Counsel was verified with respect to the invoice found at page 40 of the paper book (volume 3). It is seen from the said invoice that it relates to the supply generator which does not find place in the annexure A. So also at page 41 of the paper book (volume 3) there is another invoice for supply of bearing pedestal (H&P) and at page 45 for supply of loose items and bearing pedestal and at page 53 turbine components. Those DUs do not find place in annexure 1. So, the contention of the learned counsel for the assessee in this regard cannot be accepted." Having thus ruled out section 3, the Tribunal held that the matter has to be examined in the light of section 4. It observed that inasmuch as on the date of letter of intent or the date of execution of formal contracts, much of the equipment/machinery agreed to be supplied was not in exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of intent, the formal contracts and the correspondence which passed between the parties, it must be held that the sale of the said machinery and equipment has taken place within the State of Orissa. Learned counsel also submitted that the factual basis upon which the Andhra Pradesh High Court has rendered its decision is not admitted by or acceptable to the State of Orissa. They pointed out that State of Orissa was not made a respondent to the writ petitions filed by BHEL in the Andhra Pradesh High Court which are the subject-matter of Civil Appeals Nos. 5362 to 5368 of 1996 and that there are a number of facts and features upon which it has to be held that the conclusion arrived at by the Orissa Tribunal is correct though not its reasoning. Counsel further submitted that the question whether a particular sale is an inter-State sale or an intra-State sale is a question of fact and is not a matter to be adjudicated by this Court in a writ petition under article 32 of the Constitution. They submitted that on this ground alone these appeals should be dismissed and BHEL should be asked to pursue the remedies provided by the Orissa Act. They pointed out that some of the appeals are pref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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