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TMI Blog2009 (2) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. DCM Ltd., claimed exemptions on account of the following sales made to registered dealers: Name of the (purchasing/registered) dealer Amount of sale claimed to be made by DCM to registered dealer 1. M/s. Dayal Sons Rs. 32,33,704.74 2. M/s. Dayal Brothers Rs. 5,93,628.62 3. M/s. Vaish Brothers Rs. 35,69,571.77 Total: Rs. 73,96,905.13 The assessing authority vide order dated March 28, 1979 did not grant exemption in respect of the above-mentioned sales on the ground that the three above-mentioned purchasing dealers had been assigned specific territories, under the contract(s), outside Delhi and that they were under contractual obligations with M/s. DCM Ltd., to supply goods to the specified dealers who were also named by M/s. DCM Ltd., on a price fixed and determined by M/s. DCM Ltd. According to the said order, even the quantity of chemicals stood determined by M/s. DCM Ltd. According to the assessing authority, under the above circumstances, the said chemicals were meant for inter-State sales. However, to avoid liability under the Central Sales Tax Act, 1956, the transaction was shown by the assessee (appellant-M/s. DCM Ltd.) as a "local sale". Accordingly by the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court was: whether the Sales Tax Tribunal was right in holding that the said sale(s) was an inter-State sale(s). Vide impugned judgment dated July 3, 2007 Reported as DCM Ltd. v. Commissioner of Sales Tax [2008] 12 VST 248 (Delhi)., the High Court held that the sales were inter-State sales falling under section 3(a) of the said 1956 Act. Accordingly, the High Court directed the assessee to adduce evidence before the assessing authority to show that the chemicals were locally sold by the purchasing dealer and that they were not transferred to branches outside Delhi or sold in territories outside Delhi. Against the said order, however, the assessee has approached this court by way of special leave petition(s). Issue In this case great emphasis is placed by the assessee on the fact that all supplies were made ex-works of the assessee and that the above three registered purchasing dealers (distributors/stockists) had taken local deliveries at the factory gate and had arranged to store the chemicals in their own godown(s) in Delhi, both in terms of the contract and in fact. Therefore, the main question which arises for determination in these civil appeals is: whether the taking o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chasing dealers (distributors) were "local sales" and the said sales did not occasion movement of goods from Delhi to other States. He further submitted that the purchasing dealers were registered dealers under the local Act. They were also registered dealers under the said 1956 Act. According to learned counsel, the dealers had purchased the goods locally from the assessee in Delhi on the strength of their registration certificates by issuing prescribed declarations under the local Act and, therefore, the said purchases were local purchases in the hands of said dealers. According to learned counsel, after purchasing the goods in Delhi and getting delivery ex-works at the factory of the appellant, the purchasing dealers had stored the goods in their godowns in Delhi. According to learned counsel, the purchasing dealers were selling the goods purchased from the appellant either by making local sales in Delhi or by making inter-State sales to their own buyers outside Delhi or by making branch transfers to their own branches outside Delhi. The learned counsel next contended that a local sale cannot be deemed to take place in the course of inter-State trade or commerce simply because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the selling rates were normal commercial clauses which clauses had nothing to do with the issue as to whether the sale(s) made by the appellant to its purchasing dealers locally against the declaration forms submitted by them and such clauses did not purport to make such local sale(s) into inter-State sale(s). In support of his contention learned counsel placed reliance on a number of judgments of this court. On the other hand, Mr. Ashok Panda, learned senior counsel appearing on behalf of the Department, submitted that in view of the judgment of the Constitution Bench of this court in the case of State of Bihar v. Tata Engineering & Locomotive Co. Ltd. [1970] 3 SCC 697 the sales in question in the present case were inter-State sales. The learned counsel submitted that the judgment of this court in Tata Engineering [1970] 3 SCC 697 See [1971] 27 STC 127 (SC). is squarely applicable to the present case. In this connection, learned counsel invited our attention to various clauses in the said contract (agreement) by which specific territory stood assigned to the purchasing dealer(s) coupled with an obligation by the purchasing dealer(s) to move the goods to the assigned territory. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the purchasing dealers were obliged contractually to remove the goods from Delhi, in which they were bought, to the assigned territories and whether in fact the goods stood actually removed. It is this test that would decide the question as to whether the sales in question were "inter-State sales" or "local sales". To answer the above question we need to examine the entire contract(s). Under the contract(s), each purchasing dealer(s) was assigned an exclusive territory. Each dealer(s) was obliged to take the chemicals to his respective territory outside Delhi where they were to be sold. Despite the fact that the delivery of the goods was taken in Delhi, the purchasing dealer(s) had to move the goods to the respective assigned territories outside Delhi and it was the essential condition of the contract itself that the chemicals would move out of Delhi and would be sold in the assigned territories allotted to each of the respective purchasing dealers. The covenant in the contract obliged each of the purchasing dealers to move the goods to the territories outside Delhi. In fact in clause 3 there was a proviso that if on instructions from the purchasing dealer, the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after they were given to the purchasing dealer(s) at the factory gate and that the assessee had no idea as to whether the goods would be sold in Delhi or transferred to the branches or sent in the course of inter-State trade. In this connection, reliance was also placed on the affidavits filed by the three purchasing dealers. We do not find merit in these arguments. Once it is found that the purchasing dealers were obliged under the contract(s) to take the chemicals to their respective territories outside Delhi, once it is found that the purchasing dealers were obliged to sell the chemicals in their respective assigned territories, once it is found that the said purchasing dealers were obliged to enter into separate contract(s) with the assessee, once it is found that each of the purchasing dealers were required to sell the chemicals in their assigned territories at the price fixed by the assessee and once it is found that each of the purchasing dealers was obliged to submit monthly reports to the assessee then in that event the mode in which each of the purchasing dealers could sell their goods either by way of stock transfer or inter-State sale or local sale becomes irrelevant. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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