TMI Blog1991 (3) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... on August 7, 1978. The inspection revealed that the exemption granted on a sum of Rs. 6,72,861.47, as sales effected in the course of inter-State movement of goods from one State to another was not in order and that the sale in question was intra-State and not interState. The assessing authority found that the petitioner had entered into a contract with Southern Petro Chemical Industries Corporation Limited ("SPIC" for short) for supply of HDPE bags, according to which the assessee had agreed to supply 6 lakh numbers of HDPE bags to SPIC at Rs. 4.15 per bag. The bags were required to be delivered at the premises of SPIC at Tuticorin and the payment for the bags was to be made after confirmation and verification of the specification, dimension, quality, etc., by SPIC. It was also found that the assessee was manufacturing HDPE bags in its own factory at Karappakkam in Madras also but, in order to fulfil the contract with SPIC, the assessee had supplied HDPE bags not only from its own factory but also by purchasing the same from manufacturers outside the State. It was in respect of the goods sold, out of the purchases made from the suppliers from outside the State, that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Deputy Commissioner (C.T.) v. Pudukkottai Textiles Ltd. [1976] 37 STC 544, held that it was neither a case of sale by transfer of documents, nor was there any material to show that the goods had been appropriated outside the State. After finding it as a fact that the goods had been purchased by the assessee in Madras from various dealers outside the State and then sold to SPIC at Tuticorin, the assessing authority concluded that the sale was intra-State sale and not inter-State sale. The assessee was consequently assessed on the escaped turnover of Rs. 6,72,861.47 for the assessment year 1975-76. 4.. For the assessment year 1976-77, the assessee was assessed by the Joint Commercial Tax Officer on a taxable turnover of Rs. 27,88,825, which included the "transit" sales effected to SPIC to the tune of Rs. 7,47,090. The claim for exemption under section 6(2) of the Central Act was negatived. The appeals before the Appellate Assistant Commissioner failed in respect of both the assessment years. By a common order dated July 15, 1981, further appeals to the Tamil Nadu Sales Tax Appellate Tribunal were also dismissed. 5.. The question raised before the Tribunal by the assessee was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SPIC at Tuticorin by mentioning the name of the consignee as SPIC. The supply was made under instructions and to the account of the assessee. There is no material at all on record to establish that the assessee had effected the transfer only by documents. There is also no material on the record to show that the transfer of goods had been made after the goods had left Bangalore and before they had reached Tamil Nadu, in so far as SPIC is concerned. Indeed, there is no doubt that as between the Bangalore manufacturers and the assessee, the sale is inter-State sale, but the controversy is only about the sale by the assessee to SPIC at Tuticorin. According to learned counsel for the assessee, the supply was made to SPIC during the movement of the goods from Bangalore to Tamil Nadu and, therefore, the sale would be exempt under section 6(2) of the Central Act. It would be advantageous at this stage to notice the provisions of section 6(2) of the Central Act. It provides: "6(2) Notwithstanding anything contained in sub-section (1) or subsection (1-A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from where the goods were to be despatched. The finding of fact recorded by the Tribunal that the sale had not been effected by a transfer of documents of title to the goods during their movement from Karnataka to Tamil Nadu by any subsequent sale during that movement by transfer of documents of title to such goods has not been displaced. On these findings of fact, it is futile to contend that the case of the assessee would be covered by section 6(2) of the Central Act. Since the sale had taken place at Bangalore, in so far as the assessee is concerned, the delivery of the goods to its account at Tuticorin at the doors of SPIC, in accordance with the terms of the contract executed between it and SPIC would be only a local transaction, i.e., an intra-State transaction and not an inter-State transaction. So far as SPIC is concerned, the Bangalore manufacturer does not come into the picture except as a consignor under instructions of the assessee. There was no sale which could be said to have occurred during the movement of the goods. Thus, as between the assessee and SPIC at Tuticorin, the sale cannot be deemed to have taken place in the course of inter-State trade or commerce. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been inter-State sale, but since it was done on the instructions of and to the account of the assessee, the sale between the assessee and SPIC was a sale within the State of Tamil Nadu only, executed pursuant to the contract between the parties entered into in Tamil Nadu. 9.. In Deputy Commissioner (Commercial Taxes) v. Pudukkottai Textiles Limited [1976] 37 STC 544 (Mad.), the assessee entered into a contract with M/s. Rallis India Limited, Coimbatore, within the State of Madras, for the purchase of cotton. Under the terms of the contract executed within the State of Madras, Rallis India agreed to sell 100 bales of cotton in full pressed bales each weighing about 400 lbs. at the price of Rs. 1,080 per candy of 784 lbs. net, f.o.r. Namanasamudram, within the State of Madras. The cotton had to be forwarded/delivered through wagons at the earliest possible despatch. The payment of the price was agreed to be 90 per cent against the railway receipt at Namanasamudram and the balance 10 per cent or difference between the sellers' invoice weight and the weight at destination to be paid on the presentation of the sellers' final invoice. On the nature of the transaction covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy noticed, there was no transit sale in the instant case, nor was the sale effected by transfer of documents of title. Consequently, the assessing authority was justified in assessing the assessee on the transaction in question between the assessee and SPIC, treating the transaction as local sale, subject to tax under the Tamil Nadu Act and negativing the plea of exemption based on section 6(2) of the Central Act. 11. The alternative submission of the assessee that even if the sale was not exempt under section 6(2) of the Central Act, the same could not be subjected to levy under the Tamil Nadu Act is totally misconceived and needs a notice only to be rejected. Since the transaction between the Bangalore manufacturer and the assessee was an inter-State sale while the transaction between the assessee and SPIC was an intra-State sale, and the appropriation of goods had taken place within Tamil Nadu as per the terms of the contract, the sale by the assessee, a dealer based in Madras, to SPIC at Tuticorin would be strictly governed by the provisions of the Tamil Nadu Act and assessable and subject to levy under the State Act only. 12.. Thus, for what we have said above, we do no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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