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TMI Blog2011 (4) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government public sector undertaking engaged in the manufacture and sale of defence and scientific goods, has several units spread all over the country, i.e., Bangalore, Pune, Chennai, Kotdwara, Panchkula, Navi Mumbai and Machilipatnam. It is a dealer registered under the CST Act. At its Machilipatnam unit, the petitioner manufactures night vision devises, i.e., Hi-tech Electro Optic equipment, hand-held thermal imager, night vision goggles and binoculars, night scopes and integrated observation equipments, etc. The goods manufactured in the Machilipatnam unit are transferred to the Panchkula, Pune, Chennai and Bangalore units of the petitioner-company. It is the petitioner's case that these goods are not sold by the Machilipatnam unit but are only incorporated in the equipment manufactured at the other units, and are eventually sold therefrom to the end customers; and the respective units, which incorporate the components manufactured and transferred by the Machilipatnam unit, pay sales tax on the price of finished goods including the cost of components manufactured and supplied to them by the Machililpatnam unit. The second respondent passed an order of assessment, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not constitute "inter-State sale" ; in the absence of details being furnished in the show-cause notice, regarding the defects in the F forms submitted by the petitioner, the revisional authority must be held to have denied the petitioner an effective opportunity of being heard ; and, even if there were defects, the petitioner ought to have been permitted to rectify the defects within a reasonable period, and resubmit the F forms. The learned senior counsel would rely on Tata Iron and Steel Co. Limited, Bombay v. S. R. Sarkar [1960] 11 STC 655 (SC), Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 STC 473 (SC), Flowmore Private Limited v. Commissioner of Saks Tax [1983] 53 STC 88 (All), Smt. Shrisht Dhawan v. Shaw Brothers [1992] 1 SCC 534, Kerala State Small Industries Development and Employment Corporation Ltd. v. State of Tamil Nadu [1999] 113 STC 169 (Mad) and Bharat Heavy Electricals Ltd. v. State of Andhra Pradesh [1996] 102 STC 345 (AP). Sri P. Balaji Verma, learned Special Standing Counsel for Commercial Taxes, would submit that the goods transferred by the Machilipatnam unit, to other units of the petitioner-company in other States, was pursuant to contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner-company were not sold as they were. The petitioner further stated that, in the revised show-cause notice, the first respondent had failed to mention what was transferred by the Machilipatnam unit, to other units, were only components of certain goods such as mirrors, solar battery chargers, cable assemblies, scanner assemblies, bottom plates, top plates, kit antenna brackets, etc., which were not sold by the receiving units as they were, but were used by them in their manufacturing process. Curiously the first respondent, while taking note of the contention that the goods supplied by the Machilipatnam unit were only components of a larger equipment manufactured by units located outside the State, holds that the said objection did not stand scrutiny as the goods sent by Machilipatnam unit to other units were earmarked for a particular contract/ customer ; they were not diverted to others ; movement of goods to other units was incidental to the contract ; and there was a bond between the contract and the movement of goods by the petitioner from within the State to other units located outside the State. The definition of "sale" under section 2(g) of the CST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company in respect of all the units and divisions owned and controlled by the company. . ." (emphasis supplied). Transfer of goods from one unit of the petitioner to another is in the nature of stock transfer and would not, by itself and without anything more, constitute "sale" as the petitioner-company cannot be said to have sold goods to itself. Under section 3(a) of the CST Act a sale or purchase of goods is deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions movement of goods from one State to another. A sale, by definition, being transfer of property becomes taxable under section 3(a) if the movement of goods from one State to another is under a covenant, or an incident, of the contract of sale and the property in the goods passes to the purchaser. (Tata Iron and Steel Co., Limited, Bombay [1960] 11 STC 655 (SC). If the movement of goods from the unit within the State is occasioned by the order placed by the buyer, or is an incident of the contract of sale, its movement from the very beginning, all the way until delivery is taken by the buyer, is an inter-State movement. (Sahney Steel and Press W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause, that the components and parts forming part of the larger package should be supplied from time to time by BHEL. It is not at all possible to transfer the finished product such as 'boiler package' at a time. It may be noticed that the Tribunal itself has given a different reasoning for excluding the inter-unit transfers from the taxable net at paragraph 29, sub-para 3. The Tribunal rightly puts it on the ground that the article transferred from the petitioner unit to the executing unit (Trichy, etc.) loses its identity as it is incorporated into a larger component or equipment. There is yet another closely allied reasoning to say that the goods sent to Trichy or other executing unit does not stand on the same footing as those sent direct to the customer's site. In the case of the former, there is interruption of movement and the snapping of inextricable bond that should exit between the inter-State movement and the contract of sale. In regard to the goods sent to Trichy unit (or other executing units), the despatch therefrom to inter-State customer takes place after assembly or processing and it is the sole concern of that unit. Trichy unit can even retain the goods f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of, and are incorporated in, the goods manufactured by other units of the petitioner-company locate outside the State of A. P., and the goods transferred by the Machilipatnam unit are not sold to the Armed Forces as they are. The transfer of goods by the Machilipatnam unit, to other units of the petitioner-company located outside the State, fall within the ambit of section 6A(1) of the CST Act, and are not inter-State sales exigible to tax under section 6 of the Act. The order of the first respondent, holding that the transfer of such components by the Machilipatnam unit to other units of the petitioner company situated outside the State constitutes inter-State sales under the CST Act, must therefore be quashed. The first respondent held that F forms filed by the petitioner did not meet the requirements of the CST (R and T) Rules ; they were incomplete ; the assessing authority had mechanically accepted the F forms and allowed exemption ; the F form submitted by the petitioner did not contain important details such as description of the goods sent, quantity or weight of goods, name of the road or railway transporter, and the date on which delivery was taken, etc. ; and fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing authority to satisfy himself that the movement of goods was occasioned otherwise than as a result of sale. The purpose of verification of the declaration in form F is to ascertain whether the branch/unit had merely acted as a conduit or the transaction took place independent of the agreement to sell as entered into by and between the buyer and the company or the unit of the company situated outside the State. (Ashok Leyland Ltd. [2004] 134 STC 473 (SC). While failure to submit proper F forms would necessitate the transactions being treated as inter-State sales, the first respondent should have specified in the show-cause notice the defects he found in the F forms and, thereafter, afforded the petitioner an opportunity of rectifying such defects. No person should be deprived of his vested right, or be made to suffer any disadvantage or detriment, without telling him why such an action was warranted, and without giving him an opportunity to say why it should not be taken. The requirement of audi alteram partem has two elements- notice of what action is proposed, why it is proposed, and an adequate opportunity to show that the action is uncalled for. A corollary of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such F forms were not defective or to have the defects therein rectified, and then resubmit valid F forms. The show-cause notice, in the present case, violates the audi alteram partem rule. This question can be examined from another angle also. It is only if the proposed turnover is liable to tax under the CST Act would the first respondent have jurisdiction to pass an order revising the assessment made under the CST Act. The fact or facts upon which the jurisdiction of an authority depends is a "jurisdictional fact" the existence of which is the sine qua non, or the condition precedent, to the assumption of jurisdiction by the authority. Once such a jurisdictional fact is found to exist, the authority has the power to decide adjudicatory facts or facts in issue. (Carona Ltd. v. Parvathy Swaminathan and Sons [2007] 8 SCC 559, Halsbury's Laws of England (Fourth Edition), Volume 1, para 55, page 61, Reissue, Volume 1(1), para 68, pages 114-15, Chaube Jagdish Prasad v. Ganga Prasad Chaturvedi AIR 1959 SC 492, Arun Kumar v. Union of India [2006] 286 ITR 89 (SC) ; [2006] 7 RC 407 ; [2007] 1 SCC 732). The show-cause notice should reflect the jurisdictional facts based on which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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