TMI Blog2011 (3) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... r, transactions in question were inter-State sales taxable under the Central Act, no merit in this appeal and the same is accordingly dismissed - Civil Appeal No. 3781 of 2003 - - - Dated:- 4-3-2011 - JAIN D.K. AND DATTU H.L. JJ. Ms. C.K. Sucharita and Ms. Nirada Das, Advocates, for the respondent. S.K. Bagaria, Senior Advocate, (Ramesh Singh and Adarsh Priyadarshi (for M/s. O.P. Khaitan Co.), Advocates, with him) for the appellant. -------------------------------------------------- The judgment of the court was delivered by H.L. DATTU J. This appeal is directed against the judgment and order dated June 21, 2002, passed by the Division Bench of the High Court of Judicature of Andhra Pradesh at Hyderabad in Tax Revision Case No. 54 of 1991 Reported as Hyderabad Engineering Industries Limited V. State of Andhra Pradesh [2002] 128 STC 1 (AP). By the impugned judgment and order, the High Court has dismissed the revision petition filed by the assessee, inter alia, holding that the disputed transactions constitute inter-State sales, as contemplated under section 3(a) of the Central Sales Tax Act, 1956. The issue that we are called upon to decide in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties at the time of hearing of the appeal. The company has been an assessee on the rolls of the Commercial Tax Officer, Company Circle II, Nampalli, Hyderabad. For the assessment year 1981-82, the assessee-company filed its annual returns under the Central Act in the prescribed form. The assessee-company claimed exemption on a turnover of Rs. 8,87,75,643 towards goods transported to out-of-State depots otherwise than as a result of direct sale which would attract tax under section 6 of the Central Act. The assessee's case before the assessing authority, Sales Tax Appellate Tribunal and the High Court was that the transactions on which exemptions were claimed cannot be regarded as sales in the course of inter-State trade, chargeable to tax under the Central Act. This contention of the assessee is negatived by the assessing authority, which view is confirmed by the Tribunal and the High Court. The findings of the assessing authority with respect to the nature of the transactions with its various branches, except in the case of the Calcutta depot, may be set out in his own words: "The assessee-company in Hyderabad is engaged in the manufacture of different types of fans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Marketing Department of the assessee-company as they were never received. On receipt of goods in the out-State depot, an invoice is prepared in favour of the respective unit of M/s. Usha Sales Ltd., (such as Nalanda Sales Corporation, etc.) and all the invoices are sent without fail to the Hyderabad factory. In the books of account of the factory, the account of USL is debited for the invoice value and the sales tax collection is credited to the account of the respective State. The invoice is discounted by the HEI with Canara Bank, Secunderabad and the full amount is received by drawing hundi on M/s. Usha Sales Ltd., Delhi, for 10 days on the due date. USL makes payment to Canara Bank, Delhi and on receipt of such intimation the account of USL is credited in the factory of Hyderabad. There were no transfers from one depot to another depot. The depot has no option to choose its purchase. No open sales were conducted from the depots. All the sales were effected to different units of USL, whose names are printed in the respective invoices as buyers." The assessing officer has further observed: "Thus intimate nexus and conceivable link between the assessee and the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inter-State sales. It is further submitted that there was no firm commitment between the assessee and UIL at the time of movement of goods from the assessee's manufacturing unit to their godowns situated at different places in the country. It is further submitted that the assessing authority was not justified in relying on the letters of allocation issued by UIL as a contract of firm commitment for purchase of goods manufactured by the assessee. According to Shri Bagaria, the letters of allocation issued by UIL cannot be construed to be a contract of firm commitment to purchase the goods manufactured by the assessee and those letters of allocation were mere forecast of UIL's estimate of their requirements. It is further contended that there was no firm commitment on the part of UIL to purchase specific number of specified varieties of fans and for that matter the assessee had not allotted any specific number of specified varieties of fans in favour of UIL at the time the goods manufactured by the assessee were being transferred from their factory to their godowns. It is contended that the assessing authority is bound to examine each individual transaction and decide whether it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State". To make a sale as one in the course of inter-State trade or commerce, there must be an obligation, whether of the seller or the buyer to transport the goods outside the State and it may arise by reason of statute, contract between the parties or from mutual understanding or agreement between them or even from the nature of the transaction which linked the sale to such transportation such an obligation may be imposed expressly under the contract itself or impliedly by a mutual understanding. It is not necessary that in cases, there must be pieces of direct evidence showing such obligation in a written contract or oral agreement. Such obligations are inferable from circumstantial evidence. Section 6 of the Central Act which is the charging section, levies tax under the Central Act on all inter-State sales, determined as such under section 3 of the Central Act. Section 9 of the Central Act provides that the tax payable by any dealer under the Central Act on the sale of goods effected by him in the course of inter-State trade or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Act provides that if any dealer claims that he is not liable to pay tax under the Central Act in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal and not by reason of sale, then the burden of proving that the movement of goods was so occasioned shall be on the dealer. It also provides the mode of discharge of that burden of proof. What follows from a conjoint reading of these provisions is that every dealer is liable to pay tax under the Central Act on the sale of goods effected by him in the course of inter-State trade or commerce during the year of assessment. Where the Department takes advantage of the presumption under section 3(a) and/or to show that there has been a sale or purchase of goods in the course of inter-State trade or commerce and if the assessee disputes that there has been a sale or purchase of goods in the course of inter-State trade or commerce, then the assessee can rebut the presumption by filing declaration in form F under section 6A of the Central Act to prove that the movemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Usha sales shall be intimated by JE from time to time. The prices at which Usha Sales shall sell the agreement products to their agents/dealers shall be determined by them so however that Usha Sales make up on their purchases price shall not exceed: Sewing machines/accessories 10.00 Rs. 5 (per top) Fans 7.35% Component parts 13.35% The price so computed shall be maximum price and Usha Sales shall be free to sell at prices lower than the said maximum. (b) Consumer prices (except for hire purchase) sales shall not exceed the maximum authorized by JE from time to time. However, Usha Sales/their dealers/agents shall be free to charge prices lower than the said maximum. (c) Any sales tax/other tax payable may be charged additionally by Usha Sales. Freight/handling charges shall be reimbursed on an agreed basis. (d) In the event of any reduction prices by JE corresponding rebate shall be allowed on unsold stocks held by Usha Sales/their dealers/agents. Sales to third parties In case it is considered expedient by JE to supply/bill the goods directly to any of the Usha Sales dealer's agents against orders procured by Usha Sales make JE shall pay to Usha Sales the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as an independent principal. Clause (8) is very relevant for the purpose of this case. It obligates the assessee to make delivery of the products manufactured either to the UIL's nominees or in any one of the godowns of the assessee at the option of UIL. From the above clauses in the agreement, what can be inferred is that the assessee has undertaken to supply their manufactured products to UIL or to its nominees at the agreed price at any of the assessee's godowns at the option of UIL. A contract of sale of goods would be effective when a seller agrees to transfer the property in goods to the buyer for a price and that such a contract may be either absolute or conditional. If the transfer is in presenti, it is called a "sale"; but if the transfer is to take place at a future time and subject to some conditions to be fulfilled subsequently, the contract is called "an agreement to sell". When the time in the agreement to sell lapses or the conditions therein subject to which the property in goods is to be transferred are fulfilled, the "agreement to sell" becomes a "sale". Before we deal with the issues raised in the appeal, we will first notice some of the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranch office, who initiated the contract may not make the matter different. Such an interception by a known person on behalf of the seller is the delivery State and such person's activities prior to or after the implementation of the contract may not alter the position." In South India Viscose Ltd. v. State of Tamil Nadu [1981] 48 STC 232, this court observed that if there is a conceivable link between a contract of sale and the movement of goods from one State to another in order to discharge the obligation under the contract of sale, it must be held to be an inter-State sale and that character will not be changed on account of an interposition of an agent of the seller who may temporarily intercept the movement. In Union of India v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457, this court reiterated and approved the decision in Oil India Ltd. [1975] 35 STC 445 (SC) and held that if a contract of sale contains stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-State sale. But for the purposes of section 3(a) of the Act, it is not necessary that the contract of sale must itself provide for and cause the movement of goods or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the goods. But in the light of the settled propositions that the branches and head office constitute one single legal entity, it does not matter by whom the billing is done or to whom the payment is made by the customer". From the above decisions, the principle which emerges is when the sale or agreement for sale causes or has the effect of occasioning the movement of goods from one State to another, irrespective of whether the movement of goods is provided for in the contract of sale or not, or when the order is placed with any branch office or the head office which resulted in the movement of goods, irrespective of whether the property in the goods passed in one State or the other, if the effect of such a sale is to have the movement of goods from one State to another, an inter-State sale would ensue and would result in exigibility of tax under section 3(a) of the Central Act on the turnover of such transaction. It is only when the turnover relates to sale or purchase of goods during the course of inter-State trade or commerce that it would be taxable under the Central Act. The learned counsel Shri Bagaria mainly contends that there is nothing in the sales agreement, expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1981-82 under the Central Act, claimed exemption on a turnover of Rs. 7,88,13,639 towards stock transfer of Usha brand electric fans. The same was disallowed by the assessing officer and assessed to tax at 10 per cent in the absence of C declaration forms by classifying the transactions falling under section 3(a) of the Central Act. It is not in dispute that there is "sales agreement" between the parties which was entered into some time in the year 1979 and the same was to expire some time in the year 1984. Under this agreement, UIL had agreed to purchase the products manufactured by the assessee and sell it as an independent principal. The assessee has its godown in every State including Delhi. The UIL has also its divisional office in different names at every place wherever the assessee's godown is located. In pursuance of the sales agreement, UIL placed monthly indents on the assessee with instructions to dispatch the goods of given size and quantity to the named destination. Pursuant to such indents, the assessee dispatched the goods to its godowns to the given destination and sent goods dispatch intimation directly to the concerned UIL divisional office at the destina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulation or direction in the agreement for an inter-State movement of goods, if such movement is an incident of that agreement, or if the facts and circumstances of the case denote it, the conditions of section 3(a) would be satisfied. Shri Bagaria contends that the assessee has received only "allocations" in the nature of market or distribution forecasts and such allocations are neither in the nature of indents nor orders and the assessee never accepted such allocations letter sent by UIL. It is further submitted that except in few instances, the actual dispatches of the goods to its godowns never tallied with the allocations letter sent by UIL. Therefore, such allocations letter cannot be construed as "firm orders". Therefore, the transactions cannot be brought within the purview of inter-State trade or commerce to attract charging provisions under the Central Act. In our view, though the ultimate purchaser UIL placed orders for a particular quantity of goods to be supplied, the assessee did not supply the actual quantity indented for. We do not, however, think that this makes any difference to the application of section 3(a) of the Central Act. In our view, it does not matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted sales of those goods to consumers which would include UIL also. This argument is also noticed by the final fact-finding authority, namely, the Sales Tax Appellate Tribunal and has negatived the same by assigning cogent reasons. The Tribunal, after reappreciating the entire documents available on the record and also the modus operandi adopted by the assessee in its well considered order, has concluded that the so-called "forecasts" are nothing but requests made by UIL for supply of goods to meet the requirements of the consumers in various parts of the country. Though the said communication is termed as "forecasts", according to the Tribunal, they are nothing but firm orders placed by the UIL with the assessee for supply of particular type of goods and particular quantity pursuant to their understanding reflected in the "sales agreement", which is continuing one for the continuous supply of goods during the period of agreement which stretches over a period of five years, it is difficult to accept the submission of the learned senior counsel that the "sales agreement" is only for the purpose of purchasing of their goods and selling in different parts of the country by UIL whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority, in the instant case, after carefully considering the relevant clauses in the sales agreement and the voluminous correspondence between the assessee and the UIL, has given its finding that the transaction in question is pure and simple inter-State sales and falls within the purview of section 3(a) of the Central Act. This finding of fact has received the approval of the first appellate authority and the Sales Tax Appellate Tribunal which is the last fact-finding authority in the appeals filed by the assessee. The learned senior counsel also contended that the assessing officer is expected to look into each transaction in order to find out whether a completed sale had taken place which could be brought to tax under section 3(a) of the Central Act. Reliance is placed on the Constitution Bench decision of this court in the case of Tata Engineering and Locomotive Co. Ltd. [1970] 26 STC 354. We are bound by the view expressed by the Constitution Bench decision of this court. However, in the present case, the assessing officer has not just picked up a stray transaction to hold that the entire transaction for the entire period of assessment is inter-State sales, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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