TMI Blog1997 (8) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... Department in auction on as is where is basis? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the penalty under Explanation (1) to clause (c) to sub-section (2) of section 36 of the Bombay Sales Tax Act, 1959? 2.. The facts giving rise to this reference, briefly stated, are as follows: The assessee, M/s. Nivea Time, is a manufacturer and seller of wrist watches and spare parts thereof. It has a factory at Daman where watches are manufactured. Its head office is also situated at Daman. The assessee has a branch at Kalbadevi, Bombay which is registered both under the Bombay Sales Tax Act, 1959 (Bombay Act) and the Central Sales Tax Act, 1956 (Central Act). For the period April 1, 1985 to March 31, 1986, the assessee was assessed under section 33(6) of the Bombay Act by the Sales Tax Officer, Bombay, by his order of assessment dated September 21, 1987. In course of the assessment proceedings, the Sales Tax Officer took note of a communication from the Enforcement Branch of the Sales Tax Department regarding purchases of watch movements by the assessee from the Customs Department in Bombay under four separate bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased in the auction occasioned the movement thereof from Bombay to Daman which is a Union Territory. On the basis of these materials, it was contended that the purchases made by the assessee from the customs authorities in the auction held at Bombay were inter-State purchases and hence section 13 of the Bombay Act was not attracted. The Assistant Commissioner did not accept the above contention of the assessee as he was of the opinion that the delivery of the watch movements having been taken by the assessee from the Customs Collectorate at Bombay, the purchases in question could not be held to be inter-State purchases. The Assistant Commissioner therefore dismissed the appeal of the assessee and confirmed the order of the Sales Tax Officer. 4.. Aggrieved by the order of the Assistant Commissioner, the assessee appealed to the Maharashtra Sales Tax Tribunal (Tribunal). Before the Tribunal, the assessee contended that the purchases made by it having occasioned the movement of goods from one State to another, i.e., from Maharashtra to Daman, the purchases in question were inter-State purchases within the meaning of section 3 of the Central Act. The assessee also pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of law arising out of its order to this Court for opinion. Hence this reference. 5.. We have heard the learned counsel for the parties. The real controversy in this case is whether the purchases of watch movements by the assessee from the Customs Collectorate in the auction held at Bombay were intra-State purchases or inter-State purchases because if they are held to be inter-State purchases, section 13 of the Bombay Act would not be attracted. Mr. R.V. Desai, learned counsel for the Revenue, submitted before us that the purchases of watch movements by the assessee from the Customs Collectorate at Bombay were intra-State purchases because the sale and purchase took place in Bombay and the property in the goods also passed to the assessee in Bombay. According to him, subsequent movement of the goods from Bombay to Daman would not alter this position. Mr. J.K. Sheth, learned counsel for the assessee, on the other hand, contended that the approach of the revenue was wholly erroneous. According to him, it was clear from the facts of the case that the purchases of watch movements by the assessee in the auction in Bombay occasioned the movement of goods from one State to other, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) the goods must actually be moved from one State to another; and (iii) the sale and movement of the goods must be part of the same transaction. The word occasions is used as a verb and means to cause or to be the immediate cause of. There must exist a direct nexus between the sale and the movement of goods from one State to another. In other words, the movement should be an incident of and necessitated by the contract of sale and be inter-linked with the sale of goods. [See Kelvinator of India Ltd. v. State of Haryana [1973] 32 STC 629 (SC)]. It is not necessary for a sale to be an inter-State sale that the covenant regarding inter-State movement must be specified in the contract itself. It would be enough if the movement was in pursuance of or incidental to the contract of sale. Similarly, if the movement of goods is the result of contract and is an incident to the agreement between the parties, the transaction will remain an inter-State one no matter in which State the delivery of goods is taken by the purchaser. In other words, the question whether it is an inter-State sale or intra-State sale, does not depend upon the circumstances as to in which State the property in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission and the Corporation. The State of Assam has lawfully levied the Central sales tax on the petitioner." 12.. To the same effect is the decision of the Supreme Court in English Electric Company of India Ltd. v. Deputy Commercial Tax Officer [1976] 38 STC 475. In this case also, it was observed: "When the movement of goods from one State to another is an incident of the contract it is a sale in the course of inter-State sale. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale." I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Customs Department in the name of the Bombay office of the assessee and (ii) the property in the goods passed to the assessee in Bombay. 15.. It is clear from the various decisions of the Supreme Court discussed above that the approach of the Sales Tax Officer was erroneous and the conclusion arrived at on that basis is not tenable. As stated above, it is not material for deciding whether a sale or purchase in inter-State or not as to in which State the property in the goods passes. What is decisive is whether the sale or purchase is one which occasions the movement of goods from one State to another. Applying this test, it is clear that the purchases in question are inter-State purchases and no purchase tax is exigible thereon under section 13 of the Bombay Act. That being so, the Tribunal was justified in this case in holding that the purchases in question were inter-State purchases falling under section 3(a) of the Central Sales Tax Act, 1956 and no purchase tax was leviable under section 13 of the Bombay Sales Tax Act. 16.. Accordingly, we answer question Nos. (1) and (2) in the affirmative and in favour of the assessee. In view of the above, we answer question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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