TMI Blog2008 (1) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of turnover of ₹ 3,96,32,784 on account of subsequent sale as contemplated under sub-section (2) of section 6 of the CST Act.This claim of the dealer having not been accepted in the assessment order passed under the CST Act, the same has been treated as intra-State sale in the reassessment order passed under section 12(8) of the OST Act by the assessing officer and the same has been accepted by the first and second appellate authorities after detailed factual analysis. In the circumstances, imposition of penalty of ₹ 10,00,000 under section 12(8) of the OST Act is not justified. In conclusion, we answer question No. (i) in affirmative in favour of Revenue, question No. (ii) in affirmative in favour of the Revenue and question No. (iii) in affirmative in favour of dealer. The tax revision is allowed to the aforesaid extent. - - - - - Dated:- 10-1-2008 - GANGULY A.K. C.J. AND MAHAPATRA B.N. , JJ. B.N. MAHAPATRA J. In this tax revision petition, the petitioner has raised several questions of law, but at the time of hearing, the same are confined to the following three modified questions: (i) Whether, in the facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting assessment under section 12(4) of the OST Act had excluded the sales turnover of Rs. 3,96,32,784 from the total turnover and determined gross turnover at Rs. 3,53,42,033.07 and raised a demand of Rs. 13,18,351 against which the petitioner preferred first appeal. The first appellate authority allowed the appeal by reducing the demand vide its order dated July 27, 1996. While completing the assessment under the CST Act, the assessing officer disallowed the dealer's claim of exemption under section 6(2) of the CST Act. Against the said order the dealer preferred first appeal which is still pending. On the very same day of passing of the assessment order under the CST Act, i.e., October 11, 1995, the assessing officer issued notice under section 12(8) of the OST Act for reopening of the assessment under the OST Act. At this stage, the dealer objected to reopening of the assessment on the point of maintainability on the ground that a first appeal against the order passed under section 12(4) of the OST Act was pending before the first appellate authority and this court in O.J.C. No. 7632 of 1992 directed to consider the objection on the maintainability point. However, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and not a works contract as the goods were sold to the OPGC before they were being used in course of works contract. He treated the sale as an intra-State sale. He levied tax at 12 per cent under the OST Act treating the sale as goods qua goods and not related in any way to the works contract. With regard to the agreement with NTPC dated November 29, 1999 the assessing officer found that the agreement was in two parts one is for supply of air-conditioning package, and another for erection and installation of power project. In pursuance of the said contract, the dealer placed orders with HJ manufacturer at Bombay for supply of air-conditioning package. In this transaction also, the dealer claimed deduction of Rs. 52,10,444.09 towards supply of air-conditioners as subsequent sale in course of inter-State trade within the meaning of section 6(2) of the CST Act. The claim of the dealer is that it has sold those goods to NTPC by way of transfer of documents of title over the goods when the goods were in transit, which afterwards were again supplied to it by NTPC for use in course of execution of works contract. This claim of the dealer was rejected by the assessing officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sustainable as no reason of reopening has been indicated in the notice and the same is based on mere change of opinion of the assessing officer. He further submitted that the finding of the forums below that the transactions of the dealer with OPGC and NTPC were in the nature of intra-State sale is also not correct and that in any event imposition of penalty under section 12(8) of the OST Act is uncalled for. The learned counsel for the State on the other hand supported the impugned order. In the background of these facts, three questions as formulated in paragraph 1 above fall for determination before this court. With regard to question No. (i), the learned counsel for the petitioner submitted that no reason has been assigned in the notice issued under section 12(8) of the OST Act and, therefore, reopening of the assessment is not justifiable. He further submitted that the dealer in his annual revised return disclosed the entire turnover at Rs. 7,49,74,817.24 and claimed a deduction of Rs. 3,96,32,784.17 on account of turnover under the CST Act. Since the assessing officer allowed such deduction while completing assessment under section 12(4) of the OST Act, his subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 199394 fixing the date to November 14, 1995. So I find that there was a pre-existing reason for initiation of proceeding under this sub-section. At page 11, in paragraph 7, the Tribunal further held as follows: . . . I have gone through the assessment record, and found that on November 14, 1995 the learned STO in his orders in the order sheet, mentioned that his earlier orders in the order-sheet dated October 11, 1995 which provide reasons for initiation of proceeding under section 12(8), were read-over and explained to the representative of the dealer-assessee on the day, and there was also a discussion between the learned STO and the representative regarding such reopening of the case. The fact on record proves that the reasons for reopening the case were duly communicated to the dealer before the assessment order was passed. Thus I find that all the technicalities required to be fulfilled before initiation and finalisation of proceeding under section 12(8) was duly fulfilled in this case. So the objection raised in the grounds of appeal in this regard is not sustainable. Moreover, in the notice issued under section 12(8) of the OST Act, the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CST Act. On the other hand, as stated above, during the earlier assessment proceeding under section 12(4) of the OST Act, representation was made by the dealer to produce the supporting documentary evidence relating to its claim for exemption under sub-section (2) of section 6 of the CST Act for verification of the assessing officer during the assessment stage under the CST Act for the period in question. Thus the subsequent assessment proceeding has not been initiated under section 12(8) of the OST Act on change of opinion of the assessing officer. In view of the above, we answer the question (i) in the affirmative and in favour of Revenue. With regard to question No. (ii), the learned counsel for the petitioner strenuously argued that the forums below have erred in law in holding that the sales effected by the dealer to OPGC and NTPC are not in course of inter-State sale and do not qualify for exemption under section 6(2) of the CST Act, but are intra-State sales. In support of his contention he referred to some of the clauses of the agreement entered into with the OPGC. Referring to clause 7 of the purchase order dated January 4, 1992, at page 122 of the paper book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CST Act and decision of the apex court, have misinterpreted the same. He emphasised that the State from which the movement of goods takes place is a proper State to levy tax and collect tax. In support of his above contentions the learned counsel for the petitioner relied on sections 3 and 6(2) of the CST Act and some judicial pronouncements. The learned counsel appearing on behalf of the Revenue submitted that there were two sales involved in the transaction between the dealer and the contractees. According to him, the first inter-State sale is a sale as contemplated under section 3(a) of the CST Act which completed as and when the petitioner received the goods moved from the outside State and the second sale is in Orissa by transfer of the documents by the petitioner to the contractees after receipt of the goods in Orissa and do not fall under section 6(2) of the CST Act. In support of his contention learned counsel for the Revenue referred to the finding of the Tribunal in paragraph 12 of its order and relied on the decision of the honourable Madras High Court in the case of Sundaram Industries v. State of Tamil Nadu reported in [1992] 86 STC 554. Assailing the above cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter of inter-State sale or purchase. Sub-section (2) of section 6 of the Central Sales Tax Act, reads as follows: 6. Liability to tax on inter-State sales. (1) . . . (1A) . . . (2) Notwithstanding anything contained in sub-section (1) or subsection (1A), 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 State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods, (a) to the Government, or (b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit, (a) a certificate duly filled and signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption from payment of CST as provided under section 6(2) of the CST Act. In the above case, the question before the honourable High Court was whether for the purpose of claiming exemption in respect of sale in transit, the assessees were obliged under the provisions of the CST Act and the Rules made thereunder to produce any other documents in addition to E-I and C declaration forms. The honourable High Court categorically held that the subsequent sale in course of inter-State movement of the goods pursuant to an inter-State purchase has to be granted exemption as provided under section 6(2) of the CST Act on production of E-I and C declaration forms and the learned assessing officer is not justified in requiring the dealer to produce any secondary evidence to substantiate its claim for exemption. Since in that case the subsequent sale in course of inter-State movement of goods pursuant to one inter-State purchase was not in dispute, the honourable court has rightly held that if the subsequent sale is effected in course of inter-State movement of goods pursuant to one inter-State purchase, the exemption as provided under section 6(2) of the CST Act has to be granted on produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, according to the Revenue, tax is not levied on any inter-State sale under the OST Act in the State of Orissa. The first sales are from outside the State of Orissa into the State of Orissa and no tax has been levied on these sales in the State of Orissa. What is taxed in the State of Orissa is the subsequent sale as effected by the dealer to the contractees after completion of the first sale in the State of Orissa. Relying on the judgment of the Supreme Court in the case of Bharat Heavy Electricals Limited v. Union of India reported in [1996] 102 STC 373, it is submitted that only the State from which movement of goods took place is the proper State to levy and collect tax under the CST Act. As stated above, according to the Revenue, no tax has been levied on interState sale in the State of Orissa but it is levied on intra-State sale. The learned counsel appearing for the Revenue relied on a decision of the Madras High Court in the case of Sundaram Industries [1992] 86 STC 554. In this case the honourable High Court held that there was no sale which could be said to have taken place during the movement of goods and that the transaction was taxable under the Tam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods either as the manager from the side of the dealer-assessee or on the agent from the side of M/s. O.P.G.C. Ltd. or M/s. N.T.P.C. Ltd. So his taking delivery of goods is not determinative whether or not the documents of title to goods was transferred while the goods were still in transit, so that the transaction cannot be treated as one in course of inter-State trade, for he might take delivery of goods as the manager of the dealer-assessee. So what is determinative of whether it is a sale in course of inter-State trade is the priority of events between the transfer of documents of title to the goods and taking delivery of goods. If the transfer of documents of title to goods is an event prior to the event of taking delivery of goods the sale is one in course of inter-State trade. The dealer-assessee is making a claim of exemption on the ground that the sale is one in course of inter-State trade. So the onus is upon him to prove that transfer of documents of title to the goods is earlier than taking delivery of goods. The dealer-assessee could have discharged the onus by showing the date of transfer of documents of title to the goods and the date of taking delivery of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer has assessed the dealer's escaped turnover and, in view of the same, penalty of Rs. 10,00,000 under section 12(8) of the OST Act has been rightly imposed by the assessing officer. The assessing officer has imposed penalty of Rs. 10,00,000 with the following observation at page 23 of his order: Further, the dealer-company is visited with penalty of Rs. 10,00,000 under section 12(8) of the OST Act. While dealing with levy of penalty under section 12(8) of the OST Act, the first appellate authority deleted the imposition of penalty with the following finding at page 19 of his order: The penalty imposed under section 12(8) of the OST Act is deleted, because there is no suppression of turnover. In the second appeal, the learned Tribunal even though restored the order of the learned STO has not specifically dealt with the levy of penalty under section 12(8) of the OST Act by the learned STO. As it appears, the assessing officer has imposed penalty of Rs. 10,00,000 under section 12(8) of the OST Act without assigning any reason for imposition of such penalty. The Tribunal has also not dealt with this matter while confirming the assessment order. It is the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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