TMI Blog2015 (4) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... It would be appropriate and fruitful to quote Section 3 of the CST Act, which is the bone of contention between the parties. Admittedly, the entire sale consideration on the basis of the so called lease agreement having supplied EGC to RPL on behalf of RIIL was received by the assessee as per the terms and conditions and no amount, over and above, was received or receivable in terms of the lease agreement in between the parties. The Tax Board, in the impugned order, has gone into the terms and conditions in between the two Reliance Companies vis-a-vis the assessee and it would be appropriate to observe that the terms and conditions specifically provided that the purchase order for the procurement of the EGC, to be provided on lease by the RIIL to RPL, would be given by RIIL (lessor) only to those suppliers of the EGC which would be selected by both i.e. the lessor and lessee on the basis of their mutual consultation and on such terms as were agreed to by and between them. It was not that entire purchases were required to be made from the assessee and there could be several suppliers but the supplier was also to be selected by lessor (RIIL) in consultation with RPL (lessee). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision petitions by the petitioner-assessee are directed against the order of the Rajasthan Tax Board dated 24/4/2003 for the assessment years 1999-2000 and 2000-2001 by which it decided the issue relating to freight in favour of the assesee and against the Revenue. On the issue relating to sale of Empty Gas Cylinders (for short, 'EGC') against the assessee to Reliance Industrial Infrastructure Limited (for short, 'RIIL') on the basis of a tripartite agreement by which on one hand the RIIL was purchaser (buyer) of the EGC. On the basis of the tripartite agreement, the cylinders were to be sent to Reliance Petroleum Limited (for short, 'RPL'). It has been the claim of the petitioner that the sales were made in the course of Inter State Lease transaction within the meaning of Section 3(a) of the Central Sales Tax Act (for short, 'CST Act'). It is the contention of the petitioner-assessee that the Inter State movement of goods was in pursuance of the lease agreement as goods were delivered to RPL (lessee) upon the instructions of RIIL (lessor) and since the assessee was a seller, therefore, the transaction was clearly in the nature of lease and as such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He contended that Section 3 defines movement of the goods from one State to another. He contended that there was a tripartite agreement in between the three companies namely; the petitioner on one hand, who was supplier of EGC; and on the other hand, RIIL, who was purchaser of the EGC who had a lease transaction with RPL and thus, even though the lease agreement may be in between two Reliance Companies but until and unless the petitioner-assessee was there, their agreement was incomplete. He contended that on the basis of instructions of RIIL, EGC were supplied to RPL. He contended that when the agreement is read as a whole, it provides that the petitioner-assessee supplied goods in pursuance of a lease agreement and assessee being a party to the transaction it becomes Inter State Lease Agreement and thus is not liable to pay tax under the CST Act. It was further contended that the purchase order placed by RIIL with the petitioner-assessee was in pursuance of the above lease agreement entered into by and between RIIL with RPL, who inter-se had entered into a lease agreement but both the purchase order and the lease agreement were integrally connected, mutually inter-dependent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the arguments advanced by counsel for the parties including the material available on record and the judgments on which reliance has been placed. 9.An interesting issue arise in the instant petitions. Admittedly, the assessee is only a supplier/seller of EGC to one RIIL/purchaser (buyer/lessor) who had an agreement of lease with one RPL (consignee/lessee) and agreement has been entered by the two Reliance Companies where certain lease money was required to be paid by the lessee RPL to lessor RIIL on the terms and conditions entered into by and between those two Reliance Companies. However, merely because the assessee has been shown to be a party who supplied the EGC in the lease agreement, in my view, cannot claim any benefit out of the two lease agreements which were basically in between RIIL and RPL Ltd.. It would be appropriate and fruitful to quote Section 3 of the CST Act, which is the bone of contention between the parties, which provides ad-infra:- 3.When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that independent of the lease agreement, mere transaction of sale could not have been possible because in the absence of the lease agreement, it is clear that there was no possibility for RIIL (lessor) to place the purchase order with the assessee. It further reveals that two contracts (i) contract of sale between the assessee and RIIL for supply of goods and (ii) contract of lease between RIIL and RPL for the leasing of the goods on mutually agreed terms were entered into. Though both these contracts were inter-connected in the sense that one could not have taken place without the other but in my view, the objectives of both these contracts were different. While the contract of sale aimed at purchasing goods from the assessee, the contract of lease provided for leasing the goods after procurement. Hence, both these contracts despite being mutually inter-dependent were exclusive in seeking the fulfillment of different objectives for which these were entered. The RIIL, in pursuance of the contract of sale, placed the order with the assessee for the supply of goods on behalf of the RPL (lessee) in compliance of which the assessee sent goods to RPL (lessor) after raising invoices in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been. Once, as aforesaid, the transaction, having come to a close after delivery as well as receipt of entire sale consideration, in my view, nothing remained to be performed by the assessee vis-a-vis two Reliance Companies and no right accrued to the assessee and it was simply an outsider and cannot be said to be beneficiary of an ongoing transaction in between the two Reliance Companies. The transaction is definitely a transaction of sale which was in the nature of inter-State Sales within the ambit of Section 3(a) of the CST Act. Having reproduced Section 3(a), herein above, two conditions are required to be fulfilled for taking any transaction of sale as an inter-State sale vis (i) there must be inter-State movement of the goods and (ii) the nature of such movement of goods must be occasioned by a contract of sale. 11.The Hon'ble Apex Court, in the case of M/s. Tata Iron and Steel Co. Ltd. Bombay Vs. S.R. Sarkar and others: (1960) 11 STC 655 held ad-infra:- A transaction of sale is subject to tax under the Central Sales Tax Act, 1956, on the completion of the sale, and a mere contract of sale is not a sale within the definition in section 2(g). A sale bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India V. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC). If the movement of the goods is because of a clause in the contract or as an incident of contract, the same shall be deemed to have taken place in the course of inter-State trade or commerce. In the transaction illustratively discussed by the Commissioner, the transport of goods from one State to another was an incident of the contract between the assessee and the lessee. The very hiring itself is the incident of the contract of sale, which occasioned the inter-state movement of the goods from Madras to Andhra Pradesh. Without this contract, the goods would not have moved out of Madras. This aspect we have already discussed while dealing with the question whether the purchase order and the lease agreement are separate or constitute one integral transaction. 14.On perusal of the aforesaid judgment as also the judgment of the Hon'ble Apex Court in the case of M/s. Tata Iron and Steel Co. Ltd. Bombay Vs. S.R. Sarkar and others (supra), in my view, the facts of the present case vis-a-vis I.T.C. Classic Finance and Services (supra) are squarely covered. In the aforesaid case I.T.C. Classic Finance and Services, purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered and the entire payment was received. 16.In the case of English Electric Co. of India Lt (supra) relied by the assessee it has been observed that Asha Metal Works of Bombay referred to as the Bombay buyer wrote to the Bombay branch of the appellant asking for lowest quotation of certain goods. The Madras branch which has the principal factory, and manufacturer of goods was written by the Bombay branch. The Madras branch wrote to the Bombay branch quoting the prices for Madras. The Bombay branch then wrote to the Bombay buyer that the price was for Madras and delivery would be ex-works Madras. The Bombay buyer thereupon placed the order with the Bombay branch and it was contended on behalf of the English Electric Co. of India Ltd. that the sale was at Bombay inasmuch as the Bombay buyer placed the firm order at Bombay, payment was at Bombay, railway receipt of the Bombay branch and the goods were to be delivered at Bombay and the question whether the sale was an inter-State sale or a sale at Bombay, the Honble Apex Court held that the steps taken from the beginning to the end by the Bombay branch in coordination with the Madras factory show that the Bombay branch was merely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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