TMI Blog2016 (8) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... ring activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. To bring a transaction with the scope of Section 3 of the CST Act, essentially there should be sale of goods and transport of these goods from one state to another as a result of, or as an integral part of sale. When the sale and the interstate movement of the goods are not interconnected, as there is no contractual obligation or other obligation to take the goods to another state or when there is no evidence that the transport of the goods to the other state was caused by the contract of the sale, there could be no interstate sale. In terms of the purchase order, dated 15.06.2000, the petitioner was directed to effect the supplies as per the specifications and subject to the approval of the buyer and the material to be delivered to their job worker at Ranipet. Thus, the contract of sale was completed upon delivery of the goods at Ranipet within the state of Tamil Nadu. The seller namely, the petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LL from their Mangalore office. The job worker is required to manufacture Acid Slurry from LAB and such product is stock transferred to the factory of HLL at Mangalore. Therefore, the question arose as to whether the petitioner can avail the concessional rate of tax on production of form-XVII declaration. As there appeared to be some controversy, the petitioner thought fit to seek for a clarification from the Commissioner under Section 28A of the TNGST Act, requesting to clarify as to whether the subject transaction is to be treated as a local sale or interstate sale. The Commissioner by clarification No.180/2000, dated 20.12.2000, informed the petitioner that they are not eligible to issue form-XVII declaration because the manufacture goods are not for sale by them in Tamil Nadu and LAB is taxable at 11% under residuary entry 69 in part B of the first schedule to the TNGST Act, as the commodity is delivered within Tamil Nadu. Once again, the petitioner addressed the Commissioner seeking clarification by letter dated 02.02.2001, explaining in detail about the subject transaction and reiterating that the delivery of the goods terminated at Ranipet, within Tamilnadu and the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by letter dated 09.09.2004, informed the petitioner that HLL, Mangalore, cannot make purchase of LAB against form-XVII declaration from the petitioner, though the job work was carried in Tamil Nadu by their job worker. It was further stated that as per the conditions stipulated in Section 3(3) of the TNGST Act, the registered dealers in Tamil Nadu alone can purchase goods for the purpose of manufacturing inside the State of Tamil Nadu. Accordingly, the petitioner's request to permit HLL, Mangalore, to purchase against form-XVII, from petitioner was not feasible of compliance. This communication dated 09.09.2004, is impugned in this Writ Petition. 4. Mr.N.Prasad, learned counsel for the petitioner, after elaborately referring to the facts and nature of transaction done by the petitioner, submitted that the delivery of LAB was made by the petitioner within the State of Tamil Nadu to the job worker of HLL, in other words, the delivery was effected inside the State. The product which was moved by HLL from the factory of the job worker is Acid Slurry, which is commercially different from LAB. Thus, there is delivery and consumption of LAB within the State of Tamil Nadu and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Chennai, the impugned transaction cannot be treated as a local sale and the petitioner will not be eligible for concessional rate of tax at 3% against form-XVII, declaration. Referring to sub-section 3 of Section 3 of the TNGST Act, it is submitted that the provision clearly stipulates that there should be a manufacture inside the state for sale in order to avail concessional rate of tax at 3%. Inasmuch as the Acid Slurry converted by job worker at Ranipet, is stock transferred to Mangalore for further processing, the manufacturing of the final product was done out side the state, Section 3(3) of the TNGST Act, is not applicable to the transaction. Therefore, it is submitted that the manufacturing activity having not been completely done inside the state, the clarification issued by the Commissioner is perfectly valid. Further, it is submitted that the contention of the petitioner that HLL had paid 1% for stock transferring the manufactured goods outside the State in terms of Section 3(4) of the TNGST Act is irrelevant in as much as partially process goods alone were sent to Mangalore and not manufactured good namely detergents. With the above submission, the learned counsel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., shall be at the rate of rate of only 3% on the turnover relating to such sale. Thus, for a dealer to be entitled to the benefit under sub-section (3) of Section 3, he has to show that the sale of goods to another dealer was for the use by the latter in the manufacture inside the state for sale. 11. As mentioned above, the undisputed fact is that the petitioner had sold LAB to HLL based on a purchase order placed from Mangalore with specific instruction to deliver the product at a factory in Ranipet. The specific stand of the HLL is that the factory at Ranipet is their job worker. The Revenue has not disputed this stand taken by the HLL as well as the petitioner. In the absence of any dispute, it goes without saying that the sale was effected to HLL at their factory at Ranipet, since the factory at Ranipet was their job worker. If such is the undisputed factual position relating to the nature of transaction, all that is required to seen was whether there was manufacture inside the state for sale. 12. Undoubtedly, the products sold by the petitioner was not the product which was moved out of the Ranipet factory on stock transfer to HLL Mangalore. Thus, the factory at Rani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerges upon manufacture namely Acid Slurry is infact, a final product in such process though in the chain of manufacturing activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. 16. Having come to such a conclusion, it has to be seen as to whether the second respondent while issuing the impugned clarification, dated 09.09.2004, was justified in rejecting the petitioner's request to treat the transaction against form-XVII declaration. The reasons assigned in the impugned clarification is that under Section 3(3) of the TNGST Act, registered dealers in Tamil Nadu alone can purchase goods for the purpose of manufacturing inside the State of Tamil Nadu and hence, the request of the petitioner to permit HLL, Mangalore, to purchase against form-XVII from the petitioner is not feasible of compliance. Thus, the second respondent states that for availing concessional rate of tax under Section 3(3) of the TNGST Act, the first pre-requisite is the purchaser should be a regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase order, dated 15.06.2000, the petitioner was directed to effect the supplies as per the specifications and subject to the approval of the buyer and the material to be delivered to their job worker at Ranipet. Thus, the contract of sale was completed upon delivery of the goods at Ranipet within the state of Tamil Nadu. The seller namely, the petitioner had no contractual or other obligation to take the goods to another State nor there is any evidence produced by the Revenue in this regard. Thus, when the transaction done by the petitioner is factually not disputed and the transaction/sale concluded within the State at Ranipet, which is an additional place of business of HLL, undoubtedly, the transaction is a intrastate sale and the petitioner is entitled to avail concessional rate of tax on submission of form-XVII declaration. 20. In the light of the above discussion, the Writ Petition is allowed and the impugned orders are quashed and the first respondent is directed to accept the form-XVII, issued by HLL, on the sale of delivery of LAB to the job worker's factory at Ranipet and complete the assessment for the relevant year in accordance with law. No costs. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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