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2017 (1) TMI 746 - BOMBAY HIGH COURT

2017 (1) TMI 746 - BOMBAY HIGH COURT - TMI - Validity of assessment order - situs of the inter-State sale - liability of the dealer to pay tax to a particular State - orders for the supply of Brahmos Missiles are from the Defence Ministry to the head office at Delhi. Accordingly, the components are imported from Russia and stored at Nagpur. As per the delivery schedule, the components are transferred to Hyderabad works for the purpose of job work of assembly and fixing on the SKD articles. The s .....

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of Rule 16B of the Central Excise Rules - the understanding of the assessing officer is that the petitioners have attempted to establish that the movement of goods from Hyderabad to Nagpur is in accordance with the contract for supply of Combat Missiles to the Armed Forces. - Held that: - The assessing officer holds that the movement of semi finished goods from Hyderabad to Nagpur cannot be construed as a mere stop over in the inter-State movement as projected by the petitioners/dealer. The .....

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essment order has been passed. - There is a fundamental error, in the understanding of the assessing officer, of the provisions of the Central Sales Tax Act, 1956. We had to elaborately analyse the provisions only for clearing certain doubts of the authorities, particularly in the State of Maharashtra. They have failed to notice the salient features of the Central Sales Tax Act, 1956. In our view, the understanding of the assessing officer that it is the movement of finished goods, which wou .....

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commerce. - The movement of goods has been made pursuant to an agreement of sale with the President of India. The Ministry of Defence receives the missiles for use in times of war and also for training. Once the matter is covered by the judgment of the Hon'ble Supreme Court of India and noted above, then, we do not think that any other view is possible. - Once the Hon'ble Supreme Court of India [1996 (4) TMI 419 - SUPREME COURT OF INDIA] has clarified that this is not a tax which could b .....

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it at Hyderabad. These missiles, only for warhead integration, are brought to Nagpur. The issue raised was that without warhead integration, the missile is not complete and cannot be used to target any particular place or point. The argument was that the components imported from Russia are brought to Nagpur, but the Revenue could not prove that the entire missile is manufactured at Nagpur. That the unit at Hyderabad assembles these components brought from Russia and makes a missile. Once the mis .....

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tenable in law, we do not think that the writ petition cannot be entertained. There may be remedies available to challenge the assessment order, but it is not that there is any absolute bar to entertain a writ petition under Article 226 of the Constitution of India against an assessment order. Once that assessment order is found to be vitiated in law and the assessing officer exceeding his powers, authority and jurisdiction, then, in the absence of a factual dispute, a writ petition would lie. I .....

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Leave to amend the writ petition by incorporating the proposed/draft amendment is granted. We are of the view that the amended paras do not raise any new factual issue. Therefore, the writ petition can be amended in terms of the draft amendment. For the reasons indicated hereinafter, we do not deem it necessary to go into the pleas of both sides on these amended paragraphs. 3. Rule. Respondents waive service. 4. By this writ petition under Article 226 of the Constitution of India, the petitione .....

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elopment Organisation (hereinafter referred to as the DRDO ) and NPO Mashinostroeniya - a State Unitary Enterprise incorporated and registered under the Russian Federation's Legislation (hereinafter referred to as the NPOM ). The petitioner has been established for the purpose of design, development, production and sale of Brahmos Cruise Missile weapon system. The DRDO has contributed 50.50% of the equity capital and NPOM has contributed 49.50% of the equity capital in the above joint ventur .....

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, the petitioner has entered into contracts and supplements with NPOM, joint venture partner for different configuration of missiles and various other Indian industry partners. Within the purview of the inter-Government agreement dated 12th February, 1998, NPOM and the petitioner shall have equal ownership on industrial and/or intellectual property, including inventions, industrial designs/models and other scientific and technical results on know-how, information etc., acquired by them in the co .....

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m 2007-08. During the interregnum period of 2001-08, the petitioner has been importing fully integrated missiles from its joint venture partner, namely, NPOM and has been effecting sales of the same to the Indian Armed Forces. Consequent on the completion of the manufacturing facility in the year 2007-08, the petitioner has been importing missiles in Semi-Knocked Condition (SKD), assembling them with certain bought out items in the erstwhile United State of Andhra Pradesh and has been effecting .....

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wave. 12. Since the Warhead is an explosive, used in missiles manufactured by the petitioner, the same is covered by certificate issued by the Centre for Fire Explosive and Environmental Safety (CFEES) which was established in the year 1992, which emphasises the key role of services coming under the Armament cluster of Defense Research Laboratory. It functions as Defense Establishment for Fire, Explosive and Environment Safety. It is the repository of expertise in the field of fire services, ex .....

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er company at Hyderabad under the Indian Explosives Act, 1884, as the manufacturing unit located in Hyderabad is in civilian area and if the said item explodes, it would damage the surrounding civilian establishments. In view of the above, the combat missiles fitted with warhead cannot be brought into the factory for the purpose of storage and sale thereon to the Indian Armed Forces. The Petitioner is having its branch located at Bothili village, Butibori Taluka, Nagpur District, in the State of .....

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oned by reason of transfer of such goods is not by reason of a sale and that the goods are meant for storage. 15. The Combat missile which is manufactured by the petitioner at its Hyderabad unit which is complete in all respects except with warhead is sent to Nagpur unit for the purpose of integration of warhead and subsequently dispatched to the Indian Armed Forces from Nagpur as directed by the Hyderabad office. 16. The process of dispatch is initiated by the Hyderabad branch by sending the ma .....

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a job work challan and impose such conditions including the manner in which duty, if leviable is to be paid, allow final products to be cleared from the premises of the job worker. It is in exercise of this power the Commissioner of Customs and Central Excise, Hyderabad - II, issued permission to the petitioner's Hyderabad branch to send fully finished missile without warhead to the job worker i.e. the petitioner's branch situated at Bothli, Butibori, Nagpur, and allowed job worked miss .....

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number, serial numbers of the packages kept ready for dispatch. 19. The petitioner has been awarded several contracts by the President of India on behalf of the Government of India for the supply of BRAHMOS Missiles and Associated Systems to the Indian Armed Forces. One of the contracts is contract No.100/DSR/C/05-06/Brahmos System dated 14-11-2005 for the supply and commissioning of BRAHMOS Cruise Missiles and Associated on Board Systems for SNF's Ranvir and Ranvijay, missile documentation, .....

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₹ 8033,31,17,000/-. 20. As all the sales have been effected from the Petitioner's manufacturing unit located at Hyderabad and in view of the peculiarity and sensitivity of the goods involved, the missile completed in all respects had been despatched to its Nagpur unit for warhead integration and with clear subsequent instructions by PDI-JRI Program Note to despatch the said missiles after warhead integration to the concerned unit of Indian Armed Forces. Till such time the Nagpur branc .....

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elating to the first contract, the petitioner charged and collected APVAT @ 14.5% and paid the same to its assessing authority namely the Assistant Commissioner (CT) (LTU), Saroornagar Division, Hyderabad (earlier united State of Andhra Pradesh), the third respondent herein. 21. Rule 16B of the Central Excise Rules 2002 deals with Special Procedure for removal of semi-finished goods for certain puroses. Sub-rule (6) of Rule 4 empowers the Commissioner to permit a manufacturer of the final produc .....

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owed the fully integrated Missiles to be cleared from Nagpur. 22. The Assistant commissioner (CT(LTU), Saroornagar Division, Hyderabad, the third respondent herein who is the assessing authority of the petitioner's unit at Hyderabad has passed Assessment of Value Added Tax in Form VAT 305, for the year 2012-13, by his proceedings dated 22-12-2014. 23. The petitioner questioning the above assessment order, filed Writ Petition No.2166 of 2015 before the Hon'ble High Court at Hyderabad, for .....

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ice dated 20-5-2015, for the assessment prior 2012-13 contending that the missile components are stored at Nagpur and the missile components are integrated into semi-finished state at Hyderabad and are sent to Nagpur unit for job work challan as per Rule 16 B of the Central Excise Rules for the final stage of warhead integration and the excise clearance is done from Nagpur and therefore that the fully finished ready to sue Combat Missiles are despatched from Nagpur to the customers and therefore .....

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the despatch note i.e. PDI-JRI Programme (Pre Delivery Inspection - Joint Receipt Inspection) from Hyderabad upon completion of job work. The petitioner also relied on Rule 16 B of the Central Excise Rules 2002, which empowers the Commissioner to permit a principal manufacturer of the final product to send the inputs / partially processed inputs / semi-finished goods to a job worker and impose such conditions including the manner in which duty, if leviable, is to be paid, allow final products to .....

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tioned. According to the Trade Notice, the job worker after completion of the warhead integration, should send the duplicate copy of the challan to the principal manufacturer (Brahmos Hyderabad Unit), mentioning the batch numbers, serial numbers of the packages kept ready for dispatch. 26. The petitioners further submit that they submitted a further reply dated 29th July, 2015 to respondent no. 5, duly informing the pendency of Writ Petition No. 2166 of 2015 before the High Court of Judicature a .....

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that the final product was appropriated at Nagpur in the form of Combat Missile as intended in the contract entered with Indian Armed Forces is dispatched from Nagpur to the customer after the pre-delivery inspection. Accordingly, the said authority determined the gross turnover of sales amounting to ₹ 1237,48,48,492/- from which the inter-State branch transfer of ₹ 441,89,97,934/- and ₹ 100,75,09,459/- representing the tax paid under theCST Act, 1956 in the State of erstwhile .....

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etitioners further submit that while arriving at the inter-State sales turnover of ₹ 694,83,41,099/-, the assessing authority has erroneously included an amount of ₹ 109,08,26,697/-, which is the sum total of price of a Practice Missile amounting to ₹ 11,60,00,000/- and price of a Training Missile amounting to ₹ 22,75,71,697/- and price of three Combat Missiles which were imported from the petitioners' joint venture partner, namely NPOM amounting to ₹ 74,72,55,0 .....

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ted as such, are not marketable. They are meant for the use by the Department for the safety and security of the country. It is, therefore, clear that though the Government of India places an order for the said missiles, the transactions cannot be treated as a normal sale. Thus, the sale of missiles to the Indian Armed Forces is not exigible to tax. Since the missiles are procured, assembled and delivered to Indian Armed Forces pursuant to the specifications by the Union of India, then, the impu .....

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for assembling the missiles. Warhead at all times remains at Nagpur facility only. Mr. Sridharan has explained to us as to how a missile is assembled and in a very detailed manner and which takes approximately three to four weeks. The missiles assembled and canistered at Hyderabad facility are complete in all respects. In other words, the assembled missile has its own battery, propulsion system and laser guide etc. The completely assembled missile has its own destructive power due to the kinetic .....

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idharan has pointed out orally as also by a written note as to how after the missile is brought for fitment of warhead that insertion or fitment is done within a period of three to four days. After re-canistering, testing is undertaken on the missile, which lasts for three to four days. This re-canistered missile has a life span of approximately 10 years. Mr. Sridharan submits that out of the total missiles assembled at the Hyderabad facility, about 15% of the missiles are practice missiles, whi .....

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st of the warhead procured is approximately 65 lakhs, namely, 2.6% of the total cost of the missile. After explaining the process of despatch of the missile, Mr. Sridharan would submit that as all the sales have been effected from the Petitioners' manufacturing unit located at Hyderabad and in view of the peculiarity and sensitivity of the goods involved, the missile completed in all respects had been dispatched to its Nagpur unit for warhead integration and with clear subsequent instruction .....

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Hyderabad, (earlier united State of Andhra Pradesh). However, in respect of Warhead integrated Combat Missiles supplied to the Indian Navy Unit located at Vishakhapatnam, relating to the second contract, the Petitioner charged and collected APVAT @ 14.5% and paid the same to its assessing authority namely the Assistant Commissioner (Ct) (LTU), Saroornagar, Division, Hyderabad (earlier united State of Andhra Pradesh), the third respondent herein. There is no dispute with respect to the same. The .....

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o such agreement, Brahmos assembles the missile in Hyderabad. The Petitioner further submits that, due to the reason of the Hyderabad unit being situated in a civilian area, cainstered missile is transported to the Nagpur unit of the Petitioner for insertion of warhead. 36. Mr. Sridharan submits that, in the present facts of case, agreement for sale of missile has been entered into before manufacturing of missiles. Only pursuant to such agreement of sales, the Petitioner has assembled the goods .....

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l squarely fall within the ambit of inter-state sales. 38. Alternatively, Mr. Sridharan submits that the transaction between BrahMos and Ministry of Defense shall not fall within the purview of sales. The Petitioner submits that sale means transfer of general property in goods. In the present case, the property in goods has already been vested in the Government of India. The Petitioner has acted in the capacity of agent for the purpose of assembly of missiles and warheads. In other words, the im .....

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ndia. 40. By placing reliance on the aforesaid decision, Mr. Sridharan submits that the transaction does not attract any further levy. 41. Mr. Sridharan has relied upon the following decisions in support of the above contentions:- (i) Commissioner of Commercial Taxes vs. Hindustan Aeronautics Ltd., 1972(29) STC 438 (ii) Hindustan Aeronautics Ltd. vs. State of Orissa, 1984(55) STC 327. (iii) Shafeeq Shameem and Co. and Anr. vs. The state of Andhra Pradesh, 1964(15) STC 828. (iv) State of Uttar Pr .....

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(1977) 39 STC 340. (x) Tata Iron and Steel Co. Ltd. vs. S. R. Sarkar, AIR 1961 SC 65. (xi) Indure Limited and Anr. vs. Commercial Tax Officer and Ors., (2010) 9 SCC 461. (xii) Oil India Ltd. vs. The Superintendent of Taxes and Ors. (1975) 1 SCC 733. (xiii) Union of India and Anr. vs. M/s. K. G. Khosla and Co. Ltd. and Ors., (1979) 2 SCC 242. (xiv) Sahney Steel and press Works Limited and Anr. vs. Commercial Tax Officer and Ors., (1985) 4 SCC 173. (xv) Deputy Commissioner of Agricultural Income .....

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nges an assessment order, is not maintainable. He would submit that there are multiple remedies provided by the Maharashtra Value Added Tax Act, 2002/the Central Sales Tax Act, 1956 to challenge the impugned order and therefore, this court should dismiss the writ petition, on the ground of availability of alternate and equally efficacious remedy. Thirdly, he would submit that there are factual disputes and which cannot be decided in writ jurisdiction. This is not a case where any substantial que .....

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the movement of goods from Hyderabad to Nagpur to be in accordance with the contracts for supply of Combat Missiles to the Armed Forces and further that semi finished goods were transferred to Nagpur just for a finishing or a job work of warhead integration, yet, what has been discovered from their own records is that all the major components of missiles are imported and stored at Nagpur after their import from Russia. They are moved from Nagpur to Hyderabad for assembly as semi finished missile .....

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ied to the Defence Forces has occasioned from the State of Maharashtra. Therefore, Maharashtra is the appropriate State for the purpose of levy and collection of the Central Sales Tax of the transaction. That is how the dealer is assessed by considering the despatches of finished goods as sales from Nagpur. Mr.Sonpal has relied upon this factual aspect to submit that if the rest of the work and rather major one is carried out in the State of Maharashtra, then, this assessment order is in accorda .....

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it should be dismissed. Mr. Sonpal has placed reliance upon the judgment of the Hon'ble Andhra Pradesh High Court in the case of Bharat Electronics Limited vs. Deputy Commissioner (CT), No. II Division, Vijaywada and Anr. (2011) 46 VST 179. 44. For properly appreciating the rival contentions, we would first make a reference to the Central Sales Tax Act, 1956. It is an Act to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade .....

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ia. The definitions appear in Chapter I. Section 2(a) defines the term appropriate State to mean in relation to a dealer who has one or more places of business situated in the same State, that State and in relation to a dealer who has places of business situated in different States, every such State with respect to the place or places of business situated within its territory. The term business is defined in section 2(aa) in an inclusive manner. It reads as under:- 2(aa) business includes - (i) .....

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e, the definition of the term dealer as appearing in section 2(b) is important. It reads as under:- 2(b) dealer means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commission remuneration or other valuable consideration, and includes - (i) a local authority, a body corporate, a company, any co-operative society or other society, club, firm, Hindu undivid .....

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pal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal. Explanation 1. - Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as - (i) a mercantile agent as defined in the Sales of Goods Act, 1930 (3 of 1930), or (ii) an agent for handling of goods or documents of title relat .....

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stributes, goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration, shall except in relation to any sale, supply or distribution of surplus, un-serviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act. 47. The term goods is defined in section 2(d), whereas, term place of business is defined in section 2(dd .....

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s his books of account. 48. A perusal of these definitions would denote as to how the principles are formulated. These basic definitions would guide the formulation of these principles. 49. Chapter II is titled as Formulation of Principles . These principles and formulated for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. The definitions to which we have made a reference above enabl .....

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ions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1. - Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2. - Where the movement of goods .....

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a transfer of documents, title of goods delivered, their movement from one State to another. There is an explanation below subclause (b), which would explain as to when clause (b) of section 3 would be applicable, particularly where the goods are delivered to a carrier or bailee for transmission. Therefore, it is the sale or purchase which must occasion the movement of goods or the sale or purchase is effected by a transfer of document of title to the goods delivered, their movement from one St .....

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rchase shall be deemed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State - (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. E .....

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have taken place outside all other States. By sub-section (2), the legislature, by a deeming provision, indicates as to when a sale or purchase of goods shall be deemed to take place inside a State. If the goods are within the State in the case of specific or certain goods at the time the contract of sale is made and in the case of un-ascertained or future goods at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party prior or s .....

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ments of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any good .....

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ration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority. (5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposes of its internal flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India. Explanation. - For the purposes of this sub-section, designated Indian carrier means any .....

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an inter-State sale. The situs of the inter-State sale and therefore, the liability of the dealer to pay tax to a particular State, is the issue involved before us. 56. In that regard, one must notice the provisions of section 6, which deals with liability to pay tax on inter-State sale. Therein, by sub-section (1), every dealer shall be liable to pay tax under the Central Sales Tax Act, 1956 on all sales of goods other than electrical energy effected by him in the course of inter-State trade o .....

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ion 8 shall be exempt from tax under the CST Act is then set out in sub-section (2) of section 6. By sub-section (3) of section 6 and which is the provision overriding anything contained in the Act, no Central Sales Tax is payable by any dealer in respect of sale of any goods made by such dealer and which sale takes place within the purview of sub-section (3) of section 6. Thus, this whole Chapter provides for the inter-State sales tax. In this also fall sections 7, 8 and 9 and which provide for .....

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erly:- 9. Levy and collection of tax and penalties. - (1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provision of subsection (2), in the State from which the movement of the goods commenced: Provided that, in the case of .....

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connection with the purchase of such goods; and (b) where such subsequent sale has been effected by an unregistered dealer in the State from which such subsequent sale has been effected. (2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect an .....

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registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documen .....

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an offence but excluding the provisions relating to matters provided for in sections 10 and 10-A of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment as if the tax under this Act were a tax under such .....

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tion of interest for delayed payment of tax under this Act in such States as if the tax and the interest payable under this Act were a tax and an interest under such sales tax law. (3) The proceeds in any financial year of any tax, including any interest or penalty levied and collected under this Act in any State (other than a Union Territory) on behalf of the Government of India shall be assigned to the State and shall be retained by it; and the proceeds attributable to Union Territories shall .....

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by the Hon'ble Supreme Court of India in the five Judge Bench decision in the Case of State of Andhra Pradesh vs. National Thermal Power Corporation Limited and Ors. AIR 2002 SC 1895. Para 24 of this judgment reads as under:- 24. It is well settled by a catena of decisions of this Court that a sale in the course of inter-State trade has three essential ingredients: (i) there must be a contract of sale, incorporating a stipulation, express or implied, regarding inter-State movement of goods; .....

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ment of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an inter- State element. Precedents are legion; we may briefly refer to some of them. In English Electric Company of India Ltd. .....

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-State sale even if the contract of sale does not itself provide for the movement of goods from one State to another, provided, however, that such movement was the result of a covenant in the contract of sale or was an incident of the contract. Similar view was expressed in M/s. Sahney Steel and press Works Ltd. and Anr. vs. Commercial Tax Officer and Others (1985) 4 SCC 173. In Manganese Ore (India) Ltd. v. The Regional Assistant Commissioner of Sales Tax, Jabalpur, 1976(2) SCC 44, it was obser .....

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t to such contract of sale and such movement must be from one State to another, where the sale concludes. 60. In an earlier judgment of the Hon'ble Supreme Court of India, in the case of Bharat Heavy Electrical Limited etc. vs. Union of India and Ors. AIR 1996 SC 1854, the Hon'ble Supreme Court of India, after analysing all the provisions of the Central Sales Tax Act, 1956 and particularly section 9, held as under:- 17. The aforesaid survey of the relevant provisions of the Act clearly s .....

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11 S.T.C. 655 and the decisions in Manganese Ore (India) Limited v. The Regional Assistant Commissioner (1976 (3) S.C.R.99 and Union of India v. K. S. Khosla and Company Limited (1979) 43 S.T.C.457. Similarly, where the question arises, in which State is the tax leviable, one must look to and apply the test in Section 9(1); no other provision is relevant on this question. 18. We may at this stage refer to the decision of the Bombay High Court in Commissioner of Sales Tax v. Barium Chemicals Lim .....

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Government in the matter of levy and collection of Central Sales Tax; if so, once levied and collected in one State, rightly or wrongly it cannot be levied and collected in another State. In our opinion, this may be an over-simplification of the matter. May be from the point of view of the assesses, this approach is sound enough but from the point of view of the States keeping Article 269 in mind and the provisions of the Central Sales Tax acts this may not be correct. Section 9(1) specifies the .....

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between the States and that so far as the assessee is concerned, it is enough if he pays the tax at one place whether it is really leviable in that State as per Section 9(1) or not. The law requires that it should be levied and collected in the State from which the movement of goods commences. If a dispute arises in which State is the tax lawfully leviable, the authorities under the Act have got to decide it. If, in a given case, an assessee says that the particular transaction which is sought .....

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inforced if one keeps the provisions in Section 8(2A) of the Central Sales Tax Act in view. 61. Hence, we would have to decide the present case on the touchstone of the above principles and the interpretation placed by the Hon'ble Supreme Court of India on the relevant provisions of the Central Sales Tax Act, 1956. 62. At the outset, we must clarify that the learned senior counsel appearing for the petitioners would submit that for the present petition, the petitioners proceed on the footing .....

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e solitary share holders, representing India and Russia together make this corporate entity, a dealer for the purposes of the Central Sales Tax Act, 1956. Therefore, there was indeed a case made out for invoking section 3 of the Central Sales Tax Act, 1956. Finally, the petitioners proceeded on the assumption that the State of Andhra Pradesh could have taxed the transactions even though that position is seriously disputed by the petitioners and they have filed a writ petition challenging the ass .....

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turn to the basic facts, which are undisputed. 64. What we have before us is an order of assessment. That order of assessment presupposes that there is an inter-State sale. We have before us an assessment order in which the assessing officer proceeds on the footing that the orders for the supply of Brahmos Missiles are from the Defence Ministry to the head office at Delhi. Accordingly, the components are imported from Russia and stored at Nagpur. As per the delivery schedule, the components are .....

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ng payment of excise duty with prior permission of the Commissioner of Central Excise as per the provisions of Rule 16B of the Central Excise Rules. The excise duty on the said transaction is deposited at Hyderabad. That is as per the provisions of the Central Excise Act, 1944. Thus, the understanding of the assessing officer is that the petitioners have attempted to establish that the movement of goods from Hyderabad to Nagpur is in accordance with the contract for supply of Combat Missiles to .....

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hose judgments were on the basis of these specific facts of finished goods being transferred from one State to another. These decisions did not cover a situation when the semi finished goods were transferred to another State for conducting further manufacturing process and the delivery from that State was never subject matter before these courts. 65. The assessing officer holds that the movement of semi finished goods from Hyderabad to Nagpur cannot be construed as a mere stop over in the inter- .....

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Nagpur (including warheads) after the import from Russia. They are moved from Nagpur to Hyderabad for their assembly as semi finished missiles and the semi finished job is again transferred from Hyderabad for warhead integration and final assembly of Brahmos Missiles. On this basis, the ultimate conclusion is that the movement of finished goods, namely, Brahmos Supersonic Missiles, as intended to be supplied to the Defence Forces, has occasioned from the State of Maharashtra. As such, it is an .....

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provisions of the Central Sales Tax Act, 1956. We had to elaborately analyse the provisions only for clearing certain doubts of the authorities, particularly in the State of Maharashtra. They have failed to notice the salient features of the Central Sales Tax Act, 1956. In our view, the understanding of the assessing officer that it is the movement of finished goods, which would be the determining and conclusive factor is legally flawed. It is untenable, inasmuch as the presumption that all the .....

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Supreme Court of India in the case of Bharat Heavy Electrical (supra). The factual background, in which this decision was rendered may now be referred. We have reproduced the governing principles and tests, which have been culled out in this decision from the earlier judgments of the Hon'ble Supreme Court of India on the point. In part II of this judgment, the Hon'ble Supreme Court of India refers to the facts in great details as under:- 20. Bharat Heavy Electricals Limited [BHEL] is a .....

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ry including equipment and material necessary for setting up power plants. Its dead Office is at New Delhi. It appears that whenever it undertakes to set up a power-generation plant, it enters into two contracts, one for the supply of machinery and equipment called "the Supply Contract" and the other for installation or erection of the plant called "Service Contract". Once the job is undertaken, the Head Office sends instructions to relevant units to manufacture the appropria .....

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tent [LOI] on June 3, 1982 specifying the timeschedule for the work. The units were to be made ready for commercial operation between March 1985 and November 1986. Pursuant to the LOI, BHEL commenced the work. It instructed its several units to manufacture the requisite machinery and equipment. Formal contracts, viz., supply contract and service contract were entered into much later, i.e., on March 15, 1985. The contract price under the supply agreement is ₹ 295.37 crores. The supply contr .....

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umerable parts and components, some of which are manufactured at the Hyderabad unit. The Tiruchi unit accordingly called upon the Hyderabad unit to manufacture those components/parts. The Hyderabad unit manufactured them and sent some of those parts/ components to Tiruchi for being incorporated into the boiler system and sent the remaining directly to Angul Orissa to be incorporated into the boiler system at the work-site. According to the practice uniformly followed by BHELs and accepted by the .....

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i to Hyderabad unit or the work-site were treated as branch transfers and not as sales. The tax was levied by the State in which the main machinery system was manufactured. No tax was levied by the State wherein the parts components were manufactured and sent for incorporation into the main machinery or system manufactured in other States. From the year 1984, however, the State of Andhra Pradesh started levying and demanding Central Sales Tax upon the value of the parts and components which were .....

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nto the boiler system, it would amount to double taxation insofar as the said parts and Components are concerned. According to it, they were merely branch transfers. The Andhra Pradesh State did not agree. Similar stand was taken by other States as well and assessment proceedings were in progress in various States. It is at that stage that BHEL approached this Court by way of Writ Petition (C) No.1608 of 1987 under Article 32 of the Constitution complaining that more than one State is taxing the .....

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and that Tax Revision Cases preferred by BHEL were pending in the Andhra Pradesh High Court. The judgment of the Andhra Pradesh Tribunal was also placed before us. The Andhra Pradesh Tribunal had taken the view that insofar as the parts and components manufactured in the Andhra Pradesh unit and despatched to work-site at Angul were concerned, they must be treated as inter-State sales taxable in Andhra Pradesh State inasmuch as the said goods moved from Andhra Pradesh pursuant to the supply cont .....

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iruchi constituted branch transfers became final. The only question in the said Tax Revision Cases before the Andhra Pradesh High Court, therefore, was whether the Tribunal was right in holding that the despatch of parts/components from the Andhra Pradesh Unit to Angul for incorporation into the boiler system at the work-site represented inter-State sales and whether they were taxable in the State of Andhra Pradesh. The High Court examined the said question at length and dismissed the Tax Revisi .....

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difference: BHEL impleaded the States of Tamil Nadu, Uttar Pradesh, Karnataka Madhya Pradesh, Delhi and Union of India in addition to the State of Andhra Pradesh as respondents to the writ petitions and also claimed for a direction to the respondents to adjust the Central Sales Tax collected by them in such a manner that the amount is kept, or remitted to the State, which is lawfully entitled to levy it and the States no entitled to levy it do not keep the tax amounts collected by them. The batc .....

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question of fact and law. It is, therefore, necessary to ascertain the factual position first. In Civil Appeals Nos.5369-75 of 1996 and 5362-68 of 1996, it is this: whenever BHEL enters into a supply contract with a party, it designates one of its units as the executing unit. That is treated as the main unit executing the work. Sometimes this is not done and each unit is entrusted a particular job. But it may happen that the executing unit does not manufacture all the parts and components which .....

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had happened. Tiruchi unit was supposed to be the executing unit. But some parts and components required for the boiler system and other equipment which was the responsibility of the Tiruchi unit to manufacture were being manufactured at the Hyderabad unit. At the request of the Tiruchi unit - or on the instructions of the Head Office, as the case may be - the Hyderabad unit manufactured those parts and components and despatched some of them to Tiruchi and some of them directly to Angul in Oris .....

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o Angul - in particular, Clause 3.3.0 of the Supply Contract - do clearly establish that it was not a case of branch transfer but one of sale of the said goods to NALCO, pursuant to the supply contract. Further, because the movement of the said goods has commenced in the State of Andhra Pradesh, it is in the State of Andhra Pradesh that the Central Sales Tax is leviable according to Section 9(1) of the Act. We therefore, agree with the view taken by the Andhra Pradesh High Court that in the fact .....

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hen the semi finished goods traveled from one State to another or that components and parts to manufacture the ultimate or final product are not supplied by various locations of the dealer in several States. Therefore, if one does not dispute the factual position that there is a headquarter of the petitioners at New Delhi, it is that headquarter which receives orders for supply of Combat and other Missiles. It is in pursuance and furtherance of the execution of such an order that the requisite s .....

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urposes of training or for Combat Operations. It is in these circumstances that the petitioners rightly contend before us that from their manufacturing unit at Hyderabad, which was established in the year 2001 with a manufacturing facility operational from 2007-08, that the missile takes shape. It has been pointed out by the petitioners that from 2001-08, the petitioners were importing fully integrated missiles from its joint venture partner NPOM, Russia. They were effecting the sales of these i .....

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eads, boosters, fuel etc. are transferred to Nagpur facility for storage purpose. There may be a slight dispute here and there, inasmuch as the respondents would contend that all the parts of the missiles in SKD condition arrive at Nagpur, they go to Hyderabad for the above activity, namely assembly, production and thereafter the missile is received for warhead integration at Nagpur. However, as the petitioners would contend, there is no dispute that the warhead at all times remains at Nagpur fa .....

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is a complete unit when imported from Russia. The warhead is inserted in the front portion of the missile at the Nagpur facility. It is for inserting the warhead that the missile is de-canistered and re-pressurized. The front portion of missile is detached and the warhead is fitted. That is how the missile is ready for use in situation like a war. The process has also been explained to us in detail by Mr. Sridharan. He has relied upon the written submissions. 70. It is in these circumstances tha .....

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cer ought to have appreciated that this is not a case where there is any dispute about facts. Further, there is no dispute as to whether this is a inter-State or intra- State sale. Clearly, both sides understood the controversy as emanating from the admitted inter-State sale. Therefore, it is only a question of the authority of the agent to collect the tax on behalf of the Central Government. Once the Hon'ble Supreme Court of India has clarified that this is not a tax which could be said to .....

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for processing to Nagpur. At Nagpur, they are received in semi finished stage and the rest of the work is done at Nagpur. Therefore, he would submit that this is a case pertaining to a complete act in the state of Maharashtra. He would submit that the entire act is performed in the State of Maharashtra and therefore, it is that State which has authority in terms of section 9(1) of the Central Sales Tax Act, 1956. 73. Mr. Sonpal's reliance on the judgment of a Division Bench of Andhra Pradesh .....

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and Karnataka. It was the petitioner's case that the goods are not sold by the Machilipatnam unit, but are only incorporated in the equipments manufactured by other units and eventually sold therefrom to the end customers. It was the case of the petitioner that the respective units, which incorporate the components manufactured and transferred by the Machilipatnam unit pay sales tax on the price of finished goods including the cost of components manufactured and supplied to them by the Machi .....

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are sold as they are and are not incorporated in or did not form part of other goods, would the question of such transfer of goods, attributing levy of tax under the Central Sales Tax Act, 1956, as inter-State sale, arise. These observations are made in the context of the facts before the Andhra Pradesh High Court, namely, that the Machilipatnam unit supplied the goods, which are mere components. They got incorporated in the goods manufactured by other units located outside the State of Andhra .....

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hat without warhead integration, the missile is not complete and cannot be used to target any particular place or point. The argument was that the components imported from Russia are brought to Nagpur, but the Revenue could not prove that the entire missile is manufactured at Nagpur. That the unit at Hyderabad assembles these components brought from Russia and makes a missile. Once the missile is the identifiable goods and it is in that form that it is sold, but the issue is whether the warhead .....

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the assessing officer being untenable in law, we do not think that the writ petition cannot be entertained. There may be remedies available to challenge the assessment order, but it is not that there is any absolute bar to entertain a writ petition under Article 226 of the Constitution of India against an assessment order. Once that assessment order is found to be vitiated in law and the assessing officer exceeding his powers, authority and jurisdiction, then, in the absence of a factual dispute .....

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