TMI Blog2017 (7) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... the Punjab VAT Act, 2005 holding TIN 03392097512. The taxable person has imported the goods on its TIN. The taxable person does not have any physical stock or stock in the books of such imports made. Further, it has exported goods in the course of interstate trade and commerce. Thus, the taxable person is a legitimate trader - For continuously three years the goods were being imported into the State of Punjab on the Tax Identification Number (TIN). The dealer has no stock of the goods with him in his books. Hence, it is very clear that all the goods have been sold in the State of Punjab on which the dealer is liable to pay tax. Whether the taxable person be taxed? - Held that: - The data of the Department clearly shows that the taxable person has imported the goods on its TIN. If the goods have been imported by the taxable person, then it would have disposed off also by the taxable person. It is the taxable person who has dispatched the taxable goods to the end consumer. The consumer is in the State of Punjab. Most of the transactions made by the end users are on the basis of cash on delivery. The taxable person has also received the consideration for the goods sold to the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first imported into the State of Punjab without anything more and the petitioner entered into the transactions of sale with its purchasers thereafter they would not constitute sales in the course of inter-state trade and commerce. Further, where it is established that the petitioner acted only as a logistic provider, the petitioner would not be liable under the VAT Act - It would be necessary for the ETO to consider the transactions afresh. The ETO must in other words assess the documents already furnished and the documents that may hereafter be furnished. The impugned assessment order and the demand notices issued pursuant thereto are quashed and set-aside - The matter is remanded to the ETO for passing a fresh assessment order in accordance with law - petition allowed by way of remand. - Civil Writ Petition No.18339 of 2015 (O&M) - - - Dated:- 14-7-2017 - MR. S.J. VAZIFDAR, CHIEF JUSTICE AND MR. ANUPINDER SINGH GREWAL, JJ. For The Petitioner : Mr. Tarun Gulati, Advocate and Mr. Sandeep Goyal, Advocate Ms. Sudeepti Sharma, Additional Advocate General, Punjab S . J . VAZIFDAR, CHIEF JUSTICE 1. Respondent Nos.2 and 3 are the State of Punjab and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is judgment. 5. The facts, so far as the questions we intend dealing with are concerned, are as follows: The petitioner carries on business of selling goods through an online portal www.flipkart.com to customers for their personal use. The petitioner also provides logistic services to various parties which also carry on the business of selling goods through the said online portal. The goods sold and transported by the petitioner to parties in the State of Punjab were subject to CST in the State from where the goods were despatched. The goods were brought to Punjab from other States. The petitioner s warehouses are located outside the State of Punjab. They are located in the States of Karnataka, Tamil Nadu, Maharashtra, Haryana, Uttar Pradesh, Delhi and West Bengal. The petitioner had paid the CST in respect of such goods. As the petitioner did not undertake any sale transaction in the State of Punjab, it did not have a taxable turnover for the purpose of assessment under the PVAT Act and, therefore, filed nil returns for the Assessment Year 2012-13 on quarterly basis in Form VAT-15. Based on these returns, the annual statements, as required under Rule 40 in Form VAT-20, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The delivery boys deliver the goods to customers Order Delivery is confirmed to the website flipkart . com The petitioner s case, therefore, is that the goods moved from various States to the State of Punjab on account of the contracts of sale entered into between the petitioner and various purchasers. Invoices are issued in the State from which goods are sourced with the name and address of the customer. The invoices accompanied the goods. This, according to the petitioner, makes it clear that the movement of the goods is on account of a contract of pre-existing sale. 8. It would be convenient to note at this stage that the invoices issued by the petitioner to the customers upon the customers placing orders indicate the location of the warehouse. In the sample invoices, for instance, the warehouses are stated to be situated in Maharashtra, Karnataka, Delhi, Tamil Nadu and West Bengal. None of the invoices referred to a warehouse in Punjab. The invoices also mentioned the address of the purchasers who, in the present case, are all of Punjab. The shipping addresses accordingly also mention the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner were, therefore, not true and correct. The petitioner was afforded a personal hearing and was directed to produce details of the material purchased and sold along with the invoices and proof of movement of goods, balance-sheet for the year 2012-13, item-wise list of commodities imported from and exported outside the State and details of bank accounts. The petitioner was called upon to show cause why its tax liability be not calculated on the basis of the data available with the department and penal action be not taken under section 56 of the PVAT Act for suppressing the taxable turnover and evading the tax to the State s exchequer. The petitioner filed a reply dated 09.02.2015 in which it stated some of the facts that we have already referred to. The petitioner stated that its logistic division had inadvertently quoted the TIN (Tax Identification Number) of Punjab in respect of the said sales. The petitioner stated that the transactions fall within the ambit of section 3 of the CST Act. The petitioner enclosed sample manifest along with invoices with reference to the ICC data. The alleged export of ₹ 1.10 crores was stated to be the value of goods returned by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ICC and that in Form VAT-36 the petitioner mentioned its TIN. This fact, according to the ETO, established that the petitioner had imported the goods to Punjab without anything more and sold the same only thereafter to various customers. Thus, according to the ETO, the petitioner sold the goods in the State of Punjab and that the sales were not inter-state sales as contended by the petitioner. This, in our view, was a fundamental error. 16. It will be convenient to set out the relevant parts of the order to indicate the extent of the importance placed by the ETO on this aspect. Question 2 : Whether the logistics partner is a trader? The WS Retail Services Private Limited, the logistics provider is a registered taxable person under the Punjab VAT Act, 2005 holding TIN 03392097512. The taxable person has imported the goods on its TIN. The taxable person does not have any physical stock or stock in the books of such imports made. Further, it has exported goods in the course of interstate trade and commerce. Thus, the taxable person is a legitimate trader. Any person importing goods on its TIN shall be required to dispose of such goods in course of trade and commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a legitimate sale by the taxable person within the State of Punjab and hence, the person is liable to be taxed. ( emphasis supplied ) Question 4 : Whether the sale occurred within the State of Punjab? a. The goods were imported into the State of Punjab by the taxable person on its TIN to supply to the customers who are the bonafide residents of Punjab. b. The order was made by the customer of Punjab from his residence or the premises in Punjab. The customer used the resources like internet and hardware in Punjab to reach the website to place an order. c. The goods were delivered to the Customer of Punjab. d. The seller received the consideration for the goods sold to the customer of Punjab. In this case, it is clear that the goods were imported by the taxable person to sell in the State of Punjab. Hence, all the Sales except clearly mentioned as exports as per ICC data have occurred within the State of Punjab. .. .. Question 7 . If the dealer has acted as a logistics partner, then can we tax him? .. .. b. The goods for trade or use in manufacture of goods can be purchased from within the State of Punjab o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CHAPTER - IX ESTABLISHMENT OF INFORMATION COLLECTION CENTRES 51. (1) If, with a view to prevent or check avoidance or evasion of tax under this Act, the State Government considers it necessary so to do, it may, by notification, direct for the establishment of a check post or, information collection centre or both at such place or places, as may be specified in the notification. (2) The owner or person Incharge of a goods vehicle shall carry with him a goods vehicle record, goods receipt, a trip sheet or a log-book, as the case may be, and a sale invoice or bill or cash memo, or delivery challan containing such particulars, as may be prescribed, in respect of such goods meant for the purpose of business, as are being carried in the goods vehicle and produce a copy each of the aforesaid documents to an officer Incharge of a check post or information collection centre, or any other officer not below the rank of an Excise and Taxation Officer checking the vehicle at any place: Provided that a person selling goods from within or outside the State in the course of inter- State trade or commerce, shall also furnish or cause to be furnished a declaration with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry, shall serve a notice on the consignor or consignee of the goods detained under clause (b) of sub-section (6) and give him an opportunity of being heard and if, after the enquiry, such officer is satisfied that the documents as required under sub- sections (2) and (4), were not furnished at the information collection centre or the check post, as the case may be, with a view to attempt to avoid or evade the tax due or likely to be due under this Act, he shall by order, for reasons to be recorded in writing, impose on the consignor or consignee of the goods, penalty equal to fifty per cent of the value of the goods involved. In case, he finds otherwise, he shall order release of the goods for sufficient reasons to be recorded in writing. He may, however, order release of the goods and the vehicle on furnishing of a security by the consignor or the consignee in the form of cash or bank guarantee or crossed bank draft for an amount equal to the amount of penalty imposable and shall decide the matter finally within a period of fourteen days from the commencement of the enquiry proceedings; . .. .. ... .. .. ... ... .. ... Explanation . The detained goods and the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ________________ ______________________________________________ TIN No. ______________________________________ 18. The petitioner having mentioned its TIN is by no means conclusive of the question whether the sale of goods was in the course of inter-state sale. It can, at the highest, only be a factor to be taken into consideration in the determination of the question. In the present case, there is more than one reason why the TIN being mentioned does not indicate that the import of the goods was independent of or unconnected with the contract of sale. 19. Firstly, the petitioner stated that it obtained the TIN for Punjab as it intended setting up a warehouse in Punjab. Had it done so, i.e., had it set up a warehouse, it would have been necessary for the petitioner to obtain a TIN for Punjab. The impugned assessment order does not disbelieve this case. It is not the respondents case that the petitioner, in fact, set up a warehouse in Punjab and entered into sale transactions with customers in Punjab after it had warehoused its goods in Punjab. 20. Having said that, however, we must add that this fact does not conclude the matter in the petitioner s favour either. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnishing of TIN number is not required . However, the said column cannot be left blank and the movement of goods are to Puducherry, the first three digits of Puducherry code are mentioned and this is no way amounts to suppression . The explanation given by the petitioner is reasonable considering the facts and the nature of transaction done by the petitioner . The consigner and the consignee is the petitioner and the goods moved from State of Karnataka to Puducherry and it is on self basis . The consignment is shown as electronic items, garments etc . , stored in several bags . Therefore, mere mention of TIN number by giving only the code of Puducherry as assigned by the Commercial Taxes Department that by itself will not be a ground to state that the petitioner has committed an offence . We are in respectful agreement with these observations which apply equally to the case before us. 24. The fifth question posed by the ETO in the assessment order was: Where does the property in the goods transferred ( sic transfer) to the buyer? . The ETO came to the conclusion that the proprietary rights in the goods passed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State . Explanation 3 .- Where the gas sold or purchased and transported through a common carrier pipeline or any other common transport or distribution system becomes co - mingled and fungible with other gas in the pipeline or system and such gas is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one State to another . 4 . When is a sale or purchase of goods said to take place outside a State .-( 1 ) Subject to the provisions contained in Section 3, when a sale or purchase of goods is determined in accordance with sub - section ( 2 ) to take place inside a State, such sale or purchase 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 - ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich occasions the movement of goods from one State to another is a sale in course of inter-state trade. All that is required is that the inter-state movement must be the result of the sale. It is not even necessary for the contract of sale to expressly state or provide for the movement of the goods from one State to the other. It can be implied from the contract itself. Nor is it necessary that the sale must precede the movement in order that the sale may be deemed to have occasioned such movement. Mr. Gulati s reliance upon the judgments in this regard which we will now refer to is well founded. 27. The Supreme Court in Oil India Limited vs . Superintendent of Taxes and others, (1975) 1 SCC 733 held as under:- 9. Even though clause 7 of the supplemental agreement does not expressly provide for movement of the goods, it is clear that the parties envisaged the movement of crude oil in pursuance to the contract from the State of Assam to the State of Bihar. In other words, the movement of crude oil from the State of Assam to the State of Bihar was an incident of the contract of sale. No matter in which State the property in the goods passes, a sale which occasions move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 16 . When a branch of a company forwards a buyer's order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between the factory and its branch . If there is a conceivable link between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been given a very wide connotation by the Parliament so as to include within its fold not only sales of goods which are usually known in common parlance but also transactions which legally cannot be called sales, for instance, a transfer of goods on the hire-purchase system. It seems to us that Parliament wanted to give the widest amplitude to the word sale and that is why, while in Section 3 the words sale of goods have been used in Section 4(2) clauses ( a ) and ( b ) which deal with the situs of the sale the words contract of sale have been used in the same sense. In other words, the word sale defined in clause ( g ) of Section 2 and used in Section 3 and other sections, is wide enough to include not only a concluded contract of sale but also a contract or agreement of sale provided the agreement of sale stipulates that there was a transfer of property or movement of goods. In STO, Pilibhit v. Budh Prakash Jai Prakash [AIR 1954 SC 459 : (1955) 1 SCR 243 : 5 STC 193, 196] quoting Benjamin on Sale , (8th Edn.) Venkatarama Ayyar, J., who spoke for the Court observed as follows: The distinction between a sale and an agreement to sell under Section 1 of the Engl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Section 4(1), therefore, clearly provides that a contract of sale of goods includes also an agreement to transfer property in goods to the buyer for a price. The inevitable conclusion that follows from the combined effect of the interpretation of Section 3 of the Central Sales Tax Act and Section 4 of the Sale of Goods Act is that an agreement to sell is also an essential ingredient of sale provided it contains a stipulation for transfer of goods from the seller to the buyer. This being the position if there is a movement of goods from one State to another, not in pursuance of the sale itself, but in pursuance of an agreement to sell, which later merges into a sale, the movement of goods would be deemed to have been occasioned by the sale itself wherever it takes place. In this view of the matter the question as to whether agreement to sell was a forward cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to State Y and sells the goods there. This is, therefore, purely an internal sale which takes place in State Y and falls beyond the purview of Section 3( a ) of the Central Sales Tax Act not being an inter-State sale. Case No . III -B a purchaser in State Y comes to State X and purchases the goods and pays the price thereof. After having purchased the goods he then books the goods from State X to State Y in his own name. This is also a case where the sale is purely an internal sale having taken place in State X and the movement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property. ( emphasis supplied ) The Supreme Court in Union of India and another v . K . G . Khosla Co . Ltd . and others, (1979) 2 SCC 242, observed as under:- 18 . The decisions to which we have referred above show that in order that a sale may be regarded as an inter - State sale, it is immaterial whether the property in the goods passes in one State or another . The question as regards the nature of the sale, that is, whether it is an inter - State sale or an intra - State sale, does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the import of Carbamite is the direct result of the contract of sale and as such it can be safely held in the present case that sale has occasioned the import . In Hyderabad Engineering Industries vs . State of Andhra Pradesh, (2011) 4 SCC 705, the Supreme Court held as under:- 39 . From the above decisions, the principle which emerges is - when the sale or agreement for sale causes or has the effect of occasioning the movement of goods from one State to another, irrespective of whether the movement of goods is provided for in the contract of sale or not, or when the order is placed with any branch office or the head office which resulted in the movement of goods, irrespective of whether the property in the goods passed in one State or the other, if the effect of such a sale is to have the movement of goods from one State to another, an inter - State sale would ensue and would result in exigibility of tax under Section 3 ( a ) of the Central Act on the turnover of such transaction . It is only when the turnover relates to sale or purchase of goods during the course of inter - State trade or commerce tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Limited v . Superintendent of Taxes - [( 1975 ) 1 SCC 733 ] ; English Electric Company of India Ltd . v . DCT - [( 1976 ) 4 SCC 460 ]. The most perplexing aspect of the instant case, however, is that WS Retail, the seller responsible for effecting majority of the sales to customers in Kerala, through the online portal of the petitioner, is registered as a dealer under the KVAT Act and, in the returns submitted by the said dealer for the relevant period, they had conceded NIL taxable turnover under the KVAT Act, on the contention that their entire sales turnover pertained to interstate sales effected by them . Under the said circumstances and, in the absence of any material to suggest that the returns filed by the said seller were rejected by the revenue authorities, one fails to understand how the revenue authorities could proceed to levy tax, or impose penalty, on the petitioner in respect of the same turnover . The findings in the impugned orders reflect a patent non - application of mind by the authority concerned and also smack of arbitrariness . I therefore quash Exts . P11 and P12 orders, Exts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reference to its own special facts . That movement of the goods across the borders of State is an essential pre - condition, beyond any controversy only a transaction of sale connected with that movement can be regarded as an inter - State sales . The movement and the sale must have a reasonable direct link . Such movement can be stipulated in the contract of sale specifically or it may be contemplated by the parties as an implied term of contract . Even if the movement of the goods is not specified in the contract, and even if it cannot be regarded as an implied term, if such movement is incidental to the contract, then in such case also such transaction would be an inter - State sale . The tax that is levied is on the transaction of sale . The concept of sale itself being an intangible one, where there is no transfer of property in the goods there is no sale, and mere movement cannot be the subject - matter of the taxation, nor can a mere agreement to sell be taxed . 19 . The relationship between the movement and the sale should be, very broadly put, be that of effect and cause . The sale shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner, the movement would not have occasioned. This observations is made in the light of the facts as mentioned in the impugned assessment order. .. .. . 37. A screen shot of the petitioner's online platform has been produced which further strengthens the case of the petitioner. The platform contains all the relevant details and the purchaser is given the full details including the invoice number, which is in PDF format. The delivery bill number and the shipping details are also furnished. The purchaser is well aware that the shipping of the product is being handled by E- Kart logistic which is a unit of the petitioner handling logistic part of the business and the purchaser is aware about the approximate date of delivery. The cost of shipping the product is separately recovered and mentioned in the platform. Thus, the purchase order contains all the details, which clearly prove that the purchase order has occasioned the movement of goods from the State of Karnataka to Puducherry. The sample copy of the retail invoices/bills raised from Karnataka in the name of the purchaser at Puducherry had been produced, which shows that the petitioner, who is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute inter-state sales and fall within the ambit of the Central Sales Tax, 1956. 32. This brings us to question No.7 framed by the ETO, namely: If the dealer has acted as a logistics partner, then can we tax him? The question has not been answered. The assessment order does not hold the petitioner liable for tax in respect of the sales by other vendors to purchasers in respect whereof it rendered services as a logistic provider. As a logistic provider the petitioner only facilitated the transport and delivery of goods by the vendors to the purchasers. It did not have any proprietary interest in these goods. Ms. Sharma, agreed that in respect of such transactions the petitioner is, in any event, not liable to tax under the PVAT Act. 33. The assessment order refers to the manifest submitted by the petitioner. The manifest is not a statutory document. It is not a statutory requirement to maintain a manifest. The petitioner maintains it for its own convenience. The manifest tabulates numerous transactions entered into by it. The manifest would, therefore, at the highest contain information which can be used as evidence generally. 34. The order notes that the veri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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