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TMI Blog2020 (4) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- "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 the sale or purchase- (a) occasions 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 commences and terminates in the same State 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and (b) if the subsequent sale is made - (i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or (ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of section (4) of section 8: Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,- (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name); and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section. [(3) Notwithstanding anything contained in this Act, if - (a) any official or personnel of - (i) any foreign diplomatic mission or consulate in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1994-95 effected through the same process was Rs. 3,15,639/- and for 1995-96 it was Rs. 2,60,93/-. Claim of benefit under Section 6(2) of the 1956 Act was rejected and tax along with interest and penalty was imposed under the State Act by Commercial Tax Officer, Anti-Evasion Circle-I, Kota after a survey by two orders, both dated 11th December, 1997. The appeals by Bombay Machinery Stores were allowed by the Deputy Commissioner (Appeals), Commercial Taxes, Kota following a decision delivered on 8th March, 1996 by the Rajasthan Tax Board in the case of CTO vs. Bhagwandas & Sons (1996 Tax World 107). The orders of the first appellate authority were passed on interpretation of the first explanation to Section 3B(1) of the 1956 Act. Imposition of tax, interest and penalty under the State Act was quashed. In State Tax authority's appeal before the Tax Board, reliance was placed on two circulars issued by the Commissioner bearing S.No.1132A: CCT Circular F.11(3)CST/Tax/CCT/1/61 dated 15th April, 1998, clarified by a further circular dated 19th July, 1999. The Board did not take into consideration these two circulars. These were not referred to in the orders of the Tax Assessment Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating as the lead case in this judgment), quashed the orders of the statutory authorities in both the appeals and also invalidated the two circulars. 5. The two circulars issued by the Commissioner, Commercial Taxes Department, Rajasthan have been quoted in the impugned judgment in the case of Bombay Machinery Store. Henceforth, wherever we refer to the expression judgment under appeal, we shall imply that judgment only, unless we specifically refer to any of the three other decisions under appeal. These circulars read:- "S. No. 1115B : CCT Circular F.11(3)/CST/Tax/CCT/1997/1563 dated 16.9.1997 As you are aware of the fact that to avoid multiple taxation of goods sold by transfer of documents of title to the goods in their single movement from one State-to another, provisions for exemption of such transaction are embodied in S. 6(2), CST Act, 1956. It appears that application of this provision has been made more or less mechanical by the assessing authorities in as much as on furnishing form E-I/E-II and C forms without looking into the material facts regarding single inter-State movement of such goods, benefits are conferred to such dealers. If the movement of the goods from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of warehouse rent/demurrage charges by the consignee to the transporter is conclusive evidence that transporters have assumed the role of bailee and transit having ended. It may be observed that bailment can be either gratuitous or for remuneration or partially both. In law, there can also be bailment without contract. As per legal position, 'transit' gets over as soon as a reasonable time elapses for the consignee to elect whether he would take the goods away or leave them in the transporters premises, because at the conclusion of reasonable time there is deemed to be a constructive delivery of goods from the transporters to the consignee. If a dealer claims that the had not obtained the delivery of goods, the burden of proving that the goods really remained with the carrier from the date of their arrival till the date of their clearance is on the dealer. If the dealer fails to furnish this proof, then the assessing authority would be justified in concluding that the dealer had himself taken physical delivery of the goods from the carrier and thereby disallowing his claim of exemption under S. 6(2), CST Act. The decision of the Delhi High Court in Arjun Dass Gupta a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. As per these Associations, this approach has resulted in hardship to the dealers and avoidable harassment is being caused to them with adverse effect on the trade. They have requested for increasing this limit. Keeping in view these factual aspects and the discussions at the Govt; level, it is reiterated that the reasonability of the time should be looked into after analysing the facts and circumstances of each case and the usual period of treating constructive delivery which may even extend upto thirty days instead of ten days as suggested in the above referred circular. Deputy Commissioner (Admn) should ensure that, while ensuring the State revenue, no harassment shall be caused to the dealers by enthusiastic assessing authorities while determining the end of transit." 6. The High Court has referred to two decisions, one by the Rajasthan High Court itself, in the case of Guljag Industries Limited vs. State of Rajasthan & Another reported in (2003) 129 STC 3 (Raj.) and the other of the Delhi High Court in the case of Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax, Delhi Administration (1980) 45 STC 52 (Delhi). In the latter decision, a Bench of the Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealers created by previous circular dated 16.9.1997, merely ended up extending the time limit of 10 days to 30 days without undoing the damage done by the previous circular by propounding a particular view of constructive delivery. In fact, the very power to issue such circulars by the learned Commissioner giving a particular interpretation of law purportedly binding on all the assessing authorities is doubtful. There is no specific provision in the Sales Tax Act, either under the RST Act or under the CST Act, empowering the Commissioner to issue such circulars, as against such powers conferred under Section 119 of the Income Tax Act on the Central Board of Direct Taxes. Even Section 119 of the Income Tax Act, which empowers the highest administrative body under the Act, namely CBDT, by way of its proviso restricts and provides that no such order, instruction or direction shall be issued so as to require any Income Tax authority to make a particular assessment or dispose of a particular case in a particular manner and such orders or instructions shall also not interfere with the discretion of the Commissioner (Appeals) in exercise of its appellate functions. Therefore, this court c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The respondent in this case had taken benefit of sub-section (2) on the ground that this was a case involving inter-state sale and the sale took place by way of transfer of documents of title of such goods during their movement from one State to another. It is also the respondents' case that the requisite forms and certificates were duly furnished pertaining to such sales. On the part of the State, barring retention of the goods in the transporters' godown at the destination point for a long period of time, default on no other count by the assesses has been asserted. 10. In the two appeals in which the respondent is Bombay Machinery Stores, sales pertained to financial years before the circulars came into subsistence. In these instances of sales, the Commercial Tax officer in the respective orders treated retention of goods beyond 30 days in the transporters' godown as the cut-off period. After that date, the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State of Rajasthan was held to be local sales and subjected to sales tax under the State Law. Same reasoning was followed in the respective orders of the tax authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent of the buyer. (6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. (7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods. 14. Sub-clause (1) of the said provision specifies when the goods shall be deemed to be in course of transit and sub-clause (3) thereof lays down the conditions for termination of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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