1970 (3) TMI 104 - SC - VAT and Sales Tax

whether sales made by the petitioner of its vehicles from its stock-yards in various States of India can be held liable to be taxed as inter-State trade or commerce as defined in section 3 of the Central Sales Tax Act? Whether the vehicles which are not actually sold to any customer at Jamshedpur but are sent out from Jamshedpur to the stock-yards of the company in different States of India and from there they are supplied to dealers for sale to consumers can be taken to be inter-State trade in the sense that the movement of the vehicles from Bihar into another State? Held that - Appeal allowed. The appropriation of the vehicles was done at the stock-yards through specification of the engine and the chassis number and it was open to the appellant till then to allot any vehicle to any purchaser and to transfer the vehicles from one stock-yard to another. Even the Assistant Commissioner found that on some occasion vehicle had been moved from a stock-yard in one State to a stock-yard in another State. It is not possible to comprehend how in the above situation it could be held that the movement of the vehicles from the works to the stock-yards was occasioned by any covenant or incident of the contract of sale. As regards the so-called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment. Even on the assumption that any such orders had been received by the appellant they could not be regarded as anything but mere offers in view of the specific terms in exhibit I (the dealership agreement) according to which it was open to the appellant to supply or not to supply the dealer with any vehicle in response to such order.

Summary

Issues Involved:
1. Whether the sales made by the petitioner from its stock-yards outside Bihar were liable to be taxed under the Central Sales Tax Act.
2. Whether the movement of goods from Bihar to other states was occasioned by inter-State trade or commerce.
3. Whether the assessment order passed by the Assistant Commissioner of Commercial Taxes was valid.
4. Whether the petitioner was entitled to a rebate of one percent of the tax.

Issue-wise Detailed Analysis:

1. Taxability of Sales from Stock-yards Outside Bihar:
The petitioner, a public limited company engaged in the manufacturing of automobiles, contended that the sales made from its stock-yards outside Bihar were not liable to be taxed under the Central Sales Tax Act. The petitioner argued that these sales were not in the course of inter-State trade or commerce. The Assistant Commissioner of Commercial Taxes, however, held that all sales from the stock-yards were liable to be taxed under the Central Sales Tax Act.

2. Movement of Goods and Inter-State Trade:
The court examined whether the movement of goods from Bihar to other states was occasioned by inter-State trade or commerce. The petitioner argued that the vehicles were sent to stock-yards in other states based on general demand and not specific orders. The Assistant Commissioner contended that the movement of vehicles was occasioned by orders placed by dealers, thus constituting inter-State trade. The court referred to several Supreme Court decisions, including Tata Iron and Steel Co. Ltd. v. S.R. Sarkar and K.G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, to determine that the movement of goods must be the result of a covenant or incident of the contract of sale.

3. Validity of the Assessment Order:
The petitioner challenged the assessment order passed by the Assistant Commissioner, arguing that it was erroneous and based on incorrect assumptions. The court noted that the Assistant Commissioner had not examined each transaction individually and had instead relied on generalities. The court held that the Assistant Commissioner was bound to examine each transaction to determine whether it constituted an inter-State sale exigible to tax under the Central Sales Tax Act. Consequently, the court set aside the assessment order and directed the Assistant Commissioner to make a fresh assessment in accordance with law.

4. Entitlement to Rebate:
The petitioner claimed a rebate of one percent of the tax, arguing that the annual returns were filed within the prescribed period and the admitted tax was paid within the said period. The Assistant Commissioner refused the rebate, stating that the matter had been referred to the High Court. The court did not specifically address this issue in detail but noted that any specific questions regarding rebate should be determined by the Deputy Commissioner of Commercial Taxes, where the appeal was pending.

Conclusion:
The court allowed the appeal, set aside the order of the High Court and the Assistant Commissioner, and directed a fresh assessment in accordance with law. The court emphasized the need for a detailed examination of each transaction to determine its nature as inter-State trade or commerce. The petitioner was entitled to costs incurred in the Supreme Court.