1970 (3) TMI 129 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of Andhra Pradesh to assess tax on inter-State sales.
2. Classification of sales as "branch sales" or "agency sales."
3. Applicability of tax under the Central Sales Tax Act.
4. Validity of assessment orders for the years 1961-62, 1962-63, and 1964-65.
5. Status of the petitioner-company as a commission agent or commercial agent.

Issue-wise Detailed Analysis:

1. Jurisdiction of Andhra Pradesh to Assess Tax on Inter-State Sales:
The petitioner-company questioned the jurisdiction of the State of Andhra Pradesh and its Commercial Tax Officers to assess tax under the Central Sales Tax Act on the turnover relating to sales of products manufactured by M/s. Tata Chemicals, Mithapur, Gujarat, and goods dispatched by its head office in Bombay to customers in Andhra Pradesh. The court held that under section 9(1) of the Central Sales Tax Act, the tax shall be levied and collected by the Government of India in the State from which the movement of goods commenced. As the movement of goods commenced from Bombay and Gujarat, the State of Andhra Pradesh had no jurisdiction to levy the sales tax.

2. Classification of Sales as "Branch Sales" or "Agency Sales":
The turnover was categorized into "branch sales" and "agency sales." For branch sales, the goods were dispatched by the Bombay office to customers in Andhra Pradesh, and the railway receipts were sent to the petitioner-company at Hyderabad, which then issued sale bills and sent the railway receipts to the customers. The court concluded that the movement of goods commenced from Bombay, thereby falling outside the jurisdiction of Andhra Pradesh for tax purposes. For agency sales, the petitioner-company acted as an agent for Tata Chemicals, forwarding orders to the factory in Gujarat, which directly dispatched goods to customers in Andhra Pradesh. The court found that the petitioner-company was not liable for tax as it was merely an agent.

3. Applicability of Tax under the Central Sales Tax Act:
The court examined whether the sales were inter-State transactions under section 3 of the Act, which defines inter-State trade as sales occasioning the movement of goods from one State to another or effected by a transfer of documents of title during such movement. The court held that the movement of goods commenced from outside Andhra Pradesh, making the State of Maharashtra or Gujarat the appropriate State for tax purposes. The petitioner-company's failure to submit 'C' and 'E1' forms did not alter this jurisdictional fact.

4. Validity of Assessment Orders for the Years 1961-62, 1962-63, and 1964-65:
The Additional Commercial Tax Officer assessed the petitioner-company to tax for the year 1964-65, which was contested. Similar notices were issued for revising assessments for 1961-62 and 1962-63. The court held that the assessment orders for these years were without jurisdiction as the movement of goods commenced from outside Andhra Pradesh. Consequently, the orders were quashed, and the Deputy Commissioner was restrained from revising the assessments.

5. Status of the Petitioner-Company as a Commission Agent or Commercial Agent:
The court analyzed the terms of the agreement between the petitioner-company and Tata Chemicals, concluding that the petitioner-company was a commission agent. The agreement stipulated that the petitioner-company sold products under the manufacturer's direction, assumed del credere risks, and received a commission. The court found that the petitioner-company did not purchase the goods but merely facilitated sales as an agent. Therefore, the petitioner-company was not liable to be assessed to tax under the Central Sales Tax Act for these transactions.

Conclusion:
All three writ petitions were allowed, and the assessment orders for the years 1961-62, 1962-63, and 1964-65 were quashed. The Deputy Commissioner was restrained from revising the assessments. The court awarded costs to the petitioner-company, with an advocate's fee of Rs. 100 in each petition.

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