1984 (1) TMI 276 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the turnover of Rs. 90,500 represented inter-State sales or stock transfer.
2. The applicability of Section 3(a) of the Central Sales Tax Act, 1956.
3. The relevance of the movement of goods from Tamil Nadu to Andhra Pradesh.
4. The interpretation and application of previous judgments and legal precedents.

Issue-wise Detailed Analysis:

1. Whether the turnover of Rs. 90,500 represented inter-State sales or stock transfer:
The appellant, a manufacturer and dealer in duplicators and duplicating ink, claimed that the turnover of Rs. 90,500 represented stock transfer from Madras to its Hyderabad branch and not inter-State sales. The assessing authority included this turnover as inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956, and assessed it at 10%. The Appellate Assistant Commissioner, however, concluded that the movement of goods from Madras to Hyderabad was not a result of a contract of sale but was a stock transfer. The Board of Revenue, exercising suo motu powers, set aside the Appellate Assistant Commissioner's order, concluding that the turnover should be considered inter-State sales due to the close nexus between the order placed by the Director of Stationery and Printing, Hyderabad, and the movement of goods from Madras to Hyderabad.

2. The applicability of Section 3(a) of the Central Sales Tax Act, 1956:
Section 3(a) states that 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 occasions the movement of goods from one State to another. The court examined whether the movement of goods from Tamil Nadu to Andhra Pradesh was occasioned by a contract of sale. The appellant argued that the goods were moved as a stock transfer to the Hyderabad branch, which then sold the goods locally. The court found that there was no direct contract for the supply of goods between the Madras office and the Government of Andhra Pradesh, and the goods were standard items manufactured in the ordinary course of business.

3. The relevance of the movement of goods from Tamil Nadu to Andhra Pradesh:
The court examined the method and manner of the transfer of goods, noting that the stock transfer invoices were drawn on the Hyderabad branch, and the goods were delivered by the branch to the local buyer. The purchase order did not specify the place from where the goods were to be supplied. The court concluded that the movement of goods from Madras to Hyderabad was not pursuant to a contract of sale but was a stock transfer, as the goods were manufactured and despatched in the ordinary course of business and not against a specific order for the Government of Andhra Pradesh.

4. The interpretation and application of previous judgments and legal precedents:
The court referred to several precedents, including the decisions in State of Tamil Nadu v. Hercules Rubber Co. and Addison Paints and Chemicals Ltd. v. State of Tamil Nadu, which dealt with similar issues of stock transfers versus inter-State sales. The court emphasized that the nature of the transaction must be determined based on all facts and circumstances. The court also distinguished the present case from the decisions in English Electric Company of India Limited v. Deputy Commercial Tax Officer and South India Viscose Ltd. v. State of Tamil Nadu, where there were direct contracts of sale and specific goods manufactured pursuant to those contracts. The court concluded that the present case fell within the exception recognized by the Supreme Court in Union of India v. K.G. Khosla and Co. Ltd., where goods manufactured in the ordinary course of business and moved for sale as and when offers are received do not constitute inter-State sales.

Conclusion:
The court held that the turnover of Rs. 90,500 did not represent inter-State sales but was a stock transfer from the Madras office to the Hyderabad branch. The appeal was allowed, and the order of the Board of Revenue was set aside. There was no order as to costs.