1989 (9) TMI 366 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the stock transfers from the factory at Sonepat to the Rajpura depot of the Patiala branch were exigible to Central sales tax as inter-State sales.

Detailed Analysis:

Issue 1: Inter-State Sales and Central Sales Tax Applicability

The primary question referred for the court's opinion was whether the stock transfers from the factory at Sonepat to the Rajpura depot of the Patiala branch were correctly treated as inter-State sales exigible to Central sales tax.

The assessee-company, engaged in manufacturing electrical equipment, including transformers, contended that the movement of goods from Sonepat to Rajpura was merely a branch transfer and not pursuant to a contract of sale. They argued that the transformers were incomplete without the accessories fitted at Rajpura, and thus, not ready for use.

The Assessing Authority, however, concluded that the movement of transformers from Sonepat was in pursuance of a contract of sale with the Punjab State Electricity Board. This conclusion was based on several factors:
- Inspection Clause: Clause 22(b) of the purchase order required the transformers to be inspected at the Sonepat factory before dispatch, indicating that the goods were appropriated to the buyer at Sonepat.
- Advance Notice: The assessee had to give advance notice to the Board before dispatching the transformers, suggesting that the movement was in accordance with the contract of sale.
- Ancillary Nature of Accessories: The accessories fitted at Rajpura were deemed ancillary, and their fitting at Rajpura was to prevent damage during transit, not to complete the manufacturing process.

The Deputy Excise and Taxation Commissioner (Appeals) and the Sales Tax Tribunal upheld the Assessing Authority's findings. The Tribunal allowed the assessee to submit C forms for claiming a concession in the tax rate but otherwise dismissed the appeal.

The High Court, upon reviewing the case, agreed with the lower authorities. It emphasized that:
- Contractual Terms: The purchase orders clearly indicated that the transformers were to be inspected and tested at the Sonepat factory, and the movement of goods was in pursuance of the contract of sale.
- Movement of Goods: The movement of transformers from Sonepat to Rajpura was an incident of the contract of sale, making it an inter-State sale under Section 3(a) of the Central Sales Tax Act.
- Supreme Court Precedents: The court referenced the Supreme Court's rulings in cases like Union of India v. K.G. Khosla & Co. Ltd. and English Electric Company of India Ltd. v. Deputy Commercial Tax Officer, which established that the movement of goods in pursuance of a contract of sale constitutes an inter-State sale, regardless of where the property in goods passes.

The court dismissed the assessee's argument that the contract of sale was not complete before the movement of goods, noting that the acceptance of the tender by the Board and subsequent actions indicated a binding contract.

Conclusion:
The High Court concluded that the movement of transformers from Sonepat to Rajpura or Patiala was in pursuance of the contract of sale, making it an inter-State sale exigible to Central sales tax. The question was answered in the affirmative, in favor of the Revenue, with no order as to costs.