1990 (9) TMI 336 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the movement of goods from Uthagamandalam to Cochin was occasioned by specific purchase orders from M/s. RIL, Bombay, thereby attracting section 3(a) of the CST Act.
2. Whether the sales were export sales.
3. Whether the movement of goods was merely a stock transfer to the Cochin branch.

Detailed Analysis:

Issue 1: Movement of Goods and Section 3(a) of the CST Act
The primary issue was whether the movement of goods from Uthagamandalam to Cochin was occasioned by specific purchase orders from M/s. RIL, Bombay, thereby attracting section 3(a) of the CST Act. The petitioners argued that the goods were regularly dispatched to Cochin for storage and not in pursuance of any specific purchase orders. The assessing authority, however, held that the turnover was liable to be taxed under section 3(a) at 10% for Rs. 25,92,061.83 and at 4% for Rs. 1,42,550.12 due to valid "C" form declarations.

Upon appeal, the Appellate Assistant Commissioner and the Tribunal upheld the assessment, concluding that the goods moved from Uthagamandalam to Cochin in pursuance of contracts of sale between the petitioners and RIL, Bombay. The High Court, however, found that the despatches were regular and not related to specific purchase orders. The court observed that the goods were moved to Cochin for storage and were earmarked only upon receipt of export or sale orders. The court further noted that the Revenue failed to prove that the despatches were made specifically to meet particular orders from RIL, Bombay.

Issue 2: Export Sales
The petitioners contended that the sales were export sales and should not be taxed under the CST Act. The court considered the facts that the goods were shipped to foreign buyers through RIL, Bombay, and payments were made by RIL to the petitioners upon receipt of export proceeds. However, the court found that the transactions involved two distinct sales: one from the petitioners to RIL, Bombay, and another from RIL, Bombay, to the foreign buyers. Therefore, the sales could not be considered direct export sales by the petitioners.

Issue 3: Stock Transfer to Cochin Branch
The petitioners argued that the movement of goods was merely a stock transfer to their Cochin branch, where the goods were stored until further orders were received. The court examined the modus operandi of the transfers and found that the goods were regularly dispatched to Cochin for storage, irrespective of any specific purchase orders. The court also noted that the goods were marked and stenciled at Cochin only after receipt of export or sale orders, indicating that the movement was not occasioned by any particular sale.

Conclusion:
The High Court concluded that the turnover involved in the reopening of assessment did not comprise inter-State sales within the meaning of section 3(a) of the CST Act. The assessing authorities and the Tribunal were not right in holding that the goods were transferred to Cochin in pursuance of contracts of sale. The court held that section 3(a) does not come into play and allowed the tax cases, setting aside the orders of the assessing authority, the Appellate Assistant Commissioner, and the Tribunal.

Separate Judgments:
There were no separate judgments delivered by the judges in this case.

Petitions allowed.