1995 (2) TMI 389 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay surcharge under the Tamil Nadu Sales Tax (Surcharge) Act, 1971.
2. Determination of the situs of sale for the levy of surcharge.
3. Appropriation of goods to the contract of sale.

Detailed Analysis:

Issue 1: Liability to Pay Surcharge
The core issue in these appeals is whether the assessee is liable to pay surcharge under the Tamil Nadu Sales Tax (Surcharge) Act, 1971. The Joint Commissioner had set aside the Appellate Assistant Commissioner's order, which had deleted the levy of surcharge, and determined the quantum of surcharge slightly less than the original assessment by the Deputy Commercial Tax Officer. The quantum of surcharge for the assessment years 1986-87, 1987-88, and 1985-86 was determined to be Rs. 10,731, Rs. 22,767.18, and Rs. 3,798, respectively.

Issue 2: Determination of the Situs of Sale
The relevant sales were made to Lipton India Limited, whose factory is at Trichy. The goods sold were rice bran oil produced by the assessee at Oorakkarai, Musiri taluk. The original assessing authority levied surcharge on the footing that the property in the goods passed to the buyer at Trichy, where the goods were delivered at the buyer's factory premises. However, the Appellate Assistant Commissioner, relying on the decision in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 STC 150 (Mad.), held that the situs of the sales was Oorakkarai village, Musiri taluk, and not Trichy.

The Joint Commissioner reasoned that the goods should be deemed unascertained or future goods and that the appropriation to the contract of sale gets completed only at the buyer's premises, thereby attracting the surcharge. However, this reasoning was found incorrect by the court. The passing of property has no relevance to fix the situs of sale in view of section 5(1) of the Act. The situs of sale is determined by where the goods were at the time of their appropriation to the contract of sale.

Issue 3: Appropriation of Goods to the Contract of Sale
Section 5(1)(ii) of the Act states that for unascertained or future goods, the sale is deemed to have taken place in the area where the goods are at the time of their appropriation to the contract of sale. The court emphasized that the appropriation of goods means earmarking the goods with reference to the contract of sale by some tangible means, which may also be by delivery to a carrier without the possibility of diversion of the goods.

In this case, the goods were delivered to a carrier at Oorakkarai village, Musiri taluk, which is a non-surcharge area. Therefore, the appropriation took place at Oorakkarai, and not at Trichy. Hence, the surcharge was not leviable.

The court also referred to several precedents, including Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 STC 150 (Mad.), which clarified that the passing of property is irrelevant for determining the situs of sale. The court concluded that the Joint Commissioner's reliance on the f.o.r. delivery terms and the inspection at the buyer's premises was misplaced.

Conclusion:
The appeals were allowed, and the common impugned order of the Joint Commissioner was set aside. The court held that the surcharge was not leviable as the appropriation of goods took place in a non-surcharge area. The passing of property and terms like f.o.r. delivery were deemed irrelevant for determining the situs of sale under section 5(1) of the Act. The appeals were allowed with no costs.