2002 (6) TMI 577 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that orders were being placed by UIL on HEI.
2. Whether the Tribunal was right in holding that there was no provision in the contract between HEI and UIL for market survey and forecasting of requirements.
3. Whether the Tribunal was right in holding that goods of specific sizes and specific varieties were manufactured by HEI in the quantities specified and were sent to UIL.
4. Whether the Tribunal is right in holding that the sales made to UIL should be treated as inter-State sales and liable to be taxed as such in the hands of HEI.
5. Whether the Tribunal was right in directing the assessing authority to decide whether sales made to parties other than UIL were branch transfers or inter-State sales.

Detailed Analysis:

1. Orders Placement by UIL on HEI:
The Tribunal, after reviewing the documents and materials on record, concluded that orders were indeed being placed by UIL on HEI. The Tribunal found that the documents indicated that orders were being placed by UIL and complied with by HEI, with acknowledgments and replies being sent reporting compliance. The Tribunal's conclusion was based on the factual findings that the orders placed by UIL were specific and complied with by HEI, indicating a clear placement of orders.

2. Market Survey and Forecasting of Requirements:
The Tribunal held that there was no provision in the contract between HEI and UIL for market survey and forecasting of requirements. The plea of forecast was raised only after the Commercial Tax Officer sought to assess the sales to UIL as inter-State sales. The Tribunal noted that the terms "forecast" or "market survey" were not used anywhere in the contract or in the correspondence between the parties. This finding was based on the analysis of the contract and the correspondence, which did not support the claim of market survey or forecasting.

3. Manufacturing of Specific Goods:
The Tribunal found that goods of specific sizes and specific varieties were manufactured by HEI in the quantities specified and were sent to UIL. This finding was based on the documents and correspondence that indicated that specific orders were placed by UIL and complied with by HEI, with specific sizes and varieties of goods being manufactured and dispatched as per the orders.

4. Inter-State Sales and Tax Liability:
The Tribunal held that the sales made to UIL should be treated as inter-State sales and liable to be taxed as such in the hands of HEI. The Tribunal's conclusion was based on the factual findings that the movement of goods from Hyderabad to various places was in pursuance of the orders placed by UIL, and the goods were delivered to UIL from the branches of HEI. The Tribunal found that the transactions were clear cases of inter-State sales as the goods were moved in compliance with specific orders placed by UIL.

5. Branch Transfers or Inter-State Sales:
The Tribunal directed the assessing authority to decide whether sales made to parties other than UIL were branch transfers or inter-State sales. The Tribunal held that unless there was evidence to show that the sales to other parties were inter-State sales, they should be treated as branch transfers. This direction was based on the principle that the nature of the transactions should be determined based on the evidence and the specific circumstances of each case.

Conclusion:
The High Court upheld the Tribunal's findings and conclusions, affirming that the transactions between HEI and UIL were inter-State sales and not branch transfers. The Court dismissed the revision petition, holding that the Tribunal's findings were based on substantial evidence and were not perverse. The Court emphasized that the movement of goods was in pursuance of the orders placed by UIL, and the transactions were rightly treated as inter-State sales liable to tax under the Central Sales Tax Act. The Court also upheld the Tribunal's direction to the assessing authority to determine the nature of sales to other parties based on the evidence.