2015 (3) TMI 786 - SC - VAT and Sales Tax

Denial of exemption claim - Inter state sale or intra state sale - assessee had purchased Beedi leaves, by participating in the auction conducted by the Forest Department, Government of Andhra Pradesh - After the purchase, the assessee had dispatched the said Beedi leaves to the head office in the State of Maharashtra - Whether the transactions in question are exigible to tax in the State of Andhra Pradesh under the provisions of the Act - Held that - Assessee-herein is a branch office which procures Beedi leaves from the seller. The seller had issued a notice inviting for the tenders and the tender quotes stating the rate per kg at which the prospective purchasers desire to purchase the Beedi leaf to be collected, cured, bagged in trade bags and delivered at the godown of a unit. The assessee had participated in the auction pursuant to the aforesaid invitation and succeeded in its offer. With regard to the conditions of completion of the sale transaction, it is relevant to notice Rule 3(13) of Andhra Pradesh Minor Forest Produce (Regulation of Trade in Abnus Leaves) Rules, 1970 which are applicable to the tender issued by the seller. - The tender schedule, as issued by the seller, also stipulates that the purchaser should remove the stocks from the godowns within 30 days of issue of delivery orders failing which the purchaser will have to pay the godown rent and other expenses on watch and ward, insurance etc. Further, the period for which the stocks remain in the godown, the seller shall not be responsible for any deterioration in the quality of Beedi leaves during the storage in godown. Based on the aforementioned stipulations, it is clear that the delivery of the goods is complete at the godown of the seller on payment of the amount of the agreed consideration. It can be inferred that the events of sale of goods by the seller and the movement of goods from the State of Andhra Pradesh to another State are not inextricably connected and independent of each other. There is no incident of direct sale between the seller and the head office of the respondent-Company in the State of Maharashtra. It is the branch office that purchases the goods and receives them subsequent to payment made by it to the seller and thereafter, transfers it to the head office of the respondent-Company in the State of Maharashtra. The incidence of sale is complete once the purchaser, that is, the branch office renders the payment for the goods. Once the sale transaction concludes in the State of Andhra Pradesh only, the mere transport of goods from branch office in Andhra Pradesh to the head office in Maharashtra would not result in an inter-State sale. Therefore, the sale or purchase of the Beedi leaves in the present case do not occasion the movement of the goods outside the State in order to qualify as an inter-State sale under Section 3(a) of the CST ACT and therefore, is exigible to tax under the Act. - impugned judgment and order passed by the High Court cannot be sustained and requires to be set aside - Decided in favour of Revenue.

Issues Involved:
1. Whether the transactions in question are exigible to tax in the State of Andhra Pradesh under the provisions of the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether the transactions qualify as inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Exigibility to Tax in Andhra Pradesh
The primary issue is whether the transactions conducted by the assessee are subject to tax under the Andhra Pradesh General Sales Tax Act, 1957. The Commercial Taxes Officer (CTO) initially rejected the assessee's claim for exemption, holding that the sale was a single point sale within the state, making it taxable. The First Appellate Authority overturned this decision, deeming the transactions as inter-State sales and not liable to tax under the Act. However, the Revisional Authority later reinstated the CTO's decision, concluding that the transactions were taxable within Andhra Pradesh as the delivery took place within the state before the goods were transported to Maharashtra.

Issue 2: Qualification as Inter-State Sales
The second issue is whether the transactions qualify as inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956. The High Court ruled in favor of the assessee, stating that the transactions were inter-State sales since the goods were purchased with the intention of transporting them to Maharashtra. The Revenue contended that the transportation of goods to another state was not directly linked to the sale transaction, making it a local sale.

Court's Reasoning and Judgment:

Analysis of Legal Precedents:
1. K.B. Saha and Sons Industries Pvt. Ltd. Case: The court distinguished the present case from K.B. Saha's case, where the sale was deemed inter-State due to the buyer's location outside the state and the direct link between the sale and transportation of goods. In the current case, the branch office in Andhra Pradesh was a registered dealer, and the sale concluded within the state before the goods were transported to Maharashtra.

2. Kelvinator of India Ltd. Case: The court reiterated that for a sale to qualify as inter-State, the movement of goods must be an incident of the sale. The sale and movement must be part of the same transaction.

3. Tata Iron and Steel Company Ltd. Case: Emphasized that the movement of goods must have a nexus to the sale for it to be considered inter-State.

4. Sahney Steel and Press Works Ltd. Case: Highlighted that the movement of goods must be a direct result of the sale contract, not merely a transfer between branches.

Application to Present Case:
The court examined the facts and found that the sale transaction between the seller (State Department) and the purchaser (assessee's branch office) concluded within Andhra Pradesh upon payment and delivery at the seller's godown. The subsequent transport of goods to the head office in Maharashtra was a separate event, not directly linked to the sale transaction. The court noted that the delivery of goods was complete once the payment was made, and the movement of goods was at the purchaser's instance.

Conclusion:
The court concluded that the transactions did not qualify as inter-State sales under Section 3(a) of the CST Act. The sale was complete within Andhra Pradesh, and the mere transportation of goods to another state did not render it an inter-State sale. Consequently, the transactions were exigible to tax under the Andhra Pradesh General Sales Tax Act, 1957.

Final Judgment:
The Supreme Court set aside the High Court's judgment and restored the order of the Revisional Authority, holding that the transactions were taxable within Andhra Pradesh. The appeal was allowed in favor of the Revenue.

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