2007 (9) TMI 708 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the Commissioner's circulars fixing time limits for constructive delivery.
2. Interpretation of Section 6(2) of the Central Sales Tax Act, 1956.
3. Application of judicial precedents including the Delhi High Court and Division Bench of Rajasthan High Court decisions.
4. Assessment of constructive delivery in the context of inter-State sales.

Issue-wise Detailed Analysis:

1. Validity of the Commissioner's Circulars Fixing Time Limits for Constructive Delivery:
The core issue revolves around whether the Commissioner can issue circulars fixing a time limit of 10 days or 30 days and subsequently lay down guidelines for assessing authorities to infer constructive delivery of goods to the purchasing dealer, even if no physical delivery is taken. The court noted that the Division Bench of the Rajasthan High Court in the case of Guljag Industries Ltd. v. State of Rajasthan had already addressed this issue, holding that there was no question of any notional or constructive delivery under Section 6(2) of the CST Act. The court found that the circulars issued by the Commissioner, which were in direct conflict with this judgment, deserved to be quashed.

2. Interpretation of Section 6(2) of the Central Sales Tax Act, 1956:
Section 6(2) of the CST Act stipulates that subsequent sales made by transfer of documents of title to the goods during their movement from one State to another are exempt from tax, provided certain conditions are met, such as the furnishing of prescribed declarations. The court emphasized that the conditions for exemption are clearly laid out in the Act, and there is no room for importing the concept of constructive delivery into these conditions. The court reiterated that the movement of goods continues until actual delivery is taken from the carrier or bailee, as per Explanation 1 to Section 3(b) of the CST Act.

3. Application of Judicial Precedents Including the Delhi High Court and Division Bench of Rajasthan High Court Decisions:
The court discussed the reliance on the Delhi High Court's decision in Arjan Dass Gupta & Bros. v. Commissioner of Sales Tax, which supported the notion of constructive delivery. However, the Rajasthan High Court's Division Bench in Guljag Industries Ltd. disagreed with this view and aligned with the Allahabad High Court's decision in Karam Chand Thappar and Brother (C.S.) Ltd., which emphasized actual delivery over constructive delivery. The court found itself in agreement with the Division Bench's interpretation, which held that the movement of goods does not terminate until actual delivery is taken by the buyer.

4. Assessment of Constructive Delivery in the Context of Inter-State Sales:
The court examined the concept of constructive delivery and found it irrelevant for granting exemption under Section 6(2) of the CST Act. The court held that the Commissioner's circulars, which introduced the notion of constructive delivery and stipulated time frames for the same, were not legally tenable. The court concluded that the circulars unduly fettered the quasi-judicial discretion of assessing authorities and were without authority of law. Consequently, these circulars were quashed.

Conclusion:
The court dismissed the Revenue's revision petitions, upholding the Tax Board's order that allowed the exemption under Section 6(2) of the CST Act to the assessee. The court found no basis for the Commissioner's circulars that imposed time limits for constructive delivery and emphasized that the statutory conditions for exemption were fulfilled by the dealer. The court's decision reinforced the principle that actual delivery, not constructive delivery, determines the termination of the movement of goods for the purpose of tax exemption under the CST Act.