2023 (1) TMI 797 - HC - VAT and Sales Tax

Time bound supply scheme - branch transfers - interstate sales - Section 3(a) of the Central Sales Tax Act, 1956 - Whether in the facts and in the circumstances of the case, the Tribunal has ignored the fact of absence of any conceivable links with the customers and the despatch of the goods to the Branch? - HELD THAT - There can be no manner of doubt that an AO is required to examine each transaction forming the subject matter of the assessment proceedings to determine whether it amounts to a branch transfer as contended by the Assessee or an interstate sale as contended by the Department. Therefore, the decision in any particular year, even involving the same Assessee and the same scheme, need not necessarily form a precedent for a subsequent year since the transaction in each subsequent year will have to in any event be examined on a case by case basis. Therefore, there need not be any apprehension entertained by the Department that if the Court for the present year i.e. 1988-89 decides that the transactions in question do not amount to interstate sales then in all subsequent years ipso facto, without anything more, all the transactions for those years will also be termed only as branch transfers and not interstate sales. While the Assessee has discharged its initial burden of showing that the transaction was only a branch transfer, the Department has been unable to discharge its burden of showing that in fact the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale occasioned by a concluded contract - the Court is not persuaded that the matter pertaining to 1988-89 should again be sent to the Tribunal for verification of each transaction to determine whether it is an interstate sale as contended by the Department. The Court notes that nearly 35 years have already elapsed since the year 1988-89 and these proceedings cannot interminably carry on. The impugned order of the Tribunal and the corresponding orders of the First Appellate Authority and the AO are hereby set aside - issue answered in favour of the Assessee and against the Department.

Summary

Issues:
1. Determination of whether goods manufactured by sale in Rourkela Steel Plant and dispatched to different branches outside the State of Odisha under specific schemes constitute interstate sales.
2. Examination of the absence of a conceivable link with customers and dispatch of goods to the branch.
3. Assessment of whether transactions for the year 1988-89 were branch transfers or interstate sales.

Issue 1:
The primary issue in this case revolves around the classification of goods manufactured and dispatched by Steel Authority of India Ltd. (SAIL) to its branches outside Odisha. The Odisha Sales Tax Appellate Tribunal referred questions regarding the treatment of these transactions under the Central Sales Tax Act, 1956. The Petitioner argued that the transactions were branch transfers, citing a similar Supreme Court judgment involving branch transfers. The Department contended that each transaction must be verified to determine if they constitute interstate sales or branch transfers.

Issue 2:
Another aspect under consideration was the alleged absence of a direct link between customers and the dispatch of goods to branches. The Petitioner emphasized the distinction between 'standard goods' and 'non-standard goods' transferred to branches under specific schemes. The Court examined the documentation related to customer demand registration, highlighting clauses indicating a lack of commitment to supply materials upon registration.

Issue 3:
The core dispute for the year 1988-89 was whether the transactions in question were branch transfers or interstate sales. The Department sought to send the matter back to the Tribunal for further examination based on previous years' cases. However, the Court emphasized the need to assess each transaction independently and rejected the idea of a blanket classification for subsequent years based on the current decision.

In its detailed analysis, the Court referenced the Supreme Court judgment in Tata Engineering and Locomotive Co. Ltd., emphasizing the need to establish a concluded contract for goods movement to qualify as interstate sales. The Court noted the lack of evidence from the Department to refute the Petitioner's claim of branch transfers. Ultimately, the Court ruled in favor of the Assessee, determining that the transactions in 1988-89 were branch transfers and not interstate sales. The Court highlighted the need for a case-by-case examination of transactions and clarified that the decision for one year does not automatically apply to subsequent years.