2014 (3) TMI 39 - HC - VAT and Sales Tax

Stock transfer or interstate sale - Whether in view of the agreement with Delhi Administration, a perusal of which clearly shows that the applicant has to maintain a buffer stock as well as there was no guarantee for purchase of any specific quantity of 50 degree up Rum, still the authorities were justified in treating the stock transfer made to Delhi Depot as inter-State sale - Held that - As is evident from the terms of the agreement, the intention of the parties was to bring about intra-State sales at Delhi from warehouse of the dealer that it was required to establish within the territory of Delhi where the dealer was required to maintain a buffer stock of atleast two trucks without any guarantee of any purchase being actually made by the Delhi Administration. As and when the Delhi Administration would make the purchases, the dealer who was to be a L1-A licensee would supply the goods and replenish the stocks and the things would go on like that during the currency of the agreement. Therefore, as is indicated by the agreement, the movement of the goods to Delhi was not in pursuance of any transaction of sale but in pursuance of the licence under which the dealer was to maintain a warehouse with a minimum stock within the territory of Delhi. The agreement by itself did not bring about any sale or purchase and, therefore, the transport of goods from the distillery in U.P. to warehouse in Delhi could not be treated as a movement of goods occasioned by any sale or purchase. Assessing officer has not probed further into the matter to find out if there was no buffer stock at Delhi and the goods were transported from the distillery only on receipt of the orders. Therefore, there is no evidence to show that the supply of rum to the Delhi Administration in the three years resulted in any inter-State sales taxable in State of U.P. The findings of the authorities below are based on a misconception about the nature of the agreements dated 27th of December, 1984 which, as stated above, did not bring about any sale or purchase. The Tribunal s finding, therefore, that the disputed turnover was taxable as inter-State sales suffers from a legal error and is hereby set aside - Following decision of M/s Central Distillery and Breweries Ltd., Meerut Vs. Commissioner of Trade Tax 1999 (4) TMI 585 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
Determining whether the stock transfer made by the applicant to Delhi Depot constitutes an inter-State sale for the assessment year 1989-90.

Detailed Analysis:

1. Question of Law Raised:
The revisionist challenged the Trade Tax Tribunal's order rejecting the assessee's second appeal regarding the stock transfer to Delhi Depot. Various legal questions were raised, including the justification of treating the transfer as an inter-State sale.

2. Contentions of the Applicant:
The revisionist argued that the stock transfer was in compliance with an agreement with the Commissioner of Excise Department, Delhi, which required maintaining a specific stock quantity at Delhi Depot. Despite submitting Form 'F' to the Assessing Authority, the transfer was treated as a sale.

3. Tribunal's Findings:
The Tribunal upheld the Assessing Authority's decision, mentioning the lack of evidence provided by the assessee regarding the stock transfer. Although Form 'F' was submitted, details were not adequately provided, leading to the rejection of the claim.

4. Judicial Precedent:
The Court referred to a previous judgment involving a similar agreement, emphasizing that the movement of goods to Delhi was not a sale but part of the agreement's terms. The Court highlighted that the mere issuance of Form D by the Delhi Administration did not establish inter-State sales.

5. Court's Decision:
Based on the precedent and the facts of the case, the Court ruled in favor of the assessee, setting aside the Tribunal's order. The disputed turnover was deemed not liable for treatment as an inter-State sale. The Court allowed the revision with costs and directed the Tribunal to take appropriate action in line with the judgment.

In conclusion, the High Court's judgment in this case clarified the legal aspects surrounding the stock transfer to Delhi Depot, emphasizing the importance of evidence and compliance with agreements in determining the nature of transactions for tax purposes.