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2014 (9) TMI 140 - HC - VAT and Sales TaxLevy of tax under section 3(a) read with section 6 of the Central Sales Tax Act, 1956 - movement of goods from one State to another - assessee contended that the goods which were moved from Bangalore to Delhi are not the finished product and are in the nature of components or parts of the goods and therefore, the CST Act is not attracted. - Held that - the essence of an interState sale or purchase is the movement of goods from one State to another. If the movement of goods from one State to another is a result of a covenant or an incident of the contract of sale, then the sale is an interState sale, no matter in which State the property in the goods passes. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding interState movement must be specified in the contract itself. It would be enough if the movement was in pursuance of or incidental to the contract of sale. Therefore only when sale or purchase of goods occasions movement of goods from one State to another, the liability to pay tax under the Act is attracted. If the goods are manufactured and transported to another State merely because before delivery of the goods in terms of the contract some additional fixture were embedded to that manufactured goods, it would not nullify the effect of the goods being transported after it is being manufactured from one State to another. The effect of an inter-State sale is not effaced by such additions to manufactured product. This court in its revisional jurisdiction cannot interfere with the finding of fact recorded by the appellate authority based on legal evidence. Therefore the contention that what is transported from Bangalore to Delhi was only a part of the rolling stock and it was not a finished product has no substance. In a contract of this nature, what is to be seen is, what is the dominant nature. If the contract is looked into from that angle, it is very clear that after importing material from Korea, after getting locomotive part from Kolkata, Chennai and Coimbatore, at BEML, these rail coaches were assembled, fabricated, manufactured, tested and only after they found road worthy, they were despatched from Bangalore to Delhi on rails. Therefore the goods agreed to be sold under the contract of sale were moved from Bangalore to Delhi in terms of the agreement of sale and sold at Delhi. Therefore all the ingredients which have to be satisfied to attract the liability of tax under section 6 are fulfilled in this case. Agreement of sale occasioned movement of goods from Bangalore to Delhi the tax to be levied is on the value of the goods. After it reaches its destination at Delhi, if there are any value additions, that cannot be the subject-matter of levy of tax under the Act by the State of Karnataka under section 9 of the Act. It was further contended that as at the point of actual sale, the Government of India had not granted exemption from payment of customs duty and excise, all of them have added to the value of the goods. Therefore, the tax levied under section 9 is on the total value. Once Government of India granted exemption from payment of customs duty and excise duty, corresponding value of the goods is to be reduced and tax leviable under section 6 is to be confined only to that net value of the goods which were manufactured at Bangalore and transported to Delhi. If it is so it is open to the assessee to approach the authorities by furnishing the particulars which are relevant and if the authorities are satisfied firstly that there was value addition at Delhi and the cost of the goods includes customs duty as well as excise duty which is exempted, certainly, they would work the liability of tax payable under section 6 in accordance with law. That would meet the ends of justice - Decided against assessee.
Issues Involved:
1. Applicability of Section 3(a) read with Section 6 of the Central Sales Tax Act, 1956. 2. Applicability of Section 5(2) of the CST Act for exemption from tax. 3. Exclusion of tax payable on components embedded to rail cars at Delhi from the computation of tax. Detailed Analysis: Issue 1: Applicability of Section 3(a) read with Section 6 of the Central Sales Tax Act, 1956 The court examined whether the movement of goods from Bangalore to Delhi under the RSI contract constituted an inter-State sale under Section 3(a) of the CST Act. The key facts include: - The consortium, MRM, imported parts from Korea and Japan, which were then assembled into train sets at BEML, Bangalore. - BEML manufactured and tested the train sets, which were then transported to Delhi for final assembly and commissioning. - The court held that the movement of goods from Bangalore to Delhi was occasioned by the contract, making it an inter-State sale. - The court concluded that the goods were fabricated and manufactured in Karnataka and moved to Delhi, satisfying the requirements of Section 3(a) and attracting tax under Section 6. Issue 2: Applicability of Section 5(2) of the CST Act for Exemption from Tax The court addressed whether the goods imported by the consortium were exempt from CST under Section 5(2), which deals with sales in the course of import: - The court noted that Section 5(2) exempts goods imported into India from CST. - However, the court found that the imported parts were used in manufacturing new goods (train sets) in India, which were then moved inter-State. - The court ruled that the exemption under Section 5(2) did not apply because the goods were not sold in the course of import but were part of a manufacturing process that resulted in inter-State movement. Issue 3: Exclusion of Tax Payable on Components Embedded to Rail Cars at Delhi from the Computation of Tax The court considered whether the value additions made to the train sets in Delhi should be excluded from the CST computation: - The assessee argued that the train sets were not in a deliverable state until additional components were added in Delhi. - The court found that the dominant nature of the contract was for the supply of train sets, and the additional work done in Delhi was incidental. - The court held that the train sets were complete and functional when they left Bangalore, and the subsequent additions did not change the nature of the inter-State sale. - The court allowed the assessee to approach the authorities to reassess the tax if they could prove value additions in Delhi and exemptions granted for customs and excise duties. Conclusion: The court dismissed the revisions, upholding the orders of the lower authorities that the transaction was an inter-State sale under Section 3(a) of the CST Act, attracting tax under Section 6. The court also dismissed the writ appeals as infructuous. The court provided the assessee an opportunity to seek reassessment if they could substantiate their claims regarding value additions and exemptions.
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