2021 (2) TMI 247 - HC - VAT and Sales Tax

Jurisdiction - Inter-state sales or not - resident dealer in Tamil Nadu or not - Assessing Officer was of the view that since the furnished goods manufactured by M/s.UHEL moved to other states from the State of Tamil Nadu, the State of Tamil Nadu is the appropriate State to assess the transactions under Section 9(1) of the CST Act - HELD THAT - Section 3 of the CST Act falls under Chapter 2, which is a chapter dealing with formulation of principles for determining when sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a State or in the course of import or export. Section 3 explains as to when a sale or purchase of goods is said to take place in the course of inter-state trade or commerce. To qualify as a sale to have been taken place in the course of inter-state trade or commerce, two conditions have been stipulated, which are highly exclusive on account of the use of the expression or - Therefore, if the sale or purchase occasions the movement of goods from one State or another, it would qualify for a sale in the course of inter-state trade or commerce or if a sale or purchase is effected by a transfer of documents of title to the goods during the movement from one State to another, it would qualify as a sale in the course of inter-state trade or commerce. The Tribunal took note of the sub-contract entered into between the first respondent-assessee and M/s.UEHL, dated 24.06.1983. The terms and conditions of the said subcontract have been extracted in paragraph 14 of the impugned order passed by the Tribunal. On a perusal of the same, it is abundantly clear that what has been entrusted to M/s.UEHL is only a job work. The contract entered into by the first respondent-assessee with a party in Orissa or any other State is the main contract, for which, the assessee has entered into a sub-contract by supplying raw materials, so as to enable the sub-contractor to manufacture as per the design supplied by the first respondent-assessee. The first respondent-assessee has further instructed the sub-contractor, upon permission of the job worker to despatch the goods directly to others where the contract is being performed and is being fulfilled by the first respondent. Whether movement of goods from the State of Tamil Nadu, at the instance of the sub-contractor, to another State, could be construed as a sale in the course of inter-state trade or commerce. Indisputably, the title to the goods, though in the form of a raw material, continued to remain with the first respondent-assessee. What was entrusted with the UEHL was only a job work and the specifications have been clearly set out in the sub-contract. Therefore, the Tribunal rightly took into consideration the nature of the transaction and also took note of the important fact that the contract is a composite contract executed by the first respondent outside the State of Andhra Pradesh, for which, the first respondent showed various materials pertaining to various job workers for various purpose and the contracts were executed only by the first respondent at the designated place, which is situated outside the State of Andhra Pradesh. The Tribunal has not committed any error for us to substitute our opinion. Furthermore, the manner in which the Tribunal has appreciated the nature of contract and as to how the title to the goods was never transferred to M/s.UEHL are all findings on facts, which are perverse or unsustainable for us to interfere under Article 226 of The Constitution of India - Petition dismissed.

Summary

Issues:
Challenge to the common order passed by the Tribunal allowing appeals filed by the first respondent-assessee and setting aside assessments made under the CST Act by the Commercial Tax Officer, Podanur assessment circle.

Analysis:
1. The Tribunal considered the nature of the transaction between the first respondent-assessee and M/s.UEHL, focusing on the sub-contract terms and conditions. It found that the first respondent-assessee had a composite contract for manufacturing finished products to be supplied in various states. The Tribunal determined that the goods did not move from Tamil Nadu to the ultimate buyers in other states, thus not constituting an inter-state sale under Section 3(a) of the CST Act.

2. The Tribunal analyzed the provisions of the Act and relevant case law, including Bharat Heavy Electrical Limited Vs. Union of India. It concluded that no sale or incidence of sales took place in Tamil Nadu as the title to the goods was not transferred to the ultimate buyers in other states. Additionally, the Tribunal held that the Assessing Officer lacked jurisdiction to assess the first respondent-assessee, further supporting its decision to allow the appeals.

3. The High Court reviewed the Tribunal's decision in detail, emphasizing the conditions under Section 3 of the CST Act for a sale to qualify as inter-state trade or commerce. It examined whether the transaction fell under Clause (a) or (b) of Section 3 and agreed with the Tribunal's assessment that the transaction did not meet the criteria for an inter-state sale.

4. The High Court upheld the Tribunal's findings, stating that the Tribunal correctly considered the nature of the contract and the non-transfer of goods' title to M/s.UEHL. It noted that the decision was based on factual findings and legal precedents, including the case of Bharat Heavy Electrical Limited, and found no grounds to interfere with the Tribunal's order under Article 226 of the Constitution of India.

5. Consequently, the High Court dismissed the writ petitions, ruling in favor of the first respondent-assessee and affirming the Tribunal's decision. No costs were awarded in the matter.