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TMI Blog1976 (10) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ma Shell Oil Storage and Distributing Company of India Limited on 21st May, 1971 for the purchase of land with super structures comprising petrol tanks, oil installations, pipe lines and other materials in Tondiarpet and Royapurm at Madras as one lot for an aggregate price of Rs. 25,50,000. The assessees, viz. Punamchand R. Shah agreed to pay an earnest money deposit of Rs. 1,11,000 immediately on receipt of the letter of agreement and further earnest money of Rs. 2, 64, 000 on or before 31st May, 1971. The properties comprised in Annexure I to VIII attached to the agreement were sought to be sold by M/s Burmah Shell Company to the assessees. After the purchase of the properties by the assessees, the assessees have sold some movable properties for Rs. 5,04,252 in favour of 3 scrap dealers between 10th Jan., 1972 and 17th March, 1972 and some other movables in favour of 7 persons for Rs. 7,70,994 between 27th April, 1972 and 3rd March, 1973. 3. The assessees have not registered themselves as dealers under the Tamil Nadu General Sales Tax Act and did not submit form A-1 return. The Special Deputy Commercial Tax Officer, Madras City investigated into the transactions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s should have held that the goods were declared goods falling under s. 14(iv) of the Central Sales Tax Act and the rate of tax should be 3 per cent as for declared goods. 6. The points for consideration are as follows: (i) Whether the joint venture of the assessees is not business as defined in s. 2(d) of the Act and the assessees are not dealers as defined in s. 2(g) of the Act? (i) Whether the assessee should be treated as second sellers, since Tvl. Burmah Shell Co. is the first seller? (iii) Whether the goods purchased and sold by the assessee were not in the course of business? (iv) Whether the disputed turnovers related to the sale of declared goods falling under s. 14 (iv) of the C.S.T. Act? And (v) Whether the penalty imposed for 1971-72 is valid and correct? 7. Points (i) (ii) and (ii): In the letter dt. 26th April, 1971 by the Solicitors and Notaries of the assessee, it is stated that Tvl. Burmah Shell Co. at Madras have offered to sell four immovable properties and other assets as a single unit and that the assessee might improve their offer to such an extent to make it acceptable by Tvl. Burmah Shell Co. Subsequent to this letter, the assessees appeared to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and after vacant and peaceful possession of the properties were handed over to the assessees or the nominees of the assessees, the assessees would be liable for all the taxes and out goings in respect of the properties and facilities agreed to be sold including taxes and insurances. From the above specific clauses, it is quite clear that so far as Tvl. Burmah Shell Co., the first seller is concerned, they intended to effect a composite sale of their immovable properties with super structures and additions embedded into the immovable properties as a slump sale for a total single price of Rs. 25,50,000. Accordingly, sale deeds have been executed both in favour of the assessees and their nominee (South India Flower Mills), in respect of the immovable properties subsequent to the purchase of the immovable properties. Therefore, as per the agreement of sale by Tvl. Burmah Shell Co., Burmah Shell Co., can only be treated as the first seller of immovable properties with superstructures and additions and there is no question of Burmah Shell Co., becoming the first seller in respect of the immovable properties, which were subsequently sold by the assessees and which are the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tvl. Burmah Shell Co. To apportion the price according to the break up value and enter the same in the accounts of Tvl. Burmah Shell Co. for tax purposes. It is clear therefore, that the assessees were quite conscious of the fact that they had purchased immovable properties with installations and other movables, which were embedded into the immovable properties and that only after the agreement of purchase, they contemplated getting separate documents of title from Tvl. Burmah Shell Co. for the purpose of avoidance of taxes. In the subsequent letter dt. 10th Dec.,1971 also, the assessees have reiterated the above intention to their Solicitors with a specific mention in the third paragraph that the assessees had made full and final payment to Burmah Shell Co. against the sale of their properties to the assessees as a package deal and that therefore the Solicitors should request M/s. Burmah Shell Co. to release and give possession of movable and immovable properties to enable the assessees to commence removing the movables immediately. In the above latter dated 10th Dec., 1971, we clearly see that the assessees contemplated removing the movables from the immovable properties after p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nture in principle was to acquire certain specific parcels of land, which were subsequently to be redisposed and that in the course of the acquisition and disposal of lands, super-structures had to be disposed of for improving the user of the land and for its better enjoyment. Thus, the assessees have expressed in unequivocal and categorical terms that their intention was to purchase only immovables properties with super structure thereon as a business activity and their intention was not to purchase movables and immovables separately, since Burmah Shell Co. was not willing to sell their movable and immovable properties with super structures thereon in piecemeal. 11. At page 167 of the assessment file we find the letter of the assessees dated 2nd May, 1975 addressed to the Deputy Commercial Tax Officer, Royapuram Division and in page 2, the assessees have clearly stated that they sincerely believed that the sale by Tvl. Burmah Shell by a divisible instrument, constituted transfer of property in real estate as well as the installation materials agreed to be served under the contract of sale. The same idea has been repeated by the assessees in page 2 of their letter dated 3rd March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso requested in that the Deputy Commercial Tax Officer might require the first seller to pay tax. Thus they have made alternative requests to the Special Deputy Commercial Tax Officer either to approach Tvl. Burmah Shell Co. or the subsequent buyers of movable items from the assessees for the purpose of sales tax. 13. At page 109 of the assessment file, we find the agreement of sale executed by the assessees in favour of one Thiru Selvaraj on 26th July, 1971. In the said agreement, there is specific reference to the agreement of sale executed by Tvl. Burmah Shell Co. in favour of the assessees. In the present agreement dated 26th July, 1971, Thiru Selvaraj had undertaken to dismantle two used old storage tanks installed in R.D.O. installation of Tvl. Burmah Shell Co. in Royapuram at his cost and risk. The other movable articles pertaining to the old tanks have been given in detail in paragraph 4 of the agreement of sale in favour of Thiru Selvaraj. No where in the said agreement, it is mentioned, that Thiru Selvaraj would be liable to pay sales tax. 14. At page 119 of the assessment file, we find another agreement dated 9th July, 1971 executed by the assessees in favour of Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... datory to get themselves formally registered and claim exemption with any of the sales tax authorities. After receipt of the above letter, the Commercial Tax Officer (Int). Madras has written his letter D3/4/72-73 dated 26th March, 1973 to the Joint Commercial Tax Officer, Royapuram Division to implement the proposal to assess the assessees for 1971-72 and 1972-73 to levy sales tax on multi point and to levy penalty under s. 12(3) of the Act at 1 1/2 times. This is found at page 10 of the assessment file. Thereupon, the Deputy Commercial Tax Officer issued notice dated 26th March, 1975 proposing to assess the turnovers at Rs. 5,04,252 for 1971-72 and Rs. 7,54,051 for 1972-73 and also proposed to levy penalty under s. 12(3) of the Act. The assessees have referred to their letter dated 3rd March, 1973 mentioning that they had sought the guidance of the Department in getting themselves registered under the provisions of the Act, that fearing the worst, they had voluntarily registered themselves by application dated 14th March, 1973 to the Joint Commercial Tax Officer, Royapuram Division, that their transactions were not sales under the Act and that when the issue was not free from dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has given lesser turnover. In the circumstances, the assessee is not liable to be lived with penalty and we find this point accordingly in favour of the assessees. 18. Point (iv); The contention of the assessee is that the goods that were sold by the assessees are declared goods in their view falling under s. 14(iv) of the Central Sales Tax Act, attracting sales tax at 3 per cent. The assessing officer has assessed at 31/2 per cent in the D-3 notice dated 26th March, 1973 at multi point rate of tax. The Commercial Tax Officer has pointed out that the disputed turnovers were the result of sale of oil storage tanks, shed materials, oil pipes etc. for 1971-72 and sale of oil storage tanks, pipes, machinery, and fittings, etc. for 1972-73 liable to be taxed at 31/2 per cent. We have already found from the reply letters dt. 3rd March, 1973 and 20th March, 1973 that the assessees have denied their entire liability and no defence was raised that the goods sold were declared goods. After receipt of the proposed assessment from the Joint Commercial Tax Officer, Royapuram on 26th March, 1975, the assessee has sent his reply on 2nd May, 1975 which is found at page 167 of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, nuts and bolts to the said tank on the surface of the ground, including ladders, which should be dismantled by the purchaser Thiru P.R. Selvaraj at his cost. Similar description is given in the agreement of sale in favour of Thiru T. Karuppuswamy Chettiar, which is found from pages 49 to 51 of the book file so far as used old storage tanks in the Petrol Section of the Company at Tondiarpet. From the fact that old storage tanks and pipelines which were embedded into the earth were sold for the purpose of being dismantled and removed, it can be reasonable presumed that they were sold only as scraps. 20. It has been held by the Madras High Court in Stage of Madras vs. Raman Co. And others(1) that where the assessee, a dealer in scrap iron, purchased in auction condemned railway coaches, sold by the Railway Department and the assessee later dismantled the condemned railway coaches and sold the resultant iron materials in bulk, it was held that the sale was of scrap only and that the intention of the sellers and buyers could be taken to be to sell or buy condemned articles only, for the purpose of acquiring the property in the old materials contained in those condemned articles. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a declared commodity, are not entitled to plead that sales tax should be levied on that generator set at 3 per cent as a declared commodity. 22. Now we come to the sale of Engine No. 3 Rustom and Hornsby, 2 yards in length. Engine No. 3 has been described in Annexure II at page 63 of the assessment file as 24. 5 B.H.P. (Break Horse Power). The value of the said engine has been given by the assessees themselves at page 121 of the book file as Rs. 2,900. Evidently, the assessees have not sold the engine as scrap material but as an engine in running condition. The assessees have not furnished sufficient material to prove that Engine No. 3 is a declared good under s. 14 (iv) of Central Sales Tax Act. The Revenue has assessed sales tax at 31/2 per cent as multi point goods and the assessees have not proved that sales tax was paid by Tvl. Burmah Shell Co. in Tamil Nadu. In the above circumstance, we find that both generator and Engine No. 3 which are items 4 and 5 of the sale in 1972-73, not declared goods. 23. Now we are left with the third item of sale for 1971-72 viz. shed materials. The value of shed materials sold by the assessees is given as Rs. 25,250 at page 119 of the book ..... X X X X Extracts X X X X X X X X Extracts X X X X
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