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TMI Blog1984 (1) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by the assessing authority. Aggrieved by this, the appellant preferred an appeal to the Appellate Assistant Commissioner disputing the inclusion of Rs. 90,500 on the ground that the sales were effected outside Tamil Nadu, i.e., in Andhra Pradesh, and cannot properly be subjected to sales tax as inter-State sales. The Appellate Assistant Commissioner took into account the fact that the orders were placed by the Director of Stationery and Printing, Andhra Pradesh, on the Hyderabad branch, that the appellant despatched the goods to its branch office at Hyderabad which delivered the goods to the Director of Stationery and Printing who had not received any consignment directly from the appellant and concluded that the movement of goods from Madras to Hyderabad was not as a result of a covenant or an incident of a contract of sale, but that the goods were sent merely to execute the contract of sale and they had remained property of the appellant till they were delivered to the buyer. In this view, the turnover of Rs. 90,500 was directed to be deleted as representing stock transfer. Purporting to exercise suo motu powers of revision under section 34 of the Tamil Nadu General Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhra Pradesh 1972-73" and then the goods were despatched to the branch of the appellant at Hyderabad and that would clearly indicate that the goods moved from Tamil Nadu to Andhra Pradesh pursuant to a contract entered into between the Director of Stationery and Printing, Hyderabad, with the branch of the assessee at Hyderabad. 3.. Before embarking upon a consideration of these rival arguments, we may refer to section 3 of the Central Sales Tax Act, 1956, which is as follows: "3. When is a sale or purchase of goods said to take place in the course of interState trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce, if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." For purposes of the present case, the two explanations are not germane. Whether on the features laid bare relating to the despatch and delivery of goods in this case, in the light of the provisions aforesaid, the sales effected by the appellant, occasioned the movement of goods from Tamil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13th July, 1972, BT. No. MF/ISO/14 dated 27th July, 1972, and BT. No. MF/ISO/20 dated 24th July, 1972, from the factory of the appellant at Madras. Obviously, BT refers to branch transfers. In any event, there is no indication either in the requisitions for stock or in the acknowledgement thereof to spell out any nexus or link between the supply to the Government of Andhra Pradesh and the despatch of the goods in that connection. The Madras office of the appellant despatched the goods by lorry showing the Hyderabad branch as the consignee and the Hyderabad branch took delivery and delivered the goods raising the invoices for the goods so supplied. The purchase order did not even specify the place from where the goods are to be supplied, and therefore, merely from the fact that the goods had moved from Madras to Hyderabad, it cannot be readily assumed that the movement was only pursuant to a contract for sale of duplicating ink entered into between the appellant and the Director of Stationery and Printing, Andhra Pradesh. It is thus seen that when stocks had been received by the Hyderabad branch of the appellant by way of branch transfers without having been so requisitioned for fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a contract of purchase with the branch office in Andhra Pradesh. That would not either finally or conclusively determine the question as to the nature of the transaction for, the mere marking of the name of the purchaser on the consignment when the lorry receipt under which they were despatched stood in the name of the branch office would not, by itself, be sufficient to prove or establish a contract of sale between the appellant and the Government of Andhra Pradesh. A recent decision of a Division Bench to which one of us was a party, had occasion to examine this question in State of Tamil Nadu v. Hercules Rubber Co. [1983] 54 STC 85. In that case, the assessee, a manufacturer in Madras, despatched certain goods to the branch office at Vijayawada, which booked orders for the supply of goods to the local purchasers. The question arose whether the sales would be inter-State sales. In that case also, the orders were placed at Vijayawada, but the goods were despatched from Madras, received by the branch at Vijayawada and handed over to the purchasers and the price was realised. The assessing authority was of the view that these transactions were inter-State sales; but the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is therefore allowed. There will, however, be no order as to costs. Appendix [The judgment of the Division Bench of the Madras High Court consisting of RAMANUJAM and RATNAM, JJ., in Addison Paints and Chemicals Ltd. v. The State of Tamil Nadu (Tax Case No. 25 of 1978 [Revision No. 17 of 1978] decided on 20th December, 1983) is printed below: ] ADDISON PAINTS AND CHEMICALS LTD. V. STATE OF TAMIL NADU The judgment of the Court was delivered by RATNAM, J.-In this revision petition preferred by the assessee, who is a registered dealer under the Central Sales Tax Act, 1956, relating to the assessment year 1969-70 (CST), the main question that arises for consideration is whether the turnover of Rs. 3,51,050.84 represents stock transfer to branches of the assessee outside the State or inter-State sales effected by the assessee. Before the assessing authority, the assessee claimed that the turnover of Rs. 3,51,050.84 represented transfer of goods by the assessee to its branches at Bombay, Calcutta and Delhi, etc., and therefore, this amount cannot be included in the taxable turnover. The assessing authority was of the view that as the goods delivered to the outside State buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied to the local customers whenever demanded by them and therefore, the turnover in dispute cannot be treated as inter-State sales. Reliance in this connection was placed by the learned counsel for the petitioner on the decision in State of Tamil Nadu v. Hercules Rubber Co. [1983] 54 STC 85. On the other hand, the learned Additional Government Pleader submitted that the movement of the goods from the head office to the branches in the other States was only with a view to fulfil the orders of the customers there, and therefore, there was a link or nexus between the movement of the goods and the contract of the buyers which would suffice to make the transactions in question inter-State sales. Strong reliance was placed on the decisions in English Electric Company of India Limited v. Deputy Commercial Tax Officer [1969] 23 STC 32, English Electric Company of India Ltd. v. Deputy Commercial Tax Officer [1976] 38 STC 475 (SC) and South India Viscose Ltd. v. State of Tamil Nadu [1981] 48 STC 232 (SC). 3.. Before embarking upon a consideration of submissions, it would be necessary to notice section 3 of the Central Sales Tax Act, which is as follows: "3. When is a sale or purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase. Prima facie, therefore, having regard to the circumstances under which and the mode by which the goods were transfered by the assessee to its branch offices, the transactions have to be considered as bare and simple branch transfers and not inter-State sales effected by the assessee. 4.. We now proceed to consider the decisions relied on. State of Tamil Nadu v. Hercules Rubber Co. [1983] 54 STC 85 relied on by the assessee had to consider the question whether the supply of goods by the assessee therein, who was a manufacturer in Madras to the branch office at Vijayawada, which booked orders for the supply of goods to the local purchasers, would be inter-State sales. There also, the orders were placed at Vijayawada, but the goods were despatched from Madras, received by the branch at Vijayawada and handed over to the purchasers and the price realised. The assessing authority held these transactions to be inter-State sales; but the Appellate Assistant Commissioner and the Tribunal thought otherwise. In challenging the correctness of the order of the Tribunal, it was contended that even at the time of package and despatch of the goods, the name of the purchaser had been marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Company of India Limited v. Deputy Commercial Tax Officer [1969] 23 STC 32 relied on by the Revenue, the assessee, a manufacturer in Madras, had a branch at Bombay. Enquiries were made by a local buyer in Bombay office for certain articles and the Bombay office in turn secured the particulars from the Madras office and thereafter, the buyer placed an order with the Bombay office, which prepared the indent and addressed it to the Madras office. After the goods were manufactured, the Madras office despatched the goods to the place of business of the buyer by train. The assessee contended that there was no contract between the assessee and the buyer, that the mere movement of goods from one State to another was not decisive, as the goods had been consigned to Bombay as a result of the instructions of the Bombay office, and that it should not be deemed to be a sale, but would amount at best to the replenishing of the stock from one branch to another. This contention was repelled on a consideration of the several steps taken from the commencement of the transactions between the Bombay and Madras offices. It was held that the Bombay office was merely acting as an agent between the Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract of sale and the movement of goods from one State to another, in order to discharge the obligation under the contract of sale, the interposition of an agent of the seller, who may temporarily intercept the movement, will not alter the inter-State character of the sale. The existence of a prior contract of sale directly between the appellant and the buyer was found. Besides, the goods were admittedly sent pursuant to that contract of sale. It was in that context, the Supreme Court pointed out that so long as there is a direct contract of sale between the assessee and the buyer and goods were despatched pursuant to that contract, the interception of a selling agent at a later stage would not alter the true character of the sale, as the selling agent was mere a conduit pipe and the sale effected by the assessee would be interState sale, for the goods had been despatched from one State to another pursuant to a contract of sale which had come into existence directly between the assessee and the buyer. Such is not the situation in this case. There is no direct link established between the assessee at Madras and the buyers in Bombay, Calcutta and Delhi. This decision also canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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