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TMI Blog1998 (2) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... it notes and, therefore, the appropriate year for making the claim for sales return would be the year in which the credit notes were issued. He, therefore, held that in respect of the sales return in which the credit notes were issued in the subsequent year, viz., 1977-78, the claim of the assessee can be considered only in the year 1977-78 and completed the assessment rejecting the claim of the assessee for deduction towards the sales return. The assessee preferred an appeal to the Appellate Assistant Commissioner objecting to the disallowance of the claim of the assessee on sales return. The Appellate Assistant Commissioner in a brief order followed the decision of this Court in Traders and Traders v. State of Tamil Nadu [1977] 40 STC 289 and held that the claim for the sales return can be claimed in the year in which the sales were effected and therefore, the assessee was eligible to claim the deduction for the sales return amounting to Rs. 7,86,839.70 in the assessment year 1976-77. 4.. The Joint Commissioner II, Commercial Taxes Department, Chennai, on a perusal of the records, found that the assessee was granted, inter alia, the deduction of the turnover of a sum of Rs. 8,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joint Commissioner held that the said turnover should be assessed at the rate of 10 per cent and accordingly, passed the impugned order. It is against this order, the present appeal is filed. 6.. Mr. C. Natarajan, learned Senior Counsel appearing for the assessee, submitted that there can be a number of inter-State sales during a single movement of the goods which are exempt under certain conditions but otherwise taxable which is contemplated under section 6 of the CST Act. He submitted that the Legislature was not obliged to provide for the deduction under section 8A of the CST Act in respect of the sales turnover once a taxable event of sale occurs. However, the Parliament has provided for certain deductions from the sale price of all goods returned to the dealer by the purchaser of such goods within a period of six months from the date of delivery of the goods. He further submitted that section 8A of the CST Act would operate in a case where there is a concluded sale and sale price accrued in favour of the dealer which would form part of the turnover. Section 8A of the CST Act provides that the goods shall be returned to the dealer by the purchaser within a period of six mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the grant of deduction under section 8A of the Act is subject to safeguards and the authorities are competent to examine the reason for return, evidence of return and refund of prices, and only in the case of genuine transactions, the benefits of section 8A of the CST Act would be available to the assessee-dealer. He submitted that there is no difference between the head office and a branch office of the same company and the branch is only an agency of the company and the fact that there is a separate registration for the branch office would not confer a personality distinct from the firm or company and therefore, when the goods were returned by the buyer at Bhopal to an agent at Bhopal of the selling dealer, it must be taken as a sales return to the selling dealer and the order of the Joint Commissioner that the goods must physically come back to the State of Tamil Nadu is not sustainable in law. In support of his contentions, he relied upon the following decisions: (i) Sahney Steel and Press Works Ltd. v. Commercial Tax Officer [1985] 60 STC 301 (SC); (ii) Sri Ganesan Traders v. Union of India [1994] 95 STC 273 (Mad.); (iii) Metal Alloy Company Pvt. Ltd. v. Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self that there was a return of the same goods. He further submitted that it is true that there may be several inter-State sales during the course of a single movement of the goods from one State to another, but if the goods are ultimately rejected, the goods must find a way to the State of origin and then only, the assessee can claim the deduction under section 8A of the CST Act. The further submission of the learned Government Advocate is that section 8A is a provision to grant deduction and it should be construed in a very strict manner and if the assessee s contention is accepted, it will lead to tax evasion as it is not possible for the authorities in the State of Tamil Nadu to verify whether the goods were actually returned to the agent in an outside State and if the assessing officer has to satisfy himself on the basis of some delivery orders that there is a sales return, it will lead to a situation that the local agent may sell the goods outside the State avoiding the levy of Central sales tax in the State of Tamil Nadu. He further submitted that the decision in Thavakkal Agencies v. State of Tamil Nadu [1981] 47 STC 179 (Mad.) would squarely apply to the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods moved. If these conditions are satisfied, as already indicated, then, by virtue of section 9 of the Central Act, it is the State, from which the goods moved, which would be competent to levy tax under the provisions thereof. Thus, the interState sale of goods of description, as mentioned in section 3 alone is taxable or chargeable under section 6. ................................. Subsequently, section 6A of the Central Act prescribing a declaration in form F had been inserted and come into force with effect from April 1, 1973. The question is as to whether rule 4(3A) is inconsistent with the provisions of section 6A and rule 12(5). The answer to such a question is traceable, with ease and grace, if one is able to understand the reason why section 6A and rule 12(5) prescribing a declaration in form F had been made. The statement and object clause for enactment of such a provision, as had been extracted earlier, if perused, would point out that those provisions had been enacted mainly to prevent dealers trying to show even genuine sales to third parties as transactions of the type of branch transfer. What had been enacted under those provisions was relatable to burd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case: It often happens in the business world that a customer who has purchased a commodity from a dealer might wish to return it for some reason, and the dealer may also be agreeable to that course and be willing to refund the price. If both the parties act according to their second thoughts in the manner aforesaid, what happens is a sales return, as it is described in the fiscal jargon. But this does not abrogate the sale or render it, retrospectively, a nullity. On the contrary, it takes note of the circumstance that the earlier sale is an accomplished fact. Only the parties agreed to put themselves in the former position, the status quo ante, by consensual overt acts-the one returning the goods and the other refunding the price. Technically, therefore, on the theory that sales tax attaches at the moment of sale, there is no call for making any provision in the taxing Act for giving any relief to the dealer whose sale, which is subject to a subsequent return, is chargeable to tax. 10.. The Supreme Court in Deputy Commissioner of Sales Tax (Law) v. Motor Industries Co. [1983] 53 STC 48 held that the deduction in respect of sales return has to be claimed in respect of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an inter-State sale and what is decisive is the movement of the goods from one State to another. 12.. In Metal Alloy Company Pvt. Ltd. v. Commercial Tax Officer [1977] 39 STC 404, the Calcutta High Court made a distinction between the return of the goods and rejection of goods and in the case of return of the goods, there is a bilateral transaction brought about by the consent of the seller and the purchaser, which consent may have been effected either prior to the delivery of the goods or subsequent to such delivery. The Calcutta High Court held that in the case of rejection of goods, there is an unilateral transaction governed by the provisions of the Contract Act or the Sale of Goods Act, open to the purchaser. In this context, we may refer to some of the decisions relied upon by the learned Senior Counsel for the assessee. In Commissioner of Sales Tax v. Auraiya Chamber of Commerce [1986] 62 STC 327 the Supreme Court held that even in a fiscal statute, equity should prevail wherever language permits. The relevant passage of the Supreme Court reads as under: The rights and the obligations of the parties must be found within the four corners of the Act and this Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IR 1955 SC 182, the Supreme Court when construing the provisions of the West Bengal Jute Goods Future Ordinance, 1949, construed the words, actual delivery of possession and held as under: If the narrow construction which was put by the Appeal Court on the expression actual delivery of possession was accepted it would involve each one of the intermediate parties actually taking physical or manual delivery of the goods from their sellers and again in their turn giving physical or manual delivery of the goods which they had thus obtained to their immediate buyers. Such an eventuality could never have been contemplated by the Government and the only reasonable interpretation of the expression actual delivery of possession can be that actual delivery as contrasted with mere dealing in differences was within the intendment of the Ordinance and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession. The Supreme Court in the same case further held as under: The mate s receipts or the delivery orders as the case may be, represented the goods. The sellers handed over these documents to the buyers against cash p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. We are not concerned with section 4 or section 5 and under section 6 of the CST Act, the liability to tax on inter-State sales is imposed. Section 6A is also relevant for the purpose of this case, which deals with the burden of proof in the case of transfer of goods claimed otherwise than by way of sale. We do not want to burden the judgment with section 7 or section 8 of the Act. Section 8A of the CST Act provides for determination of turnover. We are concerned with section 8A(1)(b) which deals with the sales return and the relevant provision reads as under: In determining the turnover of a dealer for the purposes of this Act, the following deductions shall be made from the aggregate of the sale prices, namely: (a)..................... (b) the sale price of all goods returned to the dealer by the purchasers of such goods- (i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May, 1966 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee-dealer at Madras and the transaction could not be termed as a sales return. We have already quoted the provisions of section 8A of the CST Act. In our opinion, on a fair reading of section 8A of the CST Act, there is nothing in section 8A of the Act warranting the view taken by the Joint Commissioner that the goods must be returned to the State from which the sale originated. The statutory conditions prescribed in section 8A of the CST Act are (i) that within a period of six months from the date of delivery of the goods, the goods must be returned to the dealer ; (ii) that satisfactory evidence of such return of the goods must be furnished before the assessing authority ; and (iii) that the refund or adjustment on account of the sale price has also been made and the evidence to that effect must be produced before the authority competent who is assessing the dealer. If the assessee-dealer is able to satisfy the statutory conditions prescribed in section 8A of the CST Act, the assessee would be entitled to deduction on the sales return. The section does not in any way contemplate that the goods must be returned to the place of despatch. The emphasis that is given i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States would be able to claim deduction towards sales return. 19.. The legislative history traced in Sri Ganesan Traders case [1994] 95 STC 273 (Mad.) suggests that the tax on goods moved from one State to another in the course of inter-State trade or commerce leads to the fulfilment of certain legal requirements pursuant to either Central or State legislation as a sequence of constitutional prescriptions. The resultant position is that we are having Central Act in hand and when it is not possible and plausible in commercial world that the goods must physically pass through several States for the dealer to claim deduction towards sales return and if the physical movement from one State to another is insisted upon, it will create great hardship. The court has to take note of commercial realities and it cannot be presumed that a procedural provision like section 8A of the CST Act contemplates the physical return of the goods for the assessee to claim sales return. We are of the opinion that when the Parliament has not provided that the deduction towards sales return should be granted only when the goods are physically returned to the dealer in the State of origin, it is impermissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler only if the assessee-dealer is able to produce satisfactory evidence of the return of the goods to the dealer and refund or adjustment of the sales price before the authorities. Consequently, if the goods were sold and then returned to the selling dealer by the purchaser within the prescribed period for one reason or another, the assessee would be entitled to deduction towards sales return subject to the fulfilment of other conditions. We have also seen that the decision of the Kerala High Court in Grasim Industries Limited case [1995] 96 STC 285, held that the sales return means the return of the very goods purchased by the buyer in whole or in part and it is a reversal of the sale and therefore, when the identity is lost or when the goods returned are not the same goods sold by the dealer, the assessee is not entitled to claim the deduction towards sales return. The Act contemplates that the assessee must be able to satisfy the authorities on the basis of the satisfactory evidence of return of the goods sold by the selling dealer to the buyer. It is open to the authorities to satisfy themselves on the evidence produced that the goods returned are the very same goods purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the concept of sales return contemplates at least at one point of time, the transfer of physical possession of the goods by the buying dealer to the selling dealer. So also the decision of the Supreme Court in Bayyana Bhimayya Sukhdevi Rathi v. Government of Andhra Pradesh [1961] 12 STC 147, that the delivery order is a document of title is not very helpful in deciding the controversy before us. 24.. We have seen that according to the assessee-dealer, M/s. Sikri and Grover at Bhopal is a distributor and there was a sale by the assessee-dealer to M/s. Sikri and Grover and the sale was a section 3(b) sale and the assessee also offered the same for the purpose of assessment under the CST Act and paid the tax also. When M/s. Sikri and Grover sold the goods to BHEL, BHEL did not accept the same, but returned the goods and at least at that point of time, there should have been a physical transfer of the goods in favour of M/s. Sikri and Grover. But, it is not further clear whether M/s. Sikri and Grover had entered into a separate contract with the assessee-dealer to transfer the goods in favour of the assessee-dealer. It is also not clear to whom M/s. Sikri and Grover returned the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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