9911796707
TMI Blog1997 (11) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... tain incriminating documents were recovered. The incriminating documents so recovered mainly consisted of letters giving instructions to the branches. The said letters and stock transfer challans contained materials pointing out movement of plywoods on inter-State in order to satisfy the pre-existing contracts of sales with customers in the delivery States. To put it otherwise, the initials of the buyers in the delivery States were traceable to the said documents. For such stock transfer , the head office at Calcutta prepared invoices and those invoices also showed the abbreviated names of the parties, to whom the goods were intended. The invoices so prepared did not at all indicate the actual price for which the goods were sold to the buyers of the other States. Yet, in the said invoices, the extent of the trade discount to be given had been indicated. No C forms were also filed in respect of those transactions. 4.. The assessing officer, namely, the Deputy Commercial Tax Officer, Peddunaickenpet South, Madras-1, in such a situation, proposed to include the said transaction to the tune of Rs. 20,11,762.19 to be included in inter-State sales chargeable at ten per cent, alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -dealers are not entitled to concessional rate of levy on the transactions to the tune of Rs. 2,148.09, in the absence of production of C forms and consequently, the said transaction is exigible to tax at ten per cent. He thus disposed of the appeal by certain modifications, as indicated above, by his order dated October 12, 1983. 11.. (a) The assessee-dealers filed further appeal in T.A. No. 1884 of 1983 on the file of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Madras-104 (for short the Tribunal ). (b) The Revenue also filed enhancement petition in T.M.P. No. 356 of 1984 praying for restoration of the order of the assessing officer relating to a turnover to the tune of Rs. 17,80,731.32. 12.. Though the assessee-dealers challenged the levy of tax at ten per cent as relatable to the turnover to the tune of Rs. 2,148.09, yet, during the course of arguments, the assessee-dealers did not press the claim so made for the reason, that they have not filed C forms in proof of the claim. 13. The Tribunal, after taking into consideration the relevant materials placed on record and of course, after hearing the representatives on either side, held that the entirety ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always be based upon certain material facts. A finding, not based upon any material fact, is not finding at all in the eye of law and such a finding cannot at all be called, anything other than the one having its edifice based on perversity. There may be other cases, wherein a required legal fitment is not given to the factual matrix of the case. Such a finding is the resultant product of erroneous application of law. Such a finding, if allowed to stand, is nothing but travesty of justice. Therefore, the court sitting in revision necessarily possesses the power to interfere with the concurrent findings of fact, in such a situation. 18.. The instant case is a glaring example of erroneous application of law to its factual matrix. The moot question falling for determination is as to whether the facts and circumstances of the case relatable to the transactions covering a turnover of Rs. 17,80,731.32 represent stock transfer to branches for open market sale and therefore not exigible to tax under the CSTA or represent inter-State sales exigible to tax at the appropriate rate thereof. 19.. In finding an answer to the tangle so posed, the authorities below, we rather feel, commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale takes place, or, in other words, the agreement to sell merges into a concluded sale, the question regarding the application of the provisions of the CSTA does not arise at all, because the tax is on sale and not on an agreement to sell or a forward contract. (d) Before a sale can be said to take place in the course of inter-State trade or commerce, the following conditions must be satisfied: (i) There is an agreement to sell which contains a stipulation express or implied regarding the movement of the goods from one State to another; (ii) In pursuance of that agreement, the goods in fact moved from one State to another; and (iii) Ultimately, a concluded sale took place in the State where the goods were sent and that State is different from the State from which the goods moved. (e) If these conditions are satisfied then by virtue of section 9 of the CSTA, it is the State from which the goods moved which will be competent to levy the tax under the provisions thereof. In such a case, the question whether the agreement to sell is in respect of ascertained or unascertained goods, or existing or future goods, makes no difference whatsoever so far as the interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was made at Bombay, railway receipt was in the name of the Bombay branch, the goods were delivered at Bombay and there was no privity of contract between the Madras branch and the Bombay buyer. (e) The Madras High Court held that the sale was an inter-State sale falling under section 3(a) of the CSTA. (f) The matter was agitated further by filing an appeal before the Supreme Court. (g) The Supreme Court said that when the movement of goods from one State to another is an incident of the contract of sale, it is a sale in the course of inter-State trade falling under section 3(a) of the CSTA. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. 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 cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-State trade or whether they were intra-State sales effected within the Union Territory of Delhi. (b) The High Court held that the sales were inter-State sales assessable to sales tax under the CSTA by the sales tax authorities of Faridabad. (c) On appeal, the Supreme Court held: (i) that if a contract of a sale contains a stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-State sale. But for the purposes of section 3(a) of the CSTA, it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale can be an inter-State sale, even if the contract of sale does not itself provide for the movement of goods from one State to another but such movement is the result of a covenant in the contract of sale or is an incident of that contract; and (ii) that goods conforming to agreed specifications having been manufactured at Faridabad, the contracts of sale could be performed by the respondent only by the movement of the goods from Faridabad with the intention of deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly between the appellant and the buyer. The goods were sent pursuant to that contract of sale. The interposition at a later stage of the selling agent who acted on behalf of the appellant in the preparation of the invoice and the delivery of the goods did not alter the true character of the sale as the selling agent was just a conduit pipe. The goods having been despatched from one State to another pursuant to a contract of sale which came into existence directly between the appellant and the buyer, the sales effected by the appellant were inter-State sales. (v) In Chesebrough Pond s Inc. v. State of Tamil Nadu [1983] 52 STC 164 (Mad.), the assessee was a manufacturer and dealer in face powder, having its head office and manufacturing unit at Madras and branches at Bombay and other places. A department of the Government of India, known as Canteen Stores Department, which was part of the Defence Ministry, placed orders for the purchase of the goods manufactured by the assessee with the Bombay branch of the assessee. (a) The orders when received by the Bombay branch, were forwarded by that branch to the head office at Madras. The head office then consigned the goods by lorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mil Nadu v. Hercules Rubber Co. [1983] 54 STC 85 (Mad.), the assessee manufactured certain goods in Madras and had their branch office at Vijayawada in Andhra Pradesh. The various purchasers in Andhra Pradesh placed orders with the assessee s branch office there. Subsequently at the instance of the branch office, goods were despatched by the assessee to the branch office. The branch office took those into their stock and subsequently delivered them to its purchasers. (a) On the question as to whether the transactions were in the nature of branch transfers or inter-State sales, this Court held that there was no direct link between the assessee in Madras and the buyers in Andhra Pradesh. The contract of sale had been entered into between the assessee s Andhra Pradesh branch and the local buyers. In view of the fact that there was no direct link between the assessee, who was in Madras and the dealers of Andhra Pradesh, the despatch of the goods could not be taken to have been occasioned by the contract of sale entered into by the assessee s branch with the local buyers. Therefore, the transactions were only in the nature of branch transfers and not inter-State sales. Even if the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch sales. (d) The petitioner-company filed a writ petition in the Supreme Court claiming that the sales were not sales in the course of inter-State trade and praying that, in the event of the transactions being held to be inter-State sales, the petitioner be permitted to avail of the concessional rate envisaged by section 8(1) read with section 8(4) of the CSTA; and that in the alternative, the assessments to local sales tax be quashed in so far as they included the turnover of the stock transferred by the registered office to the branches. (e) In that context, the Supreme Court held: (i) that even if the customer placed an order with the branch office and the branch office communicated the terms and specifications of the order to registered office and the branch office itself was concerned with despatching, billing and receiving of the sale price, the order placed by the customer was an order placed with the company, and for the purpose of fulfilling that order, the manufactured goods commenced their journey from the registered office in the State of Andhra Pradesh to the branch outside the State for delivery of the goods to the customer. Both the registered office and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied purchase tax under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act No. 1 of 1959). (d) The appellant claimed that the sale of sugarcane was an inter-State sale under section 3(a) of the CSTA, and therefore, no tax could be imposed under the local Act. (e) Ultimately, the High Court held that the sale was not an inter-State sale, inasmuch as the sale took place in Tamil Nadu and the property in the goods passed to the appellant in Tamil Nadu and the mere fact of transport of the sugarcane by the appellant from Tamil Nadu to Kerala as its own goods made no difference; and it could not be said that the movement of the goods was a stipulation of or an incident of the contract of sale. (f) On appeal, the Supreme Court held, reversing the decision of the High Court, that the purchases made by the appellant were inter-State purchases. The appellant was permitted to purchase sugarcane in Coimbatore and Pollachi taluks only with a view to and exclusively for the purpose of transporting it to its factory in Kerala. The movement of the goods from Tamil Nadu to Kerala was occasioned by the sale by the farmers or by the purchase by the appellant, whichever way one looked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover of Rs. 17,80,731.32 were stock transfers to branches for open market sale and therefore not exigible to tax. No doubt true it is that there is no written contract between the assessee-dealers and the ultimate purchasers in the States of Bombay and Delhi covering the said sale transactions. The fact that there is no contract of sale between the assessee dealers and the ultimate buyers cannot at all be said to be an insurmountable obstacle in the process of finding out the nature and character of the said transactions, if there are other relevant facts and circumstances besides the conduct of the parties, from which a legitimate inference could be reasonably drawn as to the existence of a contract of sale between the assessee-dealers and the ultimate buyers in various States, pursuant to which the movement of goods commenced from one State to another. 24.. The assessee-dealers despatched the goods by stock transfer, much less to the branches at Bombay and Delhi, covered by the said transactions. While doing so, the assessee-dealers would say that as per the instructions from the head office, they put the specific initials of the ultimate buyers in the States of Bombay and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at Madras, pursuant to or incidental to a contract or covenant of sale. Such being the case, we are not far wrong in coming to the conclusion that the authorities below, namely, AAC and the Tribunal as well had committed grievous error of law in construing the said transactions as one of stock transfer to branches for open market sale and therefore, not exigible to tax. 26.. Even if the said transactions are merely stock transfers to branches for open market sale, there is no need at all to put the initials of the ultimate purchasers of the goods and most of the goods were being sold to those ultimate purchasers, whose initials appeared to bear in the despatches of the said goods. In such state of affairs, the authorities below failed to legitimately infer, from such admitted facts, that the goods moved from the State of Madras to the State of Bombay and Delhi, pursuant to an incident of contract or covenant of sale that came into existence between the assessee-dealers and the ultimate buyers at Bombay and Delhi. 27.. In these days, where scientific advancement relatable to communication facilities are available beyond one s imagination, commercial transactions either int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter is remitted to the assessing officer, with a direction that the assessee-dealers should be given a reasonable opportunity to collect C forms from their ultimate buyers at Bombay and Delhi, as relatable to the transactions, covering the turnover of Rs. 13,87,383 minus Rs. 2,31,030.87 = Rs. 11,56,352.13 and in case, the assessee-dealers produce the necessary and requisite C forms, the assessee-dealers may be given the relief of concessional rate of taxation to the extent of the transactions covered by those C forms so produced. 31.. Mr. N. Inbarajan, learned counsel appearing for the assessee-dealers would also state that the assessee-dealers may be granted liberty to apply to the assessing authorities concerned for the deletion of such transactions in the assessment under the local law, inasmuch as they have paid tax for the local sales effected by the branches. The prayer made in this regard, we rather feel, is incapable of being granted. The reasons are rather obvious. The Supreme Court in Sahney Steel and Press Works Ltd. [1985] 60 STC 301 (SC) issued such a direction, obviously because of the power inhering in its favour under article 142 of the Constitution of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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