9911796707
TMI Blog2002 (1) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... ) No. III, Enforcement Wing, Hyderabad, under the administrative control of the Commissioner of Commercial Taxes, inspected the business premises of M/s. Darshak Enterprises, S.D. Road, Secunderabad, which is the sole distributor of Symphony air-coolers in Andhra Pradesh from whom the petitioner/dealer purchased the air-coolers. The said inspection revealed that the selling dealers, namely the M/s. Darshak Enterprises have purchased the air-coolers in dispute in the course of inter-State transaction from M/s. Sanskrut Comfort Systems Limited, Ahmedabad and that the sale was effected in favour of M/s. Darshak Enterprises by transfer of documents of title during the course of movement of goods from Ahmedabad, Gujarat State to Andhra Pradesh and before they were taken delivery in Andhra Pradesh. It is also noticed that subsequently M/s. Darshak Enterprises also sold the said air-coolers in dispute during the transit of the goods before taking delivery from the transporters at Secunderabad by transferring the documents of title, like Lorry Receipts (LRs), in favour of the petitioner/dealerM/s. Sruthi Agencies, which also happened to be an inter-State sale, which was effected as a trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es including the one at Secunderabad. After receiving the goods by the branch of the manufacturing unit, it transfers the goods to the sole distributor, which is also located in Secunderabad by raising necessary sale documents. After receipt of the goods by the sole distributor the sole distributor, M/s. Darshak Enterprises sells the same to its distributors. It is also stated by the learned counsel that the sole distributor, M/s. Darshak Enterprises, had six sales distributors in the State of Andhra Pradesh of whom three are located in Hyderabad. It is therefore stated that the petitioner/dealer is a third successive party to receive the goods in the State and therefore, the sale made by the petitioner/dealer could not be considered as a first sale. The learned counsel also contended that the manufacturer with its branch at Secunderabad is a separate and independent legal entity. Similarly, M/s. Darshak Enterprises, the sole distributor is also a separate entity, which is being assessed separately. The petitioner/dealer is yet another independent entity, who purchased the goods manufactured by M/s. Sanskrut Comfort Systems Limited from its sole distributor M/s. Darshak Enterprises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such evidence. On the other hand, it is the case of the petitioner/dealer that the branch office after receiving the goods raised invoices against the sole distributor and delivered the goods, which in turn again raised sale invoice against the petitioner/dealer and effected the delivery of goods. Therefore, the claim made by the department that there was a transfer of title in the goods while the goods was in movement from one State to another is without any material. Similarly, the other claim of the department that there was a second transfer by way of endorsement of the lorry receipts by the sole distributor to the petitioner/dealer is also without any material. The documents that were produced showing the movement of the goods from the manufacturer to its branch including the Central Excise Gate-Pass and the Memo of Stock Transfer shows that the consignor is the manufacturing company at Gujarat and the consignee is its branch office at Secunderabad. Therefore, it is clear that the goods had moved from Gujarat to Andhra Pradesh only by way of stock transfer from the manufacturer to its branch office and no sale or inter-State sale is involved in such transfer. It is only aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions that the transfer was effected by the consecutive endorsements on the LRs. and finally the petitioner/dealer is the recipient of the goods from the transporters. The learned counsel also contended that in fact the memo of stock transfer issued by the manufacturer shows that the goods are to be delivered at the petitioner's address, though the petitioner's name was not shown in the said stock transfer. It was therefore, contended that under the guise of stock transfers, the manufacturer had transported the goods, which is destined to the petitioner/dealer. The learned counsel also contended that in fact the modus operandi is that the area manager, who is a common area sales manager for both the manufacturing company and the sales distributor collects the orders as well as the demand drafts from the sole distributors and those orders along with the drafts were sent to the registered office of the sole distributor at Ahmedabad in response to which the goods are being dispatched by the manufacturer. As and when the goods have been dispatched, the same are being collected by the petitioner after obtaining necessary endorsements from the company branch office as well as the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner (CT), Secunderabad Division, Secunderabad the following material facts are recorded: "The inspection revealed that the selling dealers, namely, M/s. Darshak Enterprises (who sold the coolers to the assessee) would make purchases in the course of inter-State transactions from M/s. Sanskrut Comfort Systems Limited of Ahmedabad, i.e., out of State of Andhra Pradesh and then such purchases are effected by transfer of documents of title to the goods during their movement from one State to another, the transaction of which falls under section 6(2) of the CST Act, 1956 corresponding to section 3(b) of the CST Act. As such M/s. Sruthi Agencies, i.e., assessee on the rolls of the Commercial Tax Officer, Vidyanagar effected the purchases (indirectly) in the course of inter-State trade and therefore, they become the ultimate, i.e., last purchasers in the State of Andhra Pradesh and become first seller in the State at the point of first sale in the State. M/s. Sruthi Agencies have claimed exemption in the disguise as subsequent dealers in the State of Andhra Pradesh as second sellers by producing purchase bills of M/s. Darshak Enterprises of Hyderabad and thus gained the confidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the explanation of the petitioner and also referring to the statement of one Mr. B. Louis, who is employed by both the manufacturing company as well as the sole distributor, recorded the modus operandi as under, while revising the assessment order dated July 8, 1994: "Sri B. Louis (authorised signatory), Area Manager of both M/s. Sanskrut Comfort Systems Limited, Secunderabad and M/s. Darshak Enterprises, Secunderabad in his statement recorded on inspection before the department authorities stated that the head office for both the above firms are at Ahmedabad. The assessee placed orders for air-coolers and enclosed demand draft in the name of M/s. Darshak Enterprises, Ahmedabad, who in turn instructed M/s. Sanskrut Comfort Systems Limited, Ahmedabad to dispatch the goods as per orders placed. In pursuance of the order placed and demand draft sent by the assessee through the local office of the assessee-company the movement of goods from M/s. Sanskrut Comfort Systems Limited in the State of Gujarat to the State of Andhra Pradesh on self to Secunderabad through (3) contract carriers, i.e., Patel Roadways Transport Corporation of India and Bafua Transport Company, Hyderaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be to the endorsee and it is true that the assessee has taken delivery of the goods. It is never claimed before the departmental authorities that the Sanskrut Comfort Systems Limited has taken delivery of the goods in question. Hence, all the conditions that are required to call the transaction as a sale in transit within the meaning of section 3(b) of the CST Act are existing in this case." Therefore, the Deputy Commissioner (CT) revised the order of assessment and brought to tax the entire turnover under the provisions of the APGST Act, which was originally exempted by the assessing officer. When this order is assailed before the Appellate Tribunal, the Appellate Tribunal after referring to the rival contentions with reference to section 3 of the CST Act as to the mode of transfer in the course of inter-State trade recorded the following: "Therefore in these circumstances, the fact that is required to be established in order to say that there was successive transit sales, or not is as to who has taken the delivery of the goods from transporting authorities at Secunderabad in view of the explanation 1 in section 3 of the CST Act above extracted, as the goods are deemed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer had started without any orders of sale. In fact even before the assessing authorities the said Area Manager, namely B. Louis was representing both the sale distributor, M/s. Darshak Enterprises as well as the manufacturing company M/s. Sanskrut Comfort Systems Limited. Though, in fact, it was contended by the petitioner that the manufacturing company took delivery of the goods from the transporters after reaching the destination, but no material was in fact placed before this Court whether the branch office of the manufacturer had in fact took physical delivery of the goods. In fact in an earlier proceedings against the manufacturer, when the manufacturer was assessed to Central sales tax, the contention of the manufacturer was that it took constructive delivery, contrary to the present contention of the petitioner that the manufacturer has in fact took delivery and thereafter effected sales in favour of the sole distributor. In fact one of the contention of the department was that neither the branch of the manufacturing company nor the branch of the sole distributor have got any godown of their own. Therefore, it is contended that in the absence of having any godown, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vement of the vehicles to various stock-yards located in outside the State of Bihar was not in consequence of a firm purchase orders, the appellant-company was having complete control over the vehicles till they were allotted to the dealers from various stock-yards. The completion of sale to the dealers did not take place at the works at Jamshedpur, appropriation of the vehicles was done at the stockyards and it was open to the appellant-company till then to allot any vehicle to any purchaser and to transfer a vehicle from one stockyard to another. It could not therefore be said that the movement of the vehicles from the works to the stock-yards was occasioned by any covenant or incident of the contract of sale. Holding so, the order of assessment was set aside leaving open the issue to the Assistant Commissioner to make a fresh assessment in accordance with law. In the case of Arjan Dass Gupta Bros. v. Commissioner of Sales Tax [1980] 45 STC 52 (Delhi) the dealer was carrying on the business of selling coal, imported from Bihar/Bengal, to retailers in the Union Territory of Delhi. During the assessment year 1964-65, procurement of coal from the collieries outside Delhi and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first sale by the importer-dealer was an intra-State sale within Delhi liable to sales tax under section 2(g) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi; (ii) that the words cost of freight 'separately charged' in section 2(h) connote that the intention of the parties as disclosed in the contract of sale must unequivocally be that freight charges would not form part of the sale price. In the absence of any such evidence, the freight charges paid by the coal retailers were liable to be included in the sale price and the turnover of the dealer." In the case of Thungabhadra Industries Ltd. [1986] 62 STC 71 this Court held that in order to determine the eligibility of an assessee, a registered dealer, who claimed exemption as a second seller of groundnut oil, taxable at the first point of sale within the State under the APGST Act, the two tests applicable are: (1) that the first seller should be a real and identifiable dealer within the State; and (2) that mere non-payment of tax by the first seller within the State does not shift the liability to pay tax on the second seller. In the case of State of Tamil Nadu v. N. Ramu Bros. (Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent sales by the dealer to their purchasers were exempt under section 6(2) of the CST Act, the said view was reversed by the High Court holding as under: "(i) That although the lorry receipts relating to transport from Delhi and other places to Coimbatore would come under the definition of the term 'document of title to goods' in section 2(4) of the Sale of Goods Act, 1930, they were not transferred to the purchasers for effecting sales in their favour as contemplated by section 6(2) of the Central Act. An order from the vendor to the warehouseman to deliver goods to the vendee would come under the abovesaid definition. But the delivery notes in form XX could not be taken as such delivery orders. Form XX only contained certain particulars regarding the consignor and consignee and the goods consigned. It did not contain an order as such by the vendor for delivery of the goods to the vendee. It was meant only to keep track of the movement of the goods to prevent evasion of tax and by no stretch of imagination could it be held to be a document of title within the meaning of section 2(4) of the Sale of Goods Act, 1930. Under section 2(4) of the Sale of Goods Act, only a 'warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court while considering the revisional jurisdiction held "Judicial dicta have also conditioned the exercise of revisional power under section 263 of the Income-tax Act by holding that the condition precedent for initiating proceedings under section 263(1) by the Commissioner is that Commissioner should not only record a finding that the order of the assessing officer was prejudicial to the interests of the Revenue, but he should also mention in the order the material on the basis of which he has arrived at the conclusion and that non-recording the reasons by the Commissioner would vitiate any order that the Commissioner may pass in exercise of his powers under section 263." 9.. Coming to the decisions relied upon by the Special Government Pleader, in the case of Vemula Seshaiah and Gongadi Ramappa v. State of Andhra Pradesh [1963] 14 STC 730 a division Bench of this Court considered the issue where the assessee dispatched goods by rail, obtained railway receipts in his own name and when the goods started on their journey to another State endorsed the railway receipts in favour of the buyer after receiving the sale price from him and it was held that as the transfer was effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act; 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. The apex 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 the branch office were offices of the same company; they did not possess separate juridical personalities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. In the case of State of Tamil Nadu v. N. Ramu Bros (Electricals) [1993] 89 STC 481 (Mad.) where the sale of generators by the assessee obtained from outside the State and gave necessary letters of authority to the lorry office of carriers at Coimbatore to deliver the consignments to the purchasers in their doorsteps, the Madras High Court held that the sales were in the course of intra-State sales liable to local tax. On the other hand, a division Bench of this Court in the case of Vemula Seshaiah and Gongadi Ramappa v. State of Andhra Pradesh [1963] 14 STC 730 considered where the assessee despatched the goods by rail obtaining rail receipts in his own name and when goods started on their journey to another State, endorsed the railway receipts in favour of the buyer after receiving the sale price, it was held that as the transfer was effected during the movement of the goods, the same was within the purview of section 3(b) of the CST Act. In the case of Sahney Steel and Press Works Ltd. v. Commercial Tax Officer [1985] 60 STC 301 the apex Court held that though the purchase orders were booked through its branch office and also the goods are delivered through its branch off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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