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TMI Blog2008 (3) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... een used in a works contract the necessary agreement either expressed or implied has to be looked into and scanned. While imposing penalty the show-cause notice was not given. A plea has been taken in the return there has been waiver. The concept of penalty has to be strictly construed and, therefore, the facet of imposition of penalty should not have been lightly dealt with by the authorities. Appeal allowed. - Writ Petition No. 27367 of 2003 - - - Dated:- 10-3-2008 - DIPAK MISRA , J. ORDER:- DIPAK MISRA J. The petitioner, a registered company under the Indian Companies Act, 1956 carries on its business activities in the State of Madhya Pradesh which include cement manufacturing, trading, execution of turnkey project, etc. The company is a registered dealer under both the local and the Central Sales Tax Acts. The petitioner was assessed for the year 1992-93 under the Madhya Pradesh Commercial Tax Act, 1994 (for brevity the 1994 Act ) and the assessment order was passed on March 30, 1996 determining the tax liability at Rs. 6,15,38,551. The said liability was fastened on the assessee partly due to disallowance of labour charges and disallowance of claim on inter-S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elates to goods dispatched from other States which the petitioner had treated such supply as stock transfer and second the turnover claimed as inter-State sale was effected from outside the State of M.P. without providing proof of its having been declared or liability discharged in other States. It is urged that the reasons ascribed by the authorities are contrary to the settled position of law inasmuch as supply was effected from outside the State of M.P. in course of inter-State trade or commerce is covered as a deemed sale under sub-clause (29A) of article 366 of the Constitution of India and, therefore, it is not liable to any tax under the sales tax laws of the State. The finding of the second respondent about the petitioner having dispatched the goods from other State on stock transfer basis cannot be held as an inter-State sale for the purpose of exclusion while computing the taxable turnover as inter-State sale would be decided exclusively under section 3(a) of the CST Act, 1956 where the movement of goods from one State to another is found to be in pursuance of a contract of sale. The assessing officer has fallen into error by treating the transaction as a sale in the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he competent assessing officer in the Orissa State has been brought on record as annexure R1. The assessing officer did not accept the contentions of the petitioner that the transfer was a stock/branch transfer treating it as a inter-State transfer and the tax was demanded from the petitioner. The petitioner, being aggrieved with the same, preferred an appeal and the appellate authority accepted the contention of the petitioner that it was a stock/branch transfer and consequently no tax was levied on the petitioner under the Central Sales Tax Act. It is put forth that the assessee-petitioner had taken the stand before the assessing officer that the transaction was in the nature of inter-State sale and they have paid the commercial sales tax and when proof was demanded no document was supplied. The petitioner had not produced the assessment orders of respective assessing authorities. The plea regarding payment of Central sales tax which was taken by the petitioner before the assessing officer had not been substantiated and as is manifest in the writ petition a new stand has been taken that even if it is a stock or branch transfer it is not liable to be taxed which clearly establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 733, Indian Oil Corporation Ltd. v. Union of India [1981] 47 STC 1 (SC); [1980] Suppl SCC 426, Tan India Ltd. v. State of Tamil Nadu [2003] 133 STC 311 (Mad), Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 (SC), State of Karnataka v. ECE Industries Limited [2006] 144 STC 605 (Karn), Desmet Chemfood Engg. Pvt. Ltd., Bombay v. Asstt. Commissioner of Sales Tax [1999] 32 VKN 121 and Pennwalt India Ltd. v. Divisional Deputy Commissioner [1999] 32 VKN 354. It is also urged by him that no notice to show cause was issued and, therefore, the order of penalty is vulnerable. The learned Senior Counsel has placed heavy reliance on the decision in South India Viscose Ltd. v. State of Tamil Nadu [1981] 48 STC 232 (SC) wherein it has been held as under (page 232): If there is a conceivable link between the 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 inter position of an agent of the seller who may temporarily intercept the movement will not alter the inter-State character of the sale. In this context we may refer with profit to the decision rendered in Pennwalt India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment is to be made under the statutory provisions. The court also observed that the covenant contained in agreement would in fact decide the liability of the parties. To the same effect is the judgment in the matter of Desmet Chemfood Engg. Pvt. Ltd. [1999] 32 VKN 121. From the aforesaid decisions cited at the Bar it is clear as day that a sale can be regarded as an inter-State sale if two conditions are satisfied, namely, sale of goods and second transfer of those goods from one State to another as a result or incident of the contract of sale, are satisfied. In the concept of inter-State sale or commerce there should be existence of such a bond between the contract of sale and the actual transportation outside the State so that each link is inseperably connected with the one immediately linked up with the sale and the question of disjunction or dissociation does not occur. In Shankerjee Raut Gopalji Raut v. State of Bihar [1968] 22 STC 241 the Full Bench of the Patna High Court has reviewed the case-law on the subject with regard to interpretation of the expression sale in the course of import of the goods into, or export of the goods out of, the territory of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution (Forty-sixth) Amendment Act, 1982 on general rules and its nature and effect should be carried towards its logical end. If the assessment order is tested on the decisions cited at the Bar and propositions put forth I am inclined to think that the matter requires re-scrutiny from various angles. As is patent, the assessing officer and the higher authorities who have affirmed the order of assessment have not addressed themselves appositely to the nature and character of the transfer in its very essentiality but have analysed the facts in a transient manner. There has to be keener probe and greater scrutiny. Be it noted, the assessee-petitioner has deposited the principal tax demanded. Regard being had to the facts and circumstances, I am inclined to set aside the order of the final authority and direct remit to the Board of Revenue to consider the matter from all spectrums by ascribing detailed reasons and scrutinising all the documents that have been brought on record and likely to be brought on record by the assessee as there should be no impediment in bringing further documents on record. Presently, I shall proceed to deal with the issue of penalty. I am obl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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