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TMI Blog2009 (4) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover. In the year 1986-87 also, on verification of sale patties and F forms and having found them in order, the assessing authority excluded the turnover relating to consignment sales from the taxable turnover. Only the direct inter-State sales were assessed to tax under the CST Act. However, in respect of these two assessment years (1985-86 and 1986-87), reassessment proceedings were initiated by the third respondent after the place of business of the dealer was inspected by the Enforcement Wing on February 21, 1989. The basis of reassessment was that the Tamil Nadu Milk Producers' Co-operative Federation at Chennai collected the entire amount towards the price of goods beforehand and directed the appellant to despatch the specified goods to the agents or named buyers and therefore the alleged branch transfers and consignment sales were really in the nature of direct inter-State sales. The reply filed by the appellant was rejected and revised assessment orders were passed for the years 1985-86 and 1986-87 on September 30, 1989. The appeals to the Appellate Assistant Commissioner, Coimbatore and further appeals to the Tamil Nadu Sales Tax Appellate Tribunal (Additional Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir Lordships observed in Telco [1970] 26 STC 354 (SC) that the same principles enunciated in Ben Grom case [1964] 15 STC 753 (SC) would be equally applicable to section 3(a) of the Act. In Ben Grom case [1964] 15 STC 753 (SC), stress was laid on the inextricable bond between the contract of sale and the actual exportation. As pointed out in Kelvinator of India Ltd. v. State of Haryana [1973] 32 STC 629 (SC), a movement of goods which takes place independently of a contract of sale would not fall within the ambit of clause (a) of section 3. Section 3(a) is attracted where the contract of sale precedes inter-State movement of goods and such movement has been caused by and is the result of that contract of sale. In Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196 (SC), it was emphatically stated that the movement of goods from one State to another must be the necessary incident and the necessary consequence of sale or purchase. It was described as a case of cause and effect, the cause being the sale/purchase and the effect being the movement of the goods to another State . The principles governing interpretation of section 3(a) have been elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the agent, they will be dealt with as his own goods. He will be under no obligation to account to the principal or the account is rendered merely to camouflage the real nature of transaction. Instances of such nature are to be treated prima facie as inter-State sales. The burden of proving that the movement of goods from one State to another is occasioned not by reason of contract of sale but by reason of transfer of goods to his place of business in the other State or to his agent in the other States, lies on the dealer. For the purpose of discharging this burden of proof, the dealer is enabled to file declaration signed by the principal officer of the other place of business or his agent, as the case may be. The form and content of this declaration is prescribed by rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957. The form prescribed is form F. By furnishing such declaration together with the evidence of despatch of goods, the dealer discharges the burden of proof cast on him. Till the year 2002, the filing of F forms was not obligatory in the sense that the dealer can discharge the burden of proof by adducing other satisfactory evidence that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as jurisdictional error or fraud or wilful suppression or misrepresentation on the part of the assessee. Mere change of opinion does not justify the reopening of assessment so as to bring the excluded turnover to tax under the Central Sales Tax Act. This, in brief, is what the Supreme Court held. We shall refer to some passages in the judgment which are relevant: (pages 501, 502, 503, 506, 507 and 511 of STC) 35.. When the dealer furnishes the original of form F to its assessing authority, an enquiry is required to be held. Such enquiry is held by the assessing authority himself. He may pass an order on such declaration before the assessment or along with the assessment. Once an order in terms of sub-section (2) of section 6A of the Central Act is passed, the transactions involved therein would go out of the purview of the Central Act. In other words, in relation to such transactions, a finding is arrived at that they are not subjected to the provisions of the Central Sales Tax Act. It is not in dispute thereunder no appeal is provided thereagainst. ... 37.. ... On an analysis of the aforementioned provisions, therefore, the following propositions of law emerge: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide whether the reopening of assessments for the years 1985-86 and 1986-87 is justified in law and the assessing authority was within his jurisdiction in initiating the proceedings for reassessment. That is the question which needs to be addressed, as far as the impugned assessments of the first two years are concerned. In the next two assessment years, there was no reassessment and therefore the proposition laid down in second Ashok Leyland case [2004] 134 STC 473; [2004] 2 RC 249; [2004] 3 SCC 1 on an interpretation of section 6A(2) cannot be pressed into service. Now we shall examine the legal and factual position in relation to each assessment year. 1985-86 (Appeal No. 338 of 2008) In the original assessment for the year 1985-86 made on April 15, 1987, the value of stock transfers to the agents to the tune of Rs. 21,48,500 covered by F forms was excluded from the taxable turnover under the CST Act. However, the total value of goods sent on consignment to the agents in other States was stated to be Rs. 71,70,537. That means in regard to the turnover of Rs. 50,22,037, the assessing authority did not record a specific finding about the correctness of F forms. He simply stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f those three transactions is Rs. 7,25,200. Even in respect of them, only in the case of Mahavir Ghee Bhandar, Ahmedabad, the payment was received a week earlier to the despatch of the goods. The sales list furnished by the said dealer (found in the second paper book) shows that he went on making sales in the local market and accounted for the sale proceeds, expenses and commission. Further, it transpires from the tabular statement that most of the payments were made by the said dealer after the despatch of goods and except in one transaction, the amounts sent from time to time do not tally with the value of goods transferred. Moreover, the assessing authority who made the reassessment did not doubt nor comment on the sale patties furnished by the agents. In the second instance, i.e., ghee sent to Gujjarmal Aggarwal, Jaipur, the amount received is much more than the value of the goods. It only shows that the said agent used to send the amounts in advance on rough and ready basis but not towards any particular transaction. It is not unusual for the consignee agent to send such advance amounts at the instance of the principal. In the third instance, i.e., the one relating to New Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing authority did not have the benefit of the decision in the second Ashok Leyland case [2004] 134 STC 473 (SC); [2004] 2 RC 249; [2004] 3 SCC 1 for the reason that the decision was not rendered by the date of assessment. The Tribunal curiously failed to refer to this decision and to apply the law laid down. In the light of the foregoing discussion the appeal in respect of the assessment year 1985-86 ought to be allowed in full. Accordingly, we do so and set aside the reassessment. Assessment year 1986-87 (Appeal No. 339 of 2008) In the original assessment order passed on January 14, 1988, the following observation was made: the consignment sales turnover of Rs. 1,75,85,890 which is covered by sales patti and F form and they are verified and found in order. It was then recorded that the consignment sales shall not form part of the turnover under both the Acts (CST and TNGST). Thus, it is evident that F forms and sale patties (statement of sales and expenses) relating to the consignments sent to the agents for effecting sales in other States were verified and found to be correct. Nothing has been stated in the original assessment order as regards the branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipation of the sales by the agent does not lead to an automatic inference that they are direct sales to the agent. Ultimately, the agent furnished the statement of account showing the sale price realized, the expenses and commission and the net amount ultimately credited to the appellant's account does not match the advance payment made. The sale patti (account statement) furnished by the agent was not adversely commented upon by the assessing authority in the reassessment order. In the tabular statement filed by the appellant, two more consignment transactions of August 12, 1986 for Rs. 4.80 lakhs have been shown under the category of cheques received prior to despatch but the cheque amount is as high as Rs. 16.63 lakhs which does not tally with the value of the said two consignments. Evidently, the said agent has been making payments periodically sometimes in advance, based on actual or estimated sales realizations and are maintaining a running account. Thus, even on merits, we find that there is no proper basis to treat the value of goods consigned to the agents as inter-State sales. Coming to the branch transfers, we are of the view that no exception can be taken to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the branch and the branch effected delivery or raised invoice are immaterial factors. The branch could not have diverted the goods for sale to other parties. As already noted, in regard to the alleged stock transfers to the branches, there was no finding of the assessing officer that the F forms were correct. In fact, there was no mention of branch transfers at all in the assessment order. Even if the appellant had filed the F forms covering the branch transfers, that itself is not sufficient to trigger the deeming fiction in section 6A(2). A finding of the assessing officer that the F forms were correct is a pre-condition for invoking the benefit of the deeming provision. As already seen, in the original assessment order, there was no such finding in relation to branch transfers. Hence, the appeal should fail in so far as the alleged stock-transfers to the branches are concerned. Thus, the appeal is allowed to the extent of disputed turnover of Rs. 36.20 lakhs and dismissed in respect of a turnover of Rs. 47,92,845. Appeal No. 340 of 2008 assessment year 1987-88 For this year, the claim of the appellant for exclusion of the value of goods sent to the branches and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mere noting of the word 'F' form in the advice cannot and will not alter such basic and fundamental position. So the alleged stock transfer to the branches at Jodhpur and Ahmedabad is nothing but inter-State sales only. Hence the F forms filed for those alleged stock transfers are therefore not acceptable. The facts and figures furnished in the assessment order and those furnished by the appellant as well in the tabular statement go to confirm what the assessing authority stated. The goods were sent specifically for delivery to the specified buyers who paid the sale price by way of DD or cheque to the Federation. The Federation in its turn instructed the appellant to despatch the goods to the named buyer on branch-transfer basis. Obviously, the branch was involved only to go through the formalities of raising invoices and effecting delivery. The so-called branch transfers are therefore definitely inter-State sales. The alleged sales through consignment agents to the tune of Rs. 67.50 lakhs were disbelieved by the assessing authority and the transactions were treated as direct inter-State sales to those agents. We have to examine how far the assessing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined sum of Rs. 16,00,000, which is exactly the amount paid for the purchase of goods from them. Further the commission of Rs. 17,178 allegedly charged for by the Capital Enterprise was found to be without any basis and it was not relatable either to the quantity of goods or to the amount of the sale proceeds. It was only an imaginary figure. Rather it can be said to represent only the net profit earned by Capital Enterprises in his turnover of outright purchase and sale after deducting all expenses from his gross profit. The contention that the Capital Enterprises have acted as commission agent on behalf of the assessee in respect of the turnover of Rs. 42,20,000 is not acceptable. The observations of the assessing authority are unassailable. The appellant has not furnished any clarification as to how a genuine commission transaction could happen in the manner narrated by the assessing officer. The F forms were obtained and filed only to give a colour of stock transfer (to the commission agent) to a clear transaction of inter-State sale to the so-called agent. Coming to the transactions with two other agents mentioned above, the assessing authority merely stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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