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TMI Blog2015 (10) TMI 2405X X X X Extracts X X X X X X X X Extracts X X X X ..... on this score. Validity of order - violation of article 269 and 286 of the constitution - power of state (Andhra Pradesh) to levy tax of sale of levy rice from Yanam in the Union territory of Pondicherry to Kakinada (AP) - interstate sale or not - Held that:- In order to determine whether the sale of levy rice by the Yanam Rice Millers to FCI, Kakinada is an inter-state or an intrastate sale, it is necessary to refer to the relevant provisions of the CST Act and the A.P. VAT Act. Before doing so, however, it is necessary to examine whether the petitioners, rice millers at Yanam, are bound by the control orders issued by the Government of Andhra Pradesh under Section 3 of the Essential Commodities Act, 1955. Scope of control order - Held that:- While the obligation cast on the Yanam rice millers, in terms of the arrangement between the Government of Andhra Pradesh and the Government of Pondicherry with regards supply of levy rice by Yanam rice millers to FCI at Kakinada, is similar to the statutory obligations placed on rice millers in Andhra Pradesh under the Control Orders, that does not mean that these Control Orders stand, automatically, extended to the Union Territory o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis that one of the events in the chain has taken place within the State. - The movement of levy rice, from Yanam to FCI or APSCSCL at Kakinada in the State of Andhra Pradesh, is an inter-State movement integral to the scheme of arrangement between the Government of Andhra Pradesh, the Government of Pondicherry and the Yanam rice millers, and the sale of levy rice by the petitioners to FCI, Kakinada is an inter-state sale. The impugned assessment orders levying VAT on the petitioners, (all of whom are rice millers at Yanam), under the AP VAT Act is without jurisdiction and are, accordingly, set aside. Collection of amount in the name of VAT by the petition from the FCI (AP) but not paid to the state authorities - Held that:- While the Yanam rice millers, in the representation dated 05.10.2007, had contended that they were liable to tax under the AP VAT Act, and had thereby collected 4% extra from FCI, they have avoided payment of VAT, collected by them from FCI, to the Government of A.P contending that sale of levy rice to FCI is an inter-state sale not exigible to tax under the AP VAT Act. While these contradictory stands appear to have been taken by the petitioners o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Pleader for Civil Supplies, for the respondents. Writ Petition Nos. 27335, Writ Petition Nos. 27336, Writ Petition Nos. 27337, Writ Petition Nos. 27338, Writ Petition Nos. 27339, Writ Petition Nos. 27721, Writ Petition Nos. 27788, Writ Petition Nos. 27791, Writ Petition Nos. 27803, Writ Petition Nos. 27805, Writ Petition Nos. 28718, Writ Petition Nos. 28727, Writ Petition Nos. 28731, Writ Petition Nos. 28732, Writ Petition Nos. 28734, Writ Petition Nos. 28849, Writ Petition Nos. 29123, Writ Petition Nos. 29136, Writ Petition Nos. 29142, Writ Petition Nos. 29173, Writ Petition Nos. 29343, Writ Petition Nos. 29420, Writ Petition Nos. 29423, Writ Petition Nos. 29495, Writ Petition Nos. 29542, Writ Petition Nos. 29794, Writ Petition Nos. 29917, Writ Petition Nos. 30023, Writ Petition Nos. 30070, Writ Petition Nos. 30123, Writ Petition Nos. 30409, Writ Petition Nos. 30511, Writ Petition Nos. 30532, Writ Petition Nos. 30620, Writ Petition Nos. 30641, Writ Petition Nos. 30969, Writ Petition Nos. 31046, Writ Petition Nos. 31102, Writ Petition Nos. 31453, Writ Petition Nos. 31886, Writ Petition Nos. 35111, Writ Petition Nos. 35119, Writ Petition Nos. 35127, Writ Petition Nos. 35130 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orders, 1984, (hereinafter called the 1984 order ) was supplied from Yanam to FCI, Kakinada in the course of inter-State trade and commerce; these sales of levy rice constituted inter-State sales within the meaning of Section 3(a) of the Central Sales Tax Act, 1956, and the tax authorities in Andhra Pradesh lacked jurisdiction to levy tax thereupon; and the Pondicherry tax authorities had exclusive jurisdiction to levy tax on inter-State sales of levy rice from Yanam to the FCI at their godowns at Kakinada. 4. In the assessment orders, impugned in these Writ Petitions, the assessing authority held that, for all practical purposes, the Government of A.P. had treated the Yanam Rice Millers on par with the Rice Millers of A.P.; there was neither an agreement between FCI and the Millers of Yanam nor did FCI have any knowledge of purchase of Paddy by the Yanam Millers or about the Milling or the delivery to be made to FCI; unascertained and standard goods, prone to diversion, were being accepted by FCI only after the goods reached them; as the purchaser was not bound to accept the goods, final appropriation was made in the State of A.P.; as long as there was a possibility of diversi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hery; it is geographically proximate to East Godavari District of Andhra Pradesh; the rice millers of Yanam have obtained VAT and CST registration numbers in Pondicherry; they are assessees on the rolls of the DTO, Yanam; they are not registered under the Act; the food grains, including rice and pulses (1st schedule goods), are not liable to tax under the Pondichery Value Added Tax Act; as sufficient paddy was not available for milling at Yanam, and there were restrictions on the movement of paddy from the State of Andhra Pradesh to other States/Union Territories, the rice millers at Yanam expressed their grievance, in the meeting held at Hyderabad on 15.09.1983, to the Government of A.P.; after discussions, between the Commissioner of Civil Supplies of the Government of A.P. and the Commissioner of Civil Supplies of Pondichery, the memo dated 31.10.1983 was issued by the Government of A.P.; the said memo makes no mention regarding payment of Sales Tax either on paddy or on rice; no condition was stipulated therein that the price agreed to, in the said memo, was subject to payment of sales tax either on paddy or on rice; the Yanam rice millers had supplied the milled rice to FCI, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the Yanam millers by adding tax at 3% and 2% respectively; the Yanam Rice Millers and the Rice Millers Association had submitted representation dated 05.10.2007 to FCI stating that rice millers of A.P. and Yanam were paid 4% tax by FCI under the APGST Act; introduction of the A.P. VAT Act did not envisage any differential treatment to the millers of Yanam; the earlier procedure may be continued, and 4% tax be paid to them in the interest of equal justice; the FCI had, thereafter, paid the differential tax of 1% and 2% to the millers of Yanam; there is no difference in the procurement price being paid to rice millers of Yanam and A.P. for the years 2005-06 to 2009-10; the Commissioner of Commercial Taxes, vide circular dated 27.11.2010, had forwarded a note on the issue of Yanam rice millers; he had requested that a show cause notice be issued to the dealers, and necessary action be taken in the matter; he had subsequently clarified, by circular dated 30.04.2011, that all non-resident dealers, whether as principals or as agents, fell within the jurisdiction of the A.P. tax authorities when they had business within the State; in the absence of their having filed their returns, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment of A.P.; they have been collecting sales tax from FCI, and were not depositing the said amount to the A.P. commercial tax department, as is statutorily required; the Yanam Rice Millers wanted to be treated on par with the other rice millers of A.P, yet they do not want to pay sales tax/VAT to the A.P. Commercial Taxes Department which the rice millers of A.P. were paying; this, by itself, is discriminatory; the essence of the entire agreement, between the State of Andhra Pradesh and the Union Territory of Pondicherry, was to benefit the millers at Yanam; the memo dated 31.10.1983 has the effect of notionally extending the boundary of Andhra Pradesh, to include the adjoining Yanam province, for the administrative convenience of the milling industry located thereat; the procurement rates fixed by the Government, for the State of A.P, became applicable by this order; the District Collector, East Godavari was authorized to fix the quantity to be supplied to FCI; the Yanam Rice Millers, on their own, brought rice to the FCI godowns at Kakinada; the rice so brought was subject to quality/quantity tests at the FCI godown at Kakinada, and only thereafter was it purchased by FCI; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remedy is to prefer an appeal to the Appellate Authority, and not to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. Reliance is placed by them on Set Discovery Pvt. Ltd. Mumbai v. State of Andhra Pradesh (2006) 42 APSTJ 52. 9. The petitioners invoked the jurisdiction of this Court, without availing the appellate remedy under Section 31 of the AP VAT Act. This Court admitted these Writ Petitions nearly two years ago, and they all are pending on its file ever since. In view of statutory embargo, under Section 31 of the AP VAT Act and its first proviso, prohibiting the appellate authority from entertaining an appeal, after the period prescribed therein has expired, the petitioners cannot now be relegated to the alternative remedy of a statutory appeal. The existence of an adequate or a suitable alternative remedy, available to a litigant, is merely a factor which a Court, entertaining an application under Article 226, will consider for exercising discretion to issue a writ. The existence of such a remedy does not impinge upon the jurisdiction of this Court to deal with the matter itself if it is in a position to do so on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in Andhra Pradesh; the Regional Administrator-cum-Civil Supplies Authority, Yanam had, by his letter dated 08.06.2010, informed the Commissioner of Civil Supplies, Andhra Pradesh that sale of levy rice by Yanam millers to FCI at Kakinada was not liable to tax in Andhra Pradesh; purchase of paddy by the petitioners in Andhra Pradesh constituted inter-State purchases; sale of levy rice, by the petitioners to FCI at Kakinada, constituted inter-State sales from Yanam in the Union territory of Pondicherry; the tax authorities at Yanam in Pondicherry have exclusive jurisdiction to take cognizance of the said transactions; the petitioners have shown details, of their levy rice sales to FCI, Kakinada, in their returns submitted to the Pondicherry tax authorities; the impugned assessment orders are in violation of Article 269 and 286 of the Constitution of India r/w. Sections 3(a) and 9 of the Central Sales Tax Act; and they also contravene the scheme of distribution of powers between the Union and the States under Article 246 r/w. Entries 92-A of List I and 54 of List II of the Seventh Schedule to the Constitution. 13. In examining the scope of Articles 286 and 269, Entry 54 of List ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategories of Part A States, Part B States and Part C States (excluding Part D relating to other territories), Part B States themselves, before their being constituted into so many units, contained many small States which formed themselves into unions of a number of States, and had trade barriers and custom posts even inter-se. (Atiabari Tea Co. Ltd. (1961) 1 SCR 809). This situation posed to the Constitution makers the problem of restricting the taxing power on sales or purchases involving inter-state elements, and alleviating the tax burden on the consumer. They were, at the same time, anxious to maintain the State's power of imposing nondiscriminatory taxes on goods imported from other States, while upholding the economic unity of India by providing for the freedom of inter-state trade and commerce. It was to cure the mischief of multiple taxation, and to preserve the free flow of inter-State trade or commerce in the Union of India regarded as one economic unit without, any provincial barrier, that the Constitution makers adopted Article 286 in the Constitution. (Bengal Immunity Co. AIR 1955 SC 661; The State of Bombay v. The United Motors (India) Ltd. AIR 1953 SC 252). 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3). No law made by the Legislature of a State imposing, or authorizing the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been referred for the consideration of the President, and has received his assent. 19. The object of Article 286 was to place restrictions on the legislative power of the States to impose taxes on the sales or purchases of goods. Four separate and independent restrictions were placed upon the legislative competence of the States to make a law with respect to matters enumerated in Entry 54 of List II. In order to make the ban effective, and to leave no loophole, the Constitution makers considered different aspects of sales or purchases of goods , and placed checks on the legislative power of the States at different angles. In clause (1)(a) of Article 286 they forged a fetter on the basis of situs to cure the mischief of multiple taxation by the States on the basis of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purchase, under Article 286(2), continued to be so irrespective of the State where the sale was to be located either under the general law, (when it was finally determined what the general law was), or by the fiction created by the Explanation to Article 286(1)(a). The situs of the sale or purchase was wholly irrelevant as regards its inter-state character, as the fiction created for clause (1)(a) could not be used for the entirely foreign and collateral purpose of destroying the inter-state character of the transaction, and converting it into an intra-state sale or purchase. Even when the situs of a sale or purchase was in fact inside a State, with no essential ingredient taking place outside, nevertheless, if it took place in the course of inter-State trade or commerce, it was hit by clause (2). If the sales or purchases were in the course of inter-state trade or commerce, the stream of inter-state trade or commerce caught up in its vortex all such sales or purchases which took place in its course wherever the situs of the sales or purchases may have been. (Bengal Immunity Co. AIR 1955 SC 661). 22. The ban imposed under Article 286(2) looked at the transactions entirely fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purchase takes place:- a) outside the State; or b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (I). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, (b) be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. 28. Article 286(2), as it originally stood, did not altogether take away the legislative competence of the States to impose a tax on sales taking place in the course of inter-State trade or commerce, but subjected it to legislation by Parliament. By Entry 92A of List I, introduced by the Constitution (6th Amendment) Act, 1956, the legislative power to tax sales, taking place in the course of inter-State trade and commerce, was vested exclusively in Parliamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e)... (f).... and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. 32. Instead of 'essential' goods in Article 286(3), as it originally stood, the amended Article 286(3) deals with (a) goods declared by Parliament to be of special importance in inter-State trade, (b) delivery of goods on hire-purchase or like system, and (c) transfer, of a right to use goods, for consideration. This provision was necessary in order to render effective the exclusive power of Parliament to tax sales taking place in the course of inter-State trade or commerce. As a result, even though a sale does not take place in the course of inter-State trade or commerce, the taxation power of the State Legislature is subject to Parliamentary control if the sale relates to goods which are of special importance in inter-State trade as declared by Parliament. Article 286(3)(b) is int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Legislature can impose tax on transactions of sale or purchase of goods. The dimension given to the field of legislation, by the language of an entry in List II of the Seventh Schedule, is subject to the limits of constitutional empowerment to legislate, and cannot cross the barriers created by the Constitution. The power of the State Legislature to enact a law to levy tax by reference to List II of the Seventh Schedule has two limitations: the first arising out of the entry itself, and the second flowing from the restriction embodied in the Constitution. (State of A.P. v. National Thermal Power Corpn. Ltd., (2002) 5 SCC 203; Bengal Immunity Co. Ltd. AIR 1955 SC 661 Ram Narain Sons Ltd. AIR 1955 SC 765). 35. Articles 286 and 269(3) place fetters on the powers of a State legislature to make laws imposing tax on the sale of goods, and confer power exclusively on Parliament to formulate principles for determining when a sale is in the course of inter-state trade. Article 246 read with Entry 54 of List II of the Seventh Schedule enables the State Legislature to make laws for imposition of tax on the sale of goods other those which take place in the course of inter-state trade or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement in the memo dated 31.10.1983, it can only mean that the control orders, applicable to dealers in the State of Andhra Pradesh, is applicable to the Yanam Rice Millers also; in such an event, they must be treated on par with rice millers in A.P.; and they would then be liable to pay VAT under the Act. It is, however, contended, on behalf of the petitioners, that the understanding, in terms of the Government memo dated 31.10.1983, cannot be construed as a control order; and the relevant control orders do not provide for levy of tax. 39. Before examining the rival submissions under this head, it is necessary to note the relevant provisions of the control orders, restricting movement of paddy from within the State of A.P. to any place outside the state; and the obligations placed on licensed Millers to supply levy rice to FCI/APSCSCL. In the exercise of the powers conferred, under Section 3 of the Essential Commodities Act, 1955, the Government of Andhra Pradesh made the A.P. Paddy (Restriction on Movement Order, 1987 (hereinafter called the 1987 order ), which extended to the entire State of A.P. Para 3 thereof placed restrictions on the movement of paddy and read th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with a release certificate issued by the Collector or any officer authorized by the Government in this behalf. Para 7(a)(2) stipulated that, save as otherwise provided in sub-para (1), no licenced miller shall transport rice for sale, from the licensed premises of the rice mill, except in accordance with the release certificate referred to in sub-para (1). Para 8 related to the release certificate and, under sub-para (1) thereof, after delivery of levy rice, every licenced miller could make an application, in the Form set out in Schedule VI, to the Collector, or an officer authorized in this behalf by the Government, for issue of a Release Certificate for disposal of levy free rice. Para 8(3) stipulated that, on receipt of an application under sub-para (1), the Collector or the authorized officer should issue a release certificate for movement and disposal of the levy free rice; and the release certificate should be in the Form set out in Schedule VII and as per the directions issued by the Government in this regard. Para 12 required every licenced miller, to whom an order or direction was issued, to comply with such order or direction. 41. While the obligation cast on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to the territorial limits of the State of Andhra Pradesh. As the power conferred on the State Government, by the aforesaid provisions and delegation of powers, to make orders under the 1955 Act is restricted to the territorial limits of the State of Andhra Pradesh, and as the 1984 Order specifically so provides, it does not have extra-territorial operation and cannot be made applicable to the Union Territory of Pondicherry. 43. The submission, made on behalf of the respondents, that the petitioners should be treated as rice millers in Andhra Pradesh, the provisions of the Control Orders should be made applicable to them, and they should be held obligated to pay tax under the AP VAT Act on par with rice millers in Andhra Pradesh, does not, therefore, merit acceptance. The petitioners, rice millers carrying on business at Yanam, cannot be brought within the ambit of the Control Orders which, as noted hereinabove, is limited in its operation only to the territorial limits of the State of Andhra Pradesh, and not beyond. IV. SECTION 3(A) OF THE CST ACT: INTER-STATE MOVEMENT OF GOODS: 44. It is contended, on behalf of the petitioners, that the interstate character of a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trade or commerce if the sale or purchase (a) occasions the movement of goods from one State to another. As Section 3(b) of the CST Act and the Explanations thereto are not relevant, these provisions need not be referred to. Before examining the scope of Section 3(a) of the CST Act, and whether the sale of levy rice by the Yanam rice millers to FCI at Kakinada falls within its ambit, it is necessary to briefly note the judgments cited by Counsel on either side. 48. In State Trade Corporation of India Ltd. v. The State of Mysore AIR 1963 SC 548, the cement factory, which was required to supply the cement covered by the permit, was named in it. These permits were issued to the purchasers, and the supplier named in them was the Marketing Company. On receipt of the permit, the purchaser placed an order with the Marketing Company, and later a firm contract was made with it. The firm contract did not provide for any supplies being made from any particular factory, and the supplies had actually been made from factories outside the State only to suit the convenience of the supplier i.e. the Marketing Company, and not because of any covenant in the contract. The written contracts did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an incident of the contract, it is a sale in the course of inter-State sale. 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 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 have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance and incidental to the contract of sale When a branch of a company forward a buyer's order to the principal factory of the company, and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions, it would not be a sale between factory and its branch.' If there is a conceivable link between the movement of the goods and the buyer's contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat; the purchase of goods at the public auction was a solitary business transaction entered into by the applicant-company within the State of Gujarat; after the applicant-company's bid was accepted at the public auction, but before the goods were ascertained and specified and put in a deliverable state, the applicant-company instructed the railway administration to despatch the goods from Gujarat to Bombay, and the railway administration agreed to honour such instructions; pursuant to such instructions, the railway authorities despatched the goods to Bombay in two lots after packing, loading and weighing them in motor trucks on two different occasions; transport receipts were obtained by the railway authorities from the transport contractors; in those receipts the Western Railway was named as the consignor and the applicant-company as the consignee ; and, though the freight was payable and paid by the applicant-company, no hamali charges, for loading the goods in the trucks, were shown to have been charged to the applicant-company. It is in this context that the Gujarat High Court held:- Taking an overall view of the material facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for or occasion the movement of the goods............ .The law on the point, therefore, is clear. The mere fact that the contract of sale itself does not provide for or occasion a movement of goods, would not be an impediment in the way of holding that section 3(a) of the Central Act applies provided it is established that the movement of goods from one State to another is in pursuance of or incidental to the contract of sale. If there is a conceivable link between the contract of sale and the movement of goods from one State to another which is not otherwise explained, the transaction in question will have to be regarded as a sale or purchase , as the case may be, in the course of an inter-State trade......... 53. Section 5(c) of the A.P. VAT Act stipulates that nothing contained in the Act shall be deemed to impose or authorize the imposition of a tax on the sale or purchase of any goods, where such sale or purchase takes place in the course of inter-State trade or commerce. Under the Explanation thereto, the provisions of Chapter II of the Central Sales Tax Act, 1956, shall apply for the purpose of determining when a sale or purchase takes place in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State where the goods were delivered. 55. Section 3(a) of the CST Act covers sales in which the movement of goods from one State to another is the result of a covenant or incident, of the contract of sale, and property in the goods passes in either State. (State of Orissa v. K.B. Saha and Sons Industries (P) Ltd. (2007) 9 SCC 97); Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti (1992) 3 SCC 750; Union of India v. M/s. K.G. Khosla and Co. Ltd. (1979 (2) SCC 242; S.R. Sarkar 1961) 1 SCR 379; Cement Marketing Co. of India v. State of Mysore (1963 (3) SCR 777; State Trading Corporation of India AIR 1963 SC 548; Singareni Collieries Co. v. State of Andhra Pradesh 1966 (2) SCR 190; State of Jammu and Kashmir v. Caltex (India) Ltd. AIR 1966 SC 1350; and Oil India Ltd. AIR 1975 SC 887). If a contract of sale contains a stipulation for the movement of goods from one State to another, the sale would, of course, be an inter-state sale. But it can also 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade or commerce, there must be an obligation to transport the goods outside the State. The obligation may be of the seller or the buyer and it may arise by reason of a statute, a contract between the parties, or from mutual understanding or agreement between them or even from the nature of the transaction which linked the sale to such transportation. Such an obligation may be imposed expressly under the contract itself or impliedly by a mutual understanding. It is not necessary that, in all cases, there must be pieces of direct evidence showing such obligation in a written contract or oral agreement. Such obligations are inferable from circumstantial evidence also. (Bhag Singh Milkha Singh (1974) 34 STC 535 (Pat); Shankerjee Raut Gopalji Raut v. State A.I.R. 1968 Pat. 329 (FB)). 58. Each case turns on its own facts and the question is whether, applying the settled principles to the facts of the present case, the sale of levy rice by the Rice millers at Yanam to FCI at Kakinada, can be said to be inter-state sales. An attempt to show that some of the factors present in the instant case are present or absent in some other case, in which the sale was held either to be a local sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than those notified by the Government of A.P., and as prevalent in the State of Andhra Pradesh. It required the Yanam rice millers to deliver such percentage of levy (rice) to FCI or APSCSCL as was prevalent in the State of Andhra Pradesh under the Levy Order; and to be bound by the same policy as was applicable to the millers in Andhra Pradesh, in as far as levy rice was concerned. It provided that, subject thereto, levy free eligibility of rice could be disposed of by the Yanam rice millers, after meeting the internal requirements of Yanam, anywhere in the country on the permits issued by the Government of Pondicherry in consultation with the Civil Supplies authorities in East Godavari District of Andhra Pradesh. The Administrator of Yanam, on behalf of the Government of Andhra Pradesh, was required by the said memo to collect levy rice, and deliver it to FCI or APSCSCL. The civil supplies authorities of East Godavari District were required to keep an account of the deliveries made towards levy, and a joint inspection of the rice mills at Yanam was required to be caused by the civil supplies authorities of East Godavari District and the Yanam Administration to ensure that the pad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh to Yanam on a permit issued by the Government of A.P.; for its being milled at their rice mills in Yanam. Having done so on their own volition, the Yanam Rice Millers were thereafter obligated, in terms of the aforesaid arrangement, to transport the prescribed percentage of levy rice from Yanam for its sale and delivery to FCI/APSCSCL at Kakinada. As the sale of levy rice by the rice millers at Yanam to FCI at Kakinada, (the sale transactions brought to tax under the AP VAT Act by the impugned assessment orders), occasioned the movement of goods (levy rice) from Yanam in the Union Territory of Pondicherry to Kakinada in the State of Andhra Pradesh (from one State to another), it is evident that the sale has taken place in the course of inter-state trade and commerce, and is not exigible to tax as an intra-state sale under the A.P. VAT Act. V. DOES WEIGHMENT, and ASCERTAINING THE QUALITY, OF RICE AT KAKINADA MAKE THE SALE AN INTRA-STATE SALE? 63. Both Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, and Sri D. Srinivas, learned Standing Counsel for FCI, would submit that as transfer of title, of unascertained goods (rice), took place at the FCI g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate; it does not amount to a contract in the strict sense; there is no definite or specific requirement, of a specific quantity of goods, by FCI; it does not create an obligation on the dealer to deliver, or on FCI to. accept; the millers, both from Yanam and East Godavari District, offered their rice stocks for sale at the door steps of FCI; purchase of goods by FCI, and the sale of goods by millers, is completed only after its acceptance by the FCI at its godown premises in Kakinada; there is no agreement between FCI and the millers of Yanam; FCI has no knowledge regarding purchase of paddy by the Yanam millers, or of its milling, or regarding the delivery to be made to them; un-ascertained standard goods, prone to diversion, was being accepted by FCI only after the goods reached them; the final appropriation was made in the State of A.P, as the purchaser was not bound to accept the goods as appropriated by the dealer in Yanam; there is a possibility of diversion of the goods before actual delivery to FCI; the sale process commenced only after the goods were offered to FCI at Kakinada; there is no privity of contract between the supplier of goods and the purchaser; it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in Section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 20. Specific goods in a deliverable state:- Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. 21. Specific goods to be put into a deliverable state:- Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof . 23. Sale of unascertained goods and appropriation:- (1). Where there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng transport, the seller could claim damage from the transporter and that would further demonstrate that the respondent-Company did not become owner of the goods till it took the physical delivery thereof, weighing the same and satisfying itself about the quantity received by it. It was held that it was not a mere formality to find out the quantity by it but it has the essential element of making payment depending on the extent of quantity received and in case of any drastic shortfall in the quantity, the issue would be between the supplier and the transporter. Further finding was recorded that if against the quantity of 100 quintals of castor seeds supplied by the trader, the respondent-Company received only half of it on account of loss, damage or pilferage, the company would make payment only for such quantity leaving it for the trader to recover the damages from the transporter. There would also be a case where on account of some untoward and unforeseen circumstances, such as natural calamity or theft, the respondent-Company did not receive the full quantity of castor seeds, the payment shall be made only for the quantity received by it and not for the entire quantity to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rectified by the licensed miller, before being so offered, so as to bring it in conformity with such specifications. Notwithstanding that FCI/APSCSCL were entitled to refuse to purchase levy rice, if it was not of the prescribed standards or quality, the understanding in terms of the memo dated 31.10.1983 obligated the Yanam rice millers to recondition/rectify the deficiencies and supply the stipulated quantity of rice, of the prescribed quality, to FCI/APSCSCL at Kakinada. 70. Both Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, and Sri D. Srinivas, Learned Standing Counsel for FCI, would fairly submit that, while the goods were purchased by FCI from the petitioners only after satisfying themselves of the quality, and after ascertaining the actual quantity of the levy rice supplied, the arrangement nonetheless obligated the Yanam rice millers to supply the prescribed quantity of rice to FCI; and, if the Yanam Rice Millers desired to procure paddy from Andhra Pradesh for milling it in their rice mills at Yanam, the arrangement required them to pay the minimum support price to farmers in AP, procure paddy from them, transport paddy to their rice mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls at Yanam. The transportation of paddy-was required to be accompanied with a permit issued by the Government of A.P. The details of procurement of paddy was required to be intimated to the District Collector, East Godavari, and its transportation to Yanam could only be on a no objection certificate being issued by the Administrator of Yanam. While, in terms of the Government memo dated 26.09.1990, the Administrator of Yanam, was required to collect levy rice, on behalf of the Government of Andhra Pradesh, from the rice millers at Yanam and deliver it to FCI or APSCSCL, this condition was relaxed by the Yanam administrator by his circular dated 05.09.2005, and the Yanam Rice Millers were directed to supply levy rice directly to the FCI godown at Kakinada. The Yanam rice millers were, nonetheless, required to submit a detailed account of such supplies, and monies received, to the Yanam Regional Administrator. The levy rice moved from the rice mills at Yanam, to the FCI at Kakinada, under a way bill issued by the Pondichery General Sales Tax Act authorities wherein the Yanam rice millers were shown as the consignor , and the FCI, Kakinada as the consignee . On delivery of levy ric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut levy rice which the Yanam rice millers were obligated to, and had in fact, supplied to FCI at Kakinada. The question whether the levy rice was capable of being diverted is, therefore, wholly irrelevant. 74. Where the movement of goods from one State to another is inextricably connected with the sale/purchase, the purchase and transport are but parts of one transaction. They cannot be dissociated, and there is no break between the purchase and the movement of the goods to another State. It is sufficient if the movement of goods is implicit in the sale, and the sale and movement of goods are not unconnected and dissociated transactions. (The Co-operative Sugar (Chittur) Ltd. AIR 1994 SC 1456). If in the course of inter-State movement, the goods move only to reach the buyer in satisfaction of his contract of purchase, and such a nexus is otherwise inexplicable, then the sale ought to be deemed to have been taken place in the course of inter-State trade or commerce as such a sale occasioned the movement of the goods from one State to another. (English Electric Co. (1976) 4 SCC 460). In the present case the link between the transportation of rice from Yanam, and its sale to FCI at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Andhra Pradesh, the Government of Pondicherry and the Yanam rice millers, and the sale of levy rice by the petitioners to FCI, Kakinada is an inter-state sale. 76. In the case of an inter-state sale, Section 9(1) of the CST Act requires the Government of the State, from which the movement of the goods commenced, to collect the tax so levied under the CST Act. As the movement of the goods commenced from Yanam in the Union Territory of Pondicherry, it is only the Government of Pondicherry which has jurisdiction to assess the petitioners to tax under the CST Act, and collect tax from them, and not the Government of Andhra Pradesh. The impugned assessment orders levying VAT on the petitioners, (all of whom are rice millers at Yanam), under the AP VAT Act is without jurisdiction and are, accordingly, set aside. VI. WERE THE PETITIONERS PAID A CONSOLIDATED AMOUNT, and IS THERE NO MATERIAL ON RECORD TO SHOW THAT THEY HAVE BEEN PAID VAT? 77. It is contended, on behalf of the petitioners, that the petitioners had received the prescribed consolidated price for the levy rice sold by them to FCI; the bills raised by FCI for the supply of levy rice do not show any tax payable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the procurement price, have retained the said amounts, and have not paid it to the Government of Andhra Pradesh. As the Yanam rice millers were not liable to pay tax under the AP VAT Act, the sale price, which included the VAT component, is, undoubtedly, an excess payment. 80. From the letter dated 05.07.2007, addressed by the President of the Yanam Rice Millers and Rice Merchants Association to FCI, it is evident that, till March, 2007, the Yanam rice millers were paid the same amount as the rice millers in Andhra Pradesh i.e. both of them were paid the VAT component also. For some period, thereafter, the Yanam rice millers were paid a lesser amount, as CST on rice was 3% in Andhra Pradesh and VAT 4%. On the premise that the sale of rice, by Yanam rice millers to FCI, Kakinada, was an inter-state sale, they were paid the procurement price + 3% CST which was 1% less than the procurement price paid to rice millers in Andhra Pradesh, who were paid 4%, in addition, as the VAT component. 81. In his representation dated 05.10.2007, the President of the Yanam Rice Millers and Rice Merchants Association stated that, as per Section 4(4) of the AP VAT Act, there was a liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to law. The consent of parties does not, by itself, confer jurisdiction upon a statutory authority. It is not open to the parties to confer, by their agreement, jurisdiction on a Court/Tribunal which it does not possess. The distinction lies in the jurisdiction to decide matters, and the ambit of the matters to be heard by a Tribunal having jurisdiction to deal therewith. While, in the latter, the question of acquiescence or irregularity may be considered and overlooked, in cases where the question is of the jurisdiction of the Court/Tribunal to make the order, no question of acquiescence or consent can affect the decision. (U.C. Bank v. Their Workmen AIR 1951 SC 230; and Hakam Singh v. Gammon (India) Ltd. AIR 1971 SC 740; Estate Officer and Manager (Recoveries), APIIC Ltd. v. Recovery Officer, Debts Recovery Tribunal 2003 (5) ALT 216 (DB)). Excess payment by FCI to the Yanam rice millers, as VAT component of 4%, notwithstanding, inter-state sale of levy rice cannot be subjected to tax under the A.P. VAT Act. It is, however, made clear that this order shall not preclude FCI from instituting appropriate proceedings, in accordance with law, to recover the excess payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a material fact. Material fact would mean material for the purpose of determination of the lis, the logical corollary whereof would be as to whether it is material for the grant or denial of the relief. If the fact suppressed is not material for determination of the lis between the parties, the court may not refuse to exercise its discretionary jurisdiction. What would be a material fact, suppression whereof would disentitle the petitioner from obtaining a discretionary relief, would depend upon the facts and circumstances of each case. (Arunima Baruah (2007) 6 SCC 120). Absence of clean hands is of no account unless the depravity, the dirt in question, has an immediate and necessary relation to the equity sued for. (Arunima Baruah (2007) 6 SCC 120; Spry on Equitable Remedies, Fourth Edition, page 5; Moody (1917)2 Ch 71 and Meyers (1913) 17 C.L.R. 90). 86. As the power to levy and collect tax must, in view of Article 265 of the Constitution of India, be authorized by law, and a sale in the course of inter-state trade and commerce cannot be brought to tax under the AP VAT Act, failure of the petitioners to disclose the fact that a representation dated 05.10.2007 was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the petitioners, that the petitioners cannot be treated as casual traders under Section 4(6) of the Act; a dealer , under Section 2(b) of the CST Act, includes a casual trader also; and no notice was issued to the petitioners as casual traders . As we have held that the subject sales are inter-state sales, and that the assessing authorities lack jurisdiction to levy tax thereon under the AP VAT Act, it is wholly unnecessary for us to dwell on the aforesaid rival submissions, including whether or not the petitioners are casual dealers under the AP VAT Act. 89. While Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, would also contend that the petitioners are liable to pay purchase tax, under Section 4(4) of the AP VAT Act, on the value of paddy procured by them from agriculturists in the State of Andhra Pradesh, the impugned assessment orders have not subjected the petitioners to purchase tax under Section 4(4) of the AP VAT Act, but have assessed them to tax on the sale of levy rice to FCI, Kakinada. It would be wholly inappropriate, therefore, for this Court to examine, in the present writ proceedings, whether or not purchase tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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