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TMI Blog2017 (7) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... r the logistics partner is a trader? - Held that: - The WS Retail Services Private Limited, the logistics provider is a registered taxable person under the Punjab VAT Act, 2005 holding TIN 03392097512. The taxable person has imported the goods on its TIN. The taxable person does not have any physical stock or stock in the books of such imports made. Further, it has exported goods in the course of interstate trade and commerce. Thus, the taxable person is a legitimate trader - For continuously three years the goods were being imported into the State of Punjab on the Tax Identification Number (TIN). The dealer has no stock of the goods with him in his books. Hence, it is very clear that all the goods have been sold in the State of Punjab on which the dealer is liable to pay tax. Whether the taxable person be taxed? - Held that: - The data of the Department clearly shows that the taxable person has imported the goods on its TIN. If the goods have been imported by the taxable person, then it would have disposed off also by the taxable person. It is the taxable person who has dispatched the taxable goods to the end consumer. The consumer is in the State of Punjab. Most of the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in the course of inter-state trade and commerce. It is for the petitioner to establish the same. If on the other hand the goods were first imported into the State of Punjab without anything more and the petitioner entered into the transactions of sale with its purchasers thereafter they would not constitute sales in the course of inter-state trade and commerce. Further, where it is established that the petitioner acted only as a logistic provider, the petitioner would not be liable under the VAT Act - It would be necessary for the ETO to consider the transactions afresh. The ETO must in other words assess the documents already furnished and the documents that may hereafter be furnished. The impugned assessment order and the demand notices issued pursuant thereto are quashed and set-aside - The matter is remanded to the ETO for passing a fresh assessment order in accordance with law - petition allowed by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with this judgment. 5. The facts, so far as the questions we intend dealing with are concerned, are as follows: The petitioner carries on business of selling goods through an online portal www.flipkart.com to customers for their personal use. The petitioner also provides logistic services to various parties which also carry on the business of selling goods through the said online portal. The goods sold and transported by the petitioner to parties in the State of Punjab were subject to CST in the State from where the goods were despatched. The goods were brought to Punjab from other States. The petitioner's warehouses are located outside the State of Punjab. They are located in the States of Karnataka, Tamil Nadu, Maharashtra, Haryana, Uttar Pradesh, Delhi and West Bengal. The petitioner had paid the CST in respect of such goods. As the petitioner did not undertake any sale transaction in the State of Punjab, it did not have a taxable turnover for the purpose of assessment under the PVAT Act and, therefore, filed 'nil' returns for the Assessment Year 2012-13 on quarterly basis in Form VAT-15. Based on these returns, the annual statements, as required under Rule 40 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the State of Punjab on account of the contracts of sale entered into between the petitioner and various purchasers. Invoices are issued in the State from which goods are sourced with the name and address of the customer. The invoices accompanied the goods. This, according to the petitioner, makes it clear that the movement of the goods is on account of a contract of pre-existing sale. 8. It would be convenient to note at this stage that the invoices issued by the petitioner to the customers upon the customers placing orders indicate the location of the warehouse. In the sample invoices, for instance, the warehouses are stated to be situated in Maharashtra, Karnataka, Delhi, Tamil Nadu and West Bengal. None of the invoices referred to a warehouse in Punjab. The invoices also mentioned the address of the purchasers who, in the present case, are all of Punjab. The shipping addresses accordingly also mention the addresses in Punjab. Along with the details of the products, the tax paid is also mentioned. For example, in one invoice, it is stated "12.50% in Maharashtra inter state VAT" and in another it is stated "5.50% Karnataka inter state VAT". As we mentioned earlier, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dities imported from and exported outside the State and details of bank accounts. The petitioner was called upon to show cause why its tax liability be not calculated on the basis of the data available with the department and penal action be not taken under section 56 of the PVAT Act for suppressing the taxable turnover and evading the tax to the State's exchequer. The petitioner filed a reply dated 09.02.2015 in which it stated some of the facts that we have already referred to. The petitioner stated that its logistic division had inadvertently quoted the TIN (Tax Identification Number) of Punjab in respect of the said sales. The petitioner stated that the transactions fall within the ambit of section 3 of the CST Act. The petitioner enclosed sample manifest along with invoices with reference to the ICC data. The alleged export of ₹ 1.10 crores was stated to be the value of goods returned by the customers. 12. The ETO(VAT), Punjab - respondent No.5 issued a further show cause notice dated 05.06.2015 termed "FINAL NOTICE" for framing the assessment under section 29(2) of the PVAT Act and under section 9(2) of the Central Sales Tax Act, 1956 read with section 29(2) of the PV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the ETO, the petitioner sold the goods in the State of Punjab and that the sales were not inter-state sales as contended by the petitioner. This, in our view, was a fundamental error. 16. It will be convenient to set out the relevant parts of the order to indicate the extent of the importance placed by the ETO on this aspect. "Question 2: Whether the logistics partner is a trader? The WS Retail Services Private Limited, the logistics provider is a registered taxable person under the Punjab VAT Act, 2005 holding TIN 03392097512. The taxable person has imported the goods on its TIN. The taxable person does not have any physical stock or stock in the books of such imports made. Further, it has exported goods in the course of interstate trade and commerce. Thus, the taxable person is a legitimate trader. Any person importing goods on its TIN shall be required to dispose of such goods in course of trade and commerce. The dealer takes the plea that it happened by mistake. Mistake can be made once or twice. The dealer kept on importing the goods into the State of Punjab not in the present year but in the next years too. Further, the dealer has made e-icc entries in the present y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnet and hardware in Punjab to reach the website to place an order. c. The goods were delivered to the Customer of Punjab. d. The seller received the consideration for the goods sold to the customer of Punjab. In this case, it is clear that the goods were imported by the taxable person to sell in the State of Punjab. Hence, all the Sales except clearly mentioned as exports as per ICC data have occurred within the State of Punjab. …… ….. ….. …… …… …… Question 7. If the dealer has acted as a logistics partner, then can we tax him? …… ….. ….. …… …… …… b. The goods for trade or use in manufacture of goods can be purchased from within the State of Punjab or from outside the State of Punjab. The taxable person has purchased the goods from outside the State of Punjab. Such goods should either be sold in the State, or sold in the course of interstate trade or commerce or in the course of export out of India or used in the manufacture of taxable or tax free goods or if not sold or used manufacture should be held as stock by the taxable per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h place or places, as may be specified in the notification. (2) The owner or person Incharge of a goods vehicle shall carry with him a goods vehicle record, goods receipt, a trip sheet or a log-book, as the case may be, and a sale invoice or bill or cash memo, or delivery challan containing such particulars, as may be prescribed, in respect of such goods meant for the purpose of business, as are being carried in the goods vehicle and produce a copy each of the aforesaid documents to an officer Incharge of a check post or information collection centre, or any other officer not below the rank of an Excise and Taxation Officer checking the vehicle at any place: Provided that a person selling goods from within or outside the State in the course of inter- State trade or commerce, shall also furnish or cause to be furnished a declaration with such particulars, as may be prescribed: Provided further that a taxable person, who sells or despatches any goods from within the State to a place outside the State or imports or brings any goods or otherwise receives goods from outside the State, shall furnish particulars of the goods in a specified form obtained from the designated officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hellip;..…...…...….. …...…… (c) The officer referred to in clause (b), before conducting the enquiry, shall serve a notice on the consignor or consignee of the goods detained under clause (b) of sub-section (6) and give him an opportunity of being heard and if, after the enquiry, such officer is satisfied that the documents as required under sub- sections (2) and (4), were not furnished at the information collection centre or the check post, as the case may be, with a view to attempt to avoid or evade the tax due or likely to be due under this Act, he shall by order, for reasons to be recorded in writing, impose on the consignor or consignee of the goods, penalty equal to fifty per cent of the value of the goods involved. In case, he finds otherwise, he shall order release of the goods for sufficient reasons to be recorded in writing. He may, however, order release of the goods and the vehicle on furnishing of a security by the consignor or the consignee in the form of cash or bank guarantee or crossed bank draft for an amount equal to the amount of penalty imposable and shall decide the matter finally within a period of fourteen days fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d" (ii) Form VAT-36, Insofar as it is relevant reads as under:- "FORM VAT-36 (See Rule 64 and 65) Declaration for transport of goods to and from the State of Punjab …… ….. ….. …… …… …… ……. 6. Description of the person to whom goods are sent or from whom goods are received by Punjab Dealer Name:_________________________________________ Address: _____________________________________ ______________________________________________ TIN No. ______________________________________" 18. The petitioner having mentioned its TIN is by no means conclusive of the question whether the sale of goods was in the course of inter-state sale. It can, at the highest, only be a factor to be taken into consideration in the determination of the question. In the present case, there is more than one reason why the TIN being mentioned does not indicate that the import of the goods was independent of or unconnected with the contract of sale. 19. Firstly, the petitioner stated that it obtained the TIN for Punjab as it intended setting up a warehouse in Punjab. Had it done so, i.e., had it set up a warehouse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61-MAD is well founded. The learned Judge held:- "36. One more aspect pointed out by the Revenue is with regard to use of incorrect TIN number in the E-Sugam form generated by the petitioner at Karnataka. Admittedly, the form is electronically generated and unless and until all columns are filled, the computer system will not generate the form. The petitioner's explanation is that the furnishing of TIN number is not required. However, the said column cannot be left blank and the movement of goods are to Puducherry, the first three digits of Puducherry code are mentioned and this is no way amounts to suppression. The explanation given by the petitioner is reasonable considering the facts and the nature of transaction done by the petitioner. The consigner and the consignee is the petitioner and the goods moved from State of Karnataka to Puducherry and it is on "self basis". The consignment is shown as electronic items, garments etc., stored in several bags. Therefore, mere mention of TIN number by giving only the code of Puducherry as assigned by the Commercial Taxes Department that by itself will not be a ground to state that the petitioner has committed an offence." We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. Explanation 3.-Where the gas sold or purchased and transported through a common carrier pipeline or any other common transport or distribution system becomes co-mingled and fungible with other gas in the pipeline or system and such gas is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one State to another. 4. When is a sale or purchase of goods said to take place outside a State.-(1) Subject to the provisions contained in Section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A sale or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the "movement of goods from one State to another" is a sale in course of inter-state trade. All that is required is that the inter-state movement must be the result of the sale. It is not even necessary for the contract of sale to expressly state or provide for the movement of the goods from one State to the other. It can be implied from the contract itself. Nor is it necessary that the sale must precede the movement in order that the sale may be deemed to have occasioned such movement. Mr. Gulati's reliance upon the judgments in this regard which we will now refer to is well founded. 27. The Supreme Court in Oil India Limited vs. Superintendent of Taxes and others, (1975) 1 SCC 733 held as under:- "9. Even though clause 7 of the supplemental agreement does not expressly provide for movement of the goods, it is clear that the parties envisaged the movement of crude oil in pursuance to the contract from the State of Assam to the State of Bihar. In other words, the movement of crude oil from the State of Assam to the State of Bihar was an incident of the contract of sale. No matter in which State the property in the goods passes, a sale which occasions "movement of goods from on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 covenant regarding inter- State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale. 16. When a branch of a company forwards 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 the factory and its branch. If there is a conceivable link between the movement of the goods and the buyer's contract, and if in the course of inter-State movement the goods move only to reach the buyer in satisfaction of his contract of purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is why, while in Section 3 the words "sale of goods" have been used in Section 4(2) clauses (a) and (b) which deal with the situs of the sale the words "contract of sale" have been used in the same sense. In other words, the word "sale" defined in clause (g) of Section 2 and used in Section 3 and other sections, is wide enough to include not only a concluded contract of sale but also a contract or agreement of sale provided the agreement of sale stipulates that there was a transfer of property or movement of goods. In STO, Pilibhit v. Budh Prakash Jai Prakash [AIR 1954 SC 459 : (1955) 1 SCR 243 : 5 STC 193, 196] quoting Benjamin on Sale, (8th Edn.) Venkatarama Ayyar, J., who spoke for the Court observed as follows: "The distinction between a sale and an agreement to sell under Section 1 of the English Act is thus stated by Benjamin on Sale, Eighth Edition, 1950: In order to constitute a sale there must be- (1) an agreement to sell, by which alone the property does not pass; and (2) an actual sale, by which the property passes. It will be observed that the definition of a contract of sale above cited includes a mere agreement to sell as well as an actual sale. This disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4(1), therefore, clearly provides that a contract of sale of goods includes also an agreement to transfer property in goods to the buyer for a price. The inevitable conclusion that follows from the combined effect of the interpretation of Section 3 of the Central Sales Tax Act and Section 4 of the Sale of Goods Act is that an agreement to sell is also an essential ingredient of sale provided it contains a stipulation for transfer of goods from the seller to the buyer. This being the position if there is a movement of goods from one State to another, not in pursuance of the sale itself, but in pursuance of an agreement to sell, which later merges into a sale, the movement of goods would be deemed to have been occasioned by the sale itself wherever it takes place. In this view of the matter the question as to whether agreement to sell was a forward contract or a contract in respect of unascertainable or future goods would make no difference for the simple reason that when once a sale takes place, or for that matter when the goods start moving from one State to another in pursuance of the agreement to sell they cease to be future goods because they are in existence and also as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods he then books the goods from State X to State Y in his own name. This is also a case where the sale is purely an internal sale having taken place in State X and the movement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property." (emphasis supplied) The Supreme Court in Union of India and another v. K.G. Khosla & Co. Ltd. and others, (1979) 2 SCC 242, observed as under:- "18. The decisions to which we have referred above show that in order that a sale may be regarded as an inter-State sale, it is immaterial whether the property in the goods passes in one State or another. The question as regards the nature of the sale, that is, whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstances as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter State-sale." In State of Maharashtra vs. Embee Corporation, Bombay, (1997) 7 SCC 190, the Supreme Court observed as under:- "7. The above definition of "sale" in the Act shows that the word "sale" has been given a very wide meaning so as to include not only the sale of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of goods, irrespective of whether the property in the goods passed in one State or the other, if the effect of such a sale is to have the movement of goods from one State to another, an inter-State sale would ensue and would result in exigibility of tax under Section 3(a) of the Central Act on the turnover of such transaction. It is only when the turnover relates to sale or purchase of goods during the course of inter-State trade or commerce that it would be taxable under the Central Act. 40. The learned counsel, Shri Bagaria mainly contends that there is nothing in the sales agreement, express or implied, which may be regarded as a specific covenant under which the assessee's manufacturing unit was obliged to move the specific goods from its manufacturing unit at Hyderabad to its branch offices for delivery of the goods to UIL. The learned counsel submitted that a sale can be regarded as having occurred in the course of inter-State trade, if the contract of sale concerned itself includes a covenant either express or implied, to the effect that the goods must move from one State to another for the purpose of implementing "the sales agreement". 41. We cannot agree wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind by the authority concerned and also smack of arbitrariness. I therefore quash Exts.P11 and P12 orders, Exts.P13 and P14 Demand Notices as also Exts.P8 and P9 show cause notices that are impugned in W.P. (C) No. 5348/2015 and allow the said writ petition." A petition for special leave to appeal against this judgment was admitted by the Supreme Court on 20.02.2015. 28. Mr. Gulati also relied upon a judgment of the learned single Judge of the Madras High Court in the petitioner's case, i.e., M/s. WS Retail Services Private Limited vs. Union of India and others, reported as 2016-VIL- 661-MAD. Paragraphs 2, 21, 25, 28 and 37 of the judgment read as under:- "2. The petitioner's case is that the goods meant for sale are stored by them in warehouses located in Mumbai, Kolkata, Bangalore, Delhi and Noida and on an order being placed by the customer located anywhere in the country or in particular from Puducherry, as the present controversy has arisen from Puducherry, via the online portal, the goods corresponding to the purchase order will be transported from one of the warehouses to Puducherry by way of an inter-state sale between the petitioner and the customer on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lip;… …… …… ……. 25. The above flowchart is as contained in the impugned order, illustrates the type of transaction done by the petitioner in respect of sales, where payment is effected on delivery. It is not disputed by the Revenue that the products listed for sale or available in the website www.flipkart.com. The customer goes to the online platform and chooses a particular product and confirms the purchase. A bill is generated and the identified package, that is the package containing the product purchased by the buyer is despatched to Puducherry to the outlet of the petitioner on "self basis". The Revenue seeks to tax the transaction as a local sale by primarily contending that the identified package with the prospective bill along with other consignments are despatched from Karnataka to the petitioner on "self basis". When the consignments reach Puducherry, they are kept in a depot established by the petitioner, which is registered under the provisions of the PVAT Act, as only as a courier service, thereafter, the products are segregated and sales/delivery boys deliver to the ultimate customer at Puducherry, the customer accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of the purchaser at Puducherry had been produced, which shows that the petitioner, who is the registered dealer in Karnataka has paid Central Sales Tax at 5.5% for the said product. This also goes to establish that the transaction is an "inter-state sale" The learned Judge also followed the judgment of the Kerala High Court in Flipkart Internet and Ors. vs. State of Kerala and others (supra). 29. The assessment order has not considered any of the principles discussed elaborately in the above authorities. We will assume that the authorities were not brought to the notice of the ETO. The assessment order has proceeded on a basis which is contrary to these principles. We hasten to add that as stated in the assessment order it is also possible that the entire material was not produced before the ETO. Upon remand, it would be necessary for the Assessing Officer to consider the material in the light of the above principles and authorities. 30. The sixth question framed by the ETO in the assessment order was: "Isn't the e-commerce website a virtual showroom?" The ETO held that e-commerce websites are virtual showrooms visited by persons where they are located, such as, at ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used as evidence generally. 34. The order notes that the verification process has not been completed and that there is no record of tax, if any, paid, in any State by the dealer in the case of imports made by it on the TIN of Punjab. It further notes that the sale occurred after the goods entered into the State of Punjab. Even while dealing with this question, the ETO has made general observations regarding the petitioner having purchased the goods from outside the State of Punjab. There is, however, nothing in the order that substantiates the same. It is observed that the petitioner had failed to furnish documents in support of its contention that the sales were in the course of inter-state trade. We intend directing the petitioner to produce the same upon remand even if already produced. These are issues of fact which we do not intend dealing with. It requires an examination of numerous transactions. 35. There may be several explanations for some of the discrepancies and aspects indicated in the assessment order. For instance, the fact that several packages weigh the same cannot be held against the petitioner. Each of them may consist of similar items. This is especially so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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