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TMI Blog2017 (10) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... n time . This, according to the respondent, has to be construed as local sale and taxable at higher rate of tax at 14.5% under the TNVAT Act. Thus, in the show cause notice, the respondent did not dispute the fact that the tyres were manufactured outside the State of Tamil Nadu and dispatched from the place of manufacturer and retained in the transporter's godown. The crucial question would be, for the transaction to qualify as an interstate sale, the test would be as to where the appropriation of goods took place. In fact, the proposal in the show cause notice does not seriously dispute or contest the place of appropriation, as there is no clear indication as to what has passed in the minds of the assessing officer. The chain of events clearly show that the respondent obviously could not have appreciated the details placed by the petitioner, which he had called for vide notice dated 26.12.2016. Probably after all the details have been furnished, the assessing officer thought fit to summon the purchaser to understand the nature of transaction. While the move taken by the assessing officer is appreciable, but, the time at which he exercised such discretion is not the proper time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from their factory located at K.R.S.Road, Metagalli, Mysore-570 016, ALL placed purchase order. This purchase order is placed by ALL located at Ennore and Hossur, on the factory of the petitioners located at K.R.S.Road, Metagalli, Mysore-570 016. This purchase order mentions the model of tyre to be supplied. This purchase order also fixes the price for a given model of the tyre. (ii) The petitioners state that when a new model of chassis is to be manufactured by ALL, the petitioners will provide drawings of the tyre to be manufactured to suit the specification of the chassis to be manufactured by ALL. Once this is approved, the manufacturing operations commences at the factory of the petitioners. (iii) The petitioners state that, after receiving the purchase order, the tyres are manufactured to suit the specifications of the chassis being manufactured by ALL. (iv) The petitioners state that the web portal of ALL contains a monthly schedule of tyres to be supplied by a given vendor. Every vendor of ALL of various components to be supplied to them are given a pass word. This pass word is supplied by ALL to every vendor and therefore a pass word is also given to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtal of M/s.ALL provides for a facility of periodical delivery at their request. While there is a monthly schedule and invoicing despatch as per monthly schedule, on account of the fact that M/s.ALL is not able to handle the consignments continuously and at their request, the title has passed in terms of Section 4 of the CST Act, 1956 in the State of Karnataka, the tyres are temporarily kept in the godown of the transporter. The web portal of M/s.ALL provides for downloading of a document called Advance Shipping Notification (ASN) . M/s.ALL has a facility for placing periodical indents to receive delivery from the godown of the transporter and these indents are titled as Schedule-line Agreement (SA) . The web portal of M/s.ALL, apart from indicating the monthly schedule, in accordance with which goods are sold, also contains a web portal indicating the daily requirements and accordingly, as per daily requirements, which is SA, deliveries are made by the petitioner from the godown of the transporter. 4. Therefore, the petitioner's case is that while the sale has taken place in the course of interstate trade, the quantities to be delivered on a given day are fixed online and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, by another letter dated 17.01.2017, the petitioner furnished details for the period 2012-13, 2013-14 2014-15 and by letter dated 30.01.2017, the petitioner furnished the details for the period 2011-12. 7. However, the impugned assessment order dated 30.01.2017 was served on the petitioner on 01.02.2017. The petitioner, on going through the impugned order, found that the respondent has issued summons to their purchaser M/s.ALL to appear in person to explain the supply chain management and has recorded a statement from two officials of M/s.ALL. This according to the petitioner, was not informed to them and such statements were recorded behind them and the same cannot be pressed into service. 8. Further, the two documents, which are referred to in the impugned order viz., Supplier Relationship Management (SRM) and Advance Shipping Notification (ASN) , were not at all referred to in the show cause notice and it was surprise for the petitioner to see from the impugned order, there were reference to these materials, which were not put to them in the show cause notice. 9. Therefore, the petitioner is before this Court challenging the assessment orders. In the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re manufactured outside the State of Tamil Nadu and dispatched from the place of manufacturer and retained in the transporter's godown. The crucial question would be, for the transaction to qualify as an interstate sale, the test would be as to where the appropriation of goods took place. In fact, the proposal in the show cause notice does not seriously dispute or contest the place of appropriation, as there is no clear indication as to what has passed in the minds of the assessing officer. 13. However, the doubt, which appears to have arisen in the mind of the Asssessing Officer is that the tyres are not supplied directly from the factory outside the State to the purchaser, but retained in the transporter's godown and supplied as and when required, which, according to the respondent, amounts to local sale. 14. To examine the nature of transaction, the first requirement was to examine the nature of contract between the parties, how the supply is effected, payment are made and where appropriation takes place etc. In order to appreciate these aspects, one has to essentially go through the terms of contract and how the parties have understood the scope of the contract an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the assessment. Even assuming that the respondent was justified in calling upon the purchaser to appear before them and give statement., when the statement is said to be used against the dealer/petitioner, they are entitled to have an opportunity to purforth their objections or offer their clarification. 17. Thus the assessment order appeares to have been completed in a very hasty manner, without analysing the nature of transaction as projected by the petitioner. As mentioned earlier, the respondent does not dispute the fact that the purchase order has been placed by the purchaser with the factory at Karnataka. The question would be as to whether merely because, the goods are transported and left to lie in the transporter's godown and later on, supplied, as and when required, would be a reason to deny the transaction status as an interstate sale and treat it as a local sale. 18. On this issue, useful reference can be made to the decision of the Hon'ble Supreme Court in the case of IDL Chemicals Limited vs. State of Orissa reported in (2007) 14 SCC 386. The question that arose in the said case was some what similar to the case on hand, wherein the purchase order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable in law. Firstly, as pointed out, the impugned order has proceeded beyond the proposal made in the show cause notice. The endeavour made by the assessing officer during the assessment proceedings by issuing summons to the purchaser and obtaining certain details from them, without notice to the petitioner, is a serious error and amounts to a gross violation of principles of natural justice. The petitioner had no opportunity to rebut such stand or explain their position on the factual basis. Thus, this procedural error render the impugned proceeding as bad in law. 23. The learned counsel for the petitioner placed reliance on the decision of the Hon'ble Division Bench of this Court in the case of Rallis India Limited v. State of Tamil Nadu reported in 1994 vol.92 STC (325), which is also some what a similar transaction, where the parties claimed it to be an interstate sale and the Hon'ble Division Bench held as follows: 14. We, therefore, hold that the assessing authorities and the Tribunal were not right in holding that the goods in question were transferred to Cochin in pursuance of contracts of sale. We hold that Section 3(a) does not come into play. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Tamil Nadu as interstate sale, kept in the transporter's godown and supplied to the purchaser as and when required, which was said to be treated as interstate sale. Thus, for all practical purposes, if the purchaser has to issue industrial input certificate, obviously it shall be issued in the name of manufacturer at the Mysore plant, and not to the Chennai plant which came to be in existence only during the year 2012. On the issue, it is relevant to take note of the decision of the Delhi High Court in the case of C.Jairam Pvt. Ltd. vs. Commissioner of Sales Tax, New Delhi reported in 1981 vol.52 STC 318, wherein while considering a similar issue in respect of D forms under the Central Sales Tax Act, which were rejected by stating that it has been mentioned as Bombay instead of Delhi and therefore, it has to be amended, rejecting the contention raised by the Department was held as follows: That when once the D forms were produced it was not for the sales tax authorities to reject them on some ground, but it was the duty of the sales tax authorities to determine whether the exemption was to be granted on the basis of those forms. That the branch or the head offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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