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TMI Blog2020 (4) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods in the transporters godown at the destination point for a long period of time, default on no other count by the assesses has been asserted - In the two appeals in which the respondent is Bombay Machinery Stores, sales pertained to financial years before the circulars came into subsistence. In these instances of sales, the Commercial Tax officer in the respective orders treated retention of goods beyond 30 days in the transporters godown as the cut-off period. After that date, the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State of Rajasthan was held to be local sales and subjected to sales tax under the State Law. As per the aforesaid circulars, retention of goods by the transporter beyond the time stipulated therein (being 30 days as per the later circular) would imply that constructive delivery of the goods has been made by the transporter to the consignee. In such a situation, the transit status of the goods would stand terminated and the deeming provision in first explanation to Section 3 of the 1956 Act conceiving the time-point of delivery as termination of movement shall cease to operate. Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, 1956 (1956 Act), which was operational at the material point of time. The question is as to whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be taken from a carrier when the goods are delivered to a carrier for transmission in course of inter-state sale. For proper appreciation of the dispute involved in these appeals, the aforesaid provisions are reproduced below:- 3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1 - Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than the Government, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,- (a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and (b) if the subsequent sale is made (i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or (ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of section (4) of section 8: Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,- (a) the sale or purchase of such goods is, under the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sales, they obtained the benefit of exemption under Section 6(2) of the 1956 Act. These goods had remained with the transport company upon arrival in Kota for more than a month. Revenue s case is that after importing these goods into Rajasthan, sale was effected through bilty (transport receipt) on obtaining separate orders. Such sale, it is the revenue s case, constituted sale within the State and hence taxable @12% per annum under the Rajasthan Sales Tax Act, 1954. Civil Appeal No.2220 of 2011 relates to the same firm but for the assessment year 1994-95. Quantum of sales for the year 1994-95 effected through the same process was ₹ 3,15,639/- and for 1995-96 it was ₹ 2,60,93/-. Claim of benefit under Section 6(2) of the 1956 Act was rejected and tax along with interest and penalty was imposed under the State Act by Commercial Tax Officer, Anti-Evasion Circle-I, Kota after a survey by two orders, both dated 11th December, 1997. The appeals by Bombay Machinery Stores were allowed by the Deputy Commissioner (Appeals), Commercial Taxes, Kota following a decision delivered on 8th March, 1996 by the Rajasthan Tax Board in the case of CTO vs. Bhagwandas Sons (1996 Tax Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized. (quoted from the order annexed to the paper book) These goods had reached the godown of the transport company on 25th July, 2001. These were brought against bilty and the documents were transferred to the same firm on 4th September, 2001. There was thus delay of 41 days. The tax fixation authorities directed application of the State Act treating the transactions to be local sales. This order was sustained by the Deputy Commissioner (Appeals) and the order of the Tax Board also went against Unicolour. The High Court, following the judgment in the case of Bombay Machinery Store (which we are treating as the lead case in this judgment), quashed the orders of the statutory authorities in both the appeals and also invalidated the two circulars. 5. The two circulars issued by the Commissioner, Commercial Taxes Department, Rajasthan have been quoted in the impugned judgment in the case of Bombay Machinery Store. Henceforth, wherever we refer to the expression judgment under appeal, we shall imply that judgment only, unless we specifically refer to any of the three other decisions under appeal. These circulars read:- S. No. 1115B : CCT Circular F.11(3)/CST/Tax/CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. The transporters, whether Railways or Roadways, impose condition of delivery of goods transported through them at the destination usually within ten days and the consignee is required to check up with such transporting agency as to the arrival of the goods. In these circumstances, if the carrier retains the goods for an extended period, then there is a clear inference that the consignee was aware of the arrival of his goods and the transporter is holding the goods on his behalf as a bailee for the consignee. These factual matrix leads to the conclusion that there is a local sale and not sale under said Section 6(2). Payment of warehouse rent/demurrage charges by the consignee to the transporter is conclusive evidence that transporters have assumed the role of bailee and transit having ended. It may be observed that bailment can be either gratuitous or for remuneration or partially both. In law, there can also be bailment without contract. As per legal position, transit gets over as soon as a reasonable time elapses for the consignee to elect whether he would take the goods away or leave them in the transporters premises, because at the conclusion of reasonable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with such transporting agency as to the arrival of the goods. In view of this, it was desired by the above referred circular that the AAs should ascertain the fact that whether the goods remained with the transporter beyond reasonable time. Looking to the facts and circumstances of each case, the doctrine of constructive delivery should be invoked and action be taken accordingly. The representatives of various associations of trade and industry had brought to the notice that in almost all cases the AAs are invoking the doctrine of constructive delivery in a mechanical manner immediately after ten days of arrival of the goods at the destination. As per these Associations, this approach has resulted in hardship to the dealers and avoidable harassment is being caused to them with adverse effect on the trade. They have requested for increasing this limit. Keeping in view these factual aspects and the discussions at the Govt; level, it is reiterated that the reasonability of the time should be looked into after analysing the facts and circumstances of each case and the usual period of treating constructive delivery which may even extend upto thirty days instead of ten days a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with in a common judgment. It was held by the High Court in the judgment under appeal:- 12. Therefore, the proposition of law by the learned Commissioner in the impugned circulars that as per legal position, transit gets over as soon as a reasonable time elapses for the consignee to elect whether he would take the goods away or leave them in the transporters premises, because at the conclusion of reasonable time there is deemed to be a constructive delivery of goods from the transporter to the consignee , cannot be said to be a correct legal position. The subsequent Circular dated 15.4.1998 purportedly issued to ameliorate the situation for dealers created by previous circular dated 16.9.1997, merely ended up extending the time limit of 10 days to 30 days without undoing the damage done by the previous circular by propounding a particular view of constructive delivery. In fact, the very power to issue such circulars by the learned Commissioner giving a particular interpretation of law purportedly binding on all the assessing authorities is doubtful. There is no specific provision in the Sales Tax Act, either under the RST Act or under the CST Act, empowering the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is not required to be interfered with in the present revision petitions filed by the Revenue. 8. We must add here that the decision in the case of Guljag (supra) was subsequently carried up in appeal before this Court. It appears from the records of this Court that two of these appeals were disposed of on 30th September, 2010 as the assessee chose to approach the statutory forum whereas another appeal was dismissed having regard to the quantum of tax involved in the appeal. 9. We, accordingly, shall test the revenue s case including the question of legality of the said two circulars in the context of the provisions of Sections 3 and 6 of the 1956 Act. The respondent in this case had taken benefit of sub-section (2) on the ground that this was a case involving inter-state sale and the sale took place by way of transfer of documents of title of such goods during their movement from one State to another. It is also the respondents case that the requisite forms and certificates were duly furnished pertaining to such sales. On the part of the State, barring retention of the goods in the transporters godown at the destination point for a long period of time, default on n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51. Duration of transit.-(1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. (3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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