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TMI Blog2022 (11) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CST Act and is not an inter-state sale and are mere stock transfers; (iv) any other writ, order or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and allow this petition with cost. 2. Heard Shri. V.Sridharan, learned Senior Advocate for the petitioner and Shri. Jeevan J.Neeralgi, learned AGA for the State. 3. Brief facts of the case are, petitioner is in the business of manufacture and sale of automotive paints. It is a registered dealer under the provisions of K-VAT Act (Karnataka Value Added Tax act, 2003 - 'K-VAT Act' for short). Its manufacturing unit is situated near Mangaluru in Karnataka. It has warehouses (Branch offices) in Maharashtra, Tamilnadu, Haryana and Uttarakhand. 4. Petitioner manufactures automotive paints for original equipment manufacturers and supplies to Tata Motors, Mahindra and Mahindra, Maruti Udyog Ltd., etc., who procure raw materials on just-in-time (JIT) basis. To cater to their needs, petitioner has developed a business model to ensure that stock is maintained at warehouses located near the factories of OEM Customers. 5. Petitioner's case in substance is, after the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , learned Senior Advocate submitted that: * there is no statutory appeal provided against an order passed under Section 20 of the CST Act, by CSTAA. The CST Act nor the K-VAT Act do not provide any statutory appeal against CSTAA's order; * for any sale to be treated as Inter-State sale, three conditions are essential. Firstly, there should be a sale, secondly, there should be Inter-State movement of goods and thirdly, Inter-State movement ought to have occasioned by the sale. 12. Shri. Sridharan has placed reliance on following authorities: * M/s. Kelvinator of India Ltd. Vs. The State of Haryana (1973) 2 SCC 551; * Union of India Vs. Maddala Thathiah (1964) 3 SCR 774; * Sales Tax officer, Pilibhit Vs. Budh Prakash Jai Prakash (1955) 1 SCR 243; * State of Andhra Pradesh Vs. Coromandel Paints & Chemicals Ltd. (1995) 98 STC 82 AP; 13. Shri. Jeevan J. Neeralgi, learned AGA for the State opposing the petition submitted that specific orders are placed by the purchasers and based on such orders, petitioner manufactures and supplies the paint. Thus, manufacture of paint pursuant to specific orders is customer specific. Goods move from Mangaluru to various destinations to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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." 21. Shri Sridharan urged that for a transaction to be defined as inter-state sale, two conditions must to be fulfilled. Firstly, movement of inter-state goods and secondly, transfer of title to the goods during their movement from one State to another. He submitted that the original equipment manufacturers and ancillaries who purchase goods from petitioner stipulate the 'quality standards' and other technical specifications in the open purchase orders which do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantity has been kept 'open' and the delivery schedule is mentioned as 'one day'. Similarly there are other purchase orders of different companies where the quantity has been mentioned as 'zero'. 28. In order to hold that a transaction falls under Section 3(a) of the CST Act, the sale or purchase must cause movement of goods from one State to another or transfer of title to the goods must take place during their movement from one State to another. 29. In the case on hand, goods have been moved to different States under Form-F. Assessee's specific case is, sale is effected based on the indents received from time to time from the purchasers. 30. In Budh Prakash Jai Prakash, the Constitution Bench of the Hon'ble Supreme Court of India has held that a liability to be assessed to sales tax can arise only if there is a completed sale under which, price if paid or is payable and not when there is only an agreement to sell. The distinction between 'sales' and 'agreements to sell' stated in Halsbury's Laws of England (Vol. 29 Page 15 para 13) has been noticed by the Apex Court and it reads as follows: "An agreement to sell, or, as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract was void and remanded the suit for disposal, after dealing with that matter. Railways challenged the said order before the Apex Court and the Apex Court held thus: "15. We are therefore of the view that the condition mentioned in the note to para 2 of the tender or in the letter dated February 16, 1948, refers to a right in the appellant to cancel the agreement for such supply of jaggery about which no formal order had been placed by the Deputy General Manager with the respondent and does not apply to such supplies of jaggery about which a formal order had been placed specifying definite amount of jaggery to be supplied and the definite date or definite short period for its actual delivery. Once the order is placed for such supply on such dates, that order amounts to a binding contract making it incumbent on the respondent to supply jaggery in accordance with the terms of the order and also making it incumbent on the Deputy General Manager to accept the jaggery delivered in pursuance of that order." 33. In Kelvinator, the Company had a Factory in Faridabad. Refrigerators manufactured by them were marketed under trade marks, 'Kelvinator' 'Leonard' and 'G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the assessee, it can only be a standing offer but not "sale" or an "agreement to sell". " (Emphasis Supplied) 35. Adverting to the facts of this case, the Open Purchase Orders referred to hereinabove, do not mention the quantity of the goods supplied. We may record that in order to avoid inventory, manufacturers have been using the 'JIT' (Just in time) supply model. It was argued on behalf of the assessee that to ensure prompt delivery of the goods as and when called upon, the assessee transfers the goods and stocks it in its depot. Shri. Sridharan also urged that the automobile manufacturing Industries nor the ancilliary units had any obligation to place purchase orders. In case the paint had remained unsold, the option for the assessee is to either destroy it or to take it back to its Manufacturing unit. 36. It is not in dispute that goods were transferred from Mangaluru to various depots situated in different States under Form-F and assessments for the years 2006-07 and 2007-08 were concluded by accepting the Statutory declarations filed in Form-F. 37. In view of the Authorities in the case of Maddala Thathiah and Kelvinator, we are of the considered view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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