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Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 1 | P a g e
INTER-STATE & INTRA STATE SALE, BRANCH TRANSFER
Article by: Mr. Hemant Desai
B.Com.,LL.B.
Advocate – VAT- SURAT
E-mail: [email protected]
The question whether a particular sale is an inter-State sale,
intra-State sale, sales in transit or branch transfer is a mixed
question of fact and law. The facts of particular transaction have
to be examined in the light of the provisions of section 3, section
4, section 6(2) and section 6A of the Central Sales Tax Act, 1956
(for short “Act, 1956”).
To ascertain a sale is an inter-State sale two tests have to be
applied, (i) is that a sale or purchase takes place in the course of
inter-State trade if it occasions movement of the goods from one
State to another, and (ii) is that a sale or purchase takes place by
transfer of documents of title to goods during the movement of
the goods from one State to another. See - Sec. 3 & 6(2).
To ascertain a sale is inside the State, the test to be applied is
that, in the case of ‘specific or ascertained goods’ they are within
the territory of the State at the time the contract of sale is made
or in the case of ‘unascertained or future goods’ they are within
the territory of that State at the time of their appropriation to the
contract of sale by the seller or the buyer. See – Sec. 4.
To ascertain transaction is branch transfer, the test to be applied
is that, the dispatch of goods from one State to another has not
moved in pursuance of terms of the contract for sale. Here the
onus to prove branch transfer lies upon dealer. See – Sec. 6A.
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 2 | P a g e
The situation dealt with by Section 3 with regard to inter-state
sale has been subjected to deeming provision. The legislature in
its wisdom has used the word “shall deem to take place” dealing
with two conditions with regard to inter-state sale. The dividing
line between sales or purchase under section 3(a) and those
under section 3(b) is that, in the former the movement of the
goods is under the contract of sale or purchase but in latter the
contract comes into existence after commencement and before
termination of the inter State movement of goods.
Inter-State sale or purchase can be carved out of and separated
from inside sales or purchases for the purpose of situs of
taxation. If a contract of sale contains a stipulation for the
movement of the goods from one State to another, the sale would
certainly be an inter-State sale. It is not necessary for the
purpose of section 3(a) that the contract of sale must itself
provide for an express covenant or stipulation in the contract and
cause the movement of goods or that the movement of goods
must be occasioned specifically in accordance with the terms of
the contract of sale. It can be culled out from terms that both the
parties contemplated the inter-State movement of goods
consequential to or as an incident of the contract section 3(a) will
be attracted.
Inter-State movement inference from the contract:
Even if a contract of sale does not contain a stipulation for the
inter-State movement of goods, a reasonable inference may be
drawn that the parties to the contract well knew that the
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 3 | P a g e
fulfillment of the contract condition is possible only if the goods
in question are moved from one State to another.
In STC v. STATE OF MYSORE (1963) 14 STC 188, the Supreme
Court held that although a contract of sale of cement did not
itself contain any covenant that the supply had to be made from
any particular factory, as the contract was subject to the terms of
the permit which provided that the supply had to be made from
one or other factory situated outside Mysore State, the contract
must be deemed to have contained a covenant that the cement
would be supplied in Mysore from a place situated outside its
border and a sale under such a contract would clearly be an
"inter-State sale" as defined in section 3(a) of the Act, 1956.
In COMMISSIONER OF VAT, New Delhi v. STATE OF HARYANA
(2009) 23 VST 10 (CSTAA), the assessee undertook certain
bituminous road works pursuant to contracts relating to
improvement of roads awarded by Government Departments,
Corporations, PWD and other authorities. The contracts were
entered into by the assessee's main registered office at Gurgaon.
The bituminous mixture was prepared at the hot-mix plant near
Gurgaon in Haryana State owned and operated by the assessee.
The mixture had to conform to the specifications laid down in the
contracts. The assessee had paid local sales tax on the turnover
whereas the assessing authority demanded CST. The first appeal
was rejected however in second appeal before CSTAA, it is held
that in order to constitute an inter-State sale within the meaning
of section 3(a) of the Act, 1956, there need not be an express
covenant or stipulation in the contract. If it can be clearly
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 4 | P a g e
inferred from the contract that both the parties contemplated the
inter-State movement of goods consequential to or as an incident
of the contract, section 3(a) was attracted. In other words, if the
inter-State movement was necessarily incidental to the
implementation of the contract, that would satisfy the
requirement of section 3(a). It was clear in this case that the
inter-Sate movement of the goods was clearly within the
contemplation of the parties and the reasonable presumption
that should be drawn was that the parties well knew that the
fulfillment of the contract was not possible unless the goods in
question were brought from outside Delhi because hot operations
were not permitted to take place within the territory of Delhi in
view of the directive of the Supreme Court.
Delivery place - passing of property in goods:
If a sale occasions the movement of goods from one State to
another, it is an inter-State sale irrespective of the State where
the property in the goods passes to the buyer under the Sale of
Goods Act, 1930 or where the seller and purchaser reside. The
goods at the time of movement should be specified and meant for
the particular buyer can pass in either State and yet the sale can
be an inter-State sale. When the movement of goods from one
State to another is an incident of the contract of sale, it is a sale
in the course of inter-State trade falling under section 3(a) of the
Act, 1956. 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 to another. The
inter-State movement must be the result of a covenant express or
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 5 | P a g e
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. From delivery point in the exporting State, there can be
intra-State sale, inter-State sale or export of the goods.
Conversely in the importing State, there can be either stock
transfer of the goods or inter-State purchase. That is, either the
goods can be consigned to the person making it or to any other
person; or there can be inter-State sale of the goods, if the
movement of the goods is in pursuance of the contract of sale.
Movement of goods is implicit in the sale:
Where the purchase and transport are parts of one transaction
and cannot be dissociated and also there is no break between the
purchase and movement of goods to another State, it is
immaterial whether the sale or purchase takes place within
exporting State or importing State. So long the movement of
goods is an incident of the sale or purchase it amounts to an
inter-State sale or purchase. It is sufficient if the movement of
goods is implicit in the sale.
In RIL v. STATE OF U.P. the writ petition filed case Misc. Batch
No. 6281 of 2010 decided on 07.09.2012 the Hon’ble Allahabad
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 6 | P a g e
High Court the facts were that, to obtain a marketable product,
the raw natural gas is processed to remove inert or poisonous
constituents, and condensable hydrocarbons. Then said gas is
transported to the market in underground pipelines or in
liquefied form in ocean-going tankers. RIL delivered natural gas
at the outlet flange facility located at the onshore processing
terminal at Gadimoga of A. P. State and claimed that for the
selling of lean gas sold to the purchaser through transporter,
with regard to taxability as a result of commingling of gas or the
title of the gas being transferred at the delivery point itself shall
not be answerable to “post sale” processing of gas. There is no
agreement between RIL and RGTIL or GAIL either for transport,
commingling, extracting or processing of gas transported under
the transport agreement between the consumer and the
transporter. To fulfill conditions buyers entered into agreement
with RGTIL by which the transmission of natural gas from
Gadimoga to Hajira in Gujrat took place by the carrier, i.e. RGTIL
through its pipeline and from Hajira to Orai via Bijaipur in State
of U.P. by the gas pipeline of GAIL. The Court held that,
movement of natural gas is implicit is inter State sale.
Contractual obligation of buyer to take goods outside State:
In STATE OF BIHAR v. TELCO (1971) 27 STC 127 (SC) the
respondent company, which carried on the business of
manufacturing and selling trucks, bus chassis and spare parts
thereof, had its H.O. in Bombay and its factory at Jamshedpur in
Bihar had appointed dealers all over India. Under the agreements
between the company and the dealers, each dealer was assigned
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a territory in which alone they could sell the trucks, bus chassis
and spare parts purchased from the company and the dealer was
forbidden from selling them outside his territory. The dealers
placed their indents, paid the price of the goods and obtained
delivery orders from Bombay office of the company. The trucks,
bus chassis and spare parts were delivered in Bihar to the
dealers to be taken to the territories assigned to them. Under the
contracts the dealers were required to remove the trucks, bus
chassis and spare parts delivered to them in the State of Bihar to
places outside the State. The goods were so removed, the sales
were held to be inter-State sales.
In CO-OPERATIVE SUGARS (CHITTUR) LTD. v. STATE OF T. N.
(1993) 90 STC 1 (SC) the appellant, a co-operative sugar factory,
had its sugar factory in the Kerala State was permitted by
Government Order issued by the Government of T.N. to draw
sugarcane in Coimbatore and Pollachi Taluks of the State. It was
also provided in the Government Order that the appellant should
pay sales tax to T.N. on the sugarcane supplied on the specific
basis. The appellant opened its offices in Coimbatore and Pollachi
and took delivery of the sugarcane from the farmers. They also
arranged the transport of sugarcane to the appellant's factory in
Kerala under cover of delivery note which showed the appellant
itself as the seller and the buyer. Court held that, the purchases
made by the appellant were inter-State purchases as they were
permitted to purchase sugarcane in Coimbatore and Pollachi
taluks only with a view to and exclusively for the purpose of
transporting it to its factory in Kerala. The movement of goods
from T.N. to Kerala was occasioned by the sale by the farmers or
Article by Mr. Hemant Desai – Advocate VAT – SURAT | www: hddesai.com 8 | P a g e
purchase by the appellant, whichever way one looked at it. The
movement of sugarcane from T.N. to Kerala was an incident of
and was inextricably connected with the sale or purchase.
In DCM LTD v. CST (2009) 21 VST 417 (SC) the dealer sold
chemicals ex-works in Delhi to registered dealers who were under
a contractual obligation to sell them in their assigned territory
outside Delhi. The obligation of the purchasing dealer under the
contract with the seller to take the goods outside the State
indicated the control of the selling dealer over movement of the
goods. The purchasing dealers were obliged contractually to
remove the goods from Delhi to their assigned territories and the
goods were actually so removed. Thereby the sales were held to
be inter-State sales vide section 3 of the Act, 1956.
Contractual obligation of the selling dealer for delivery:
In OIL v. SUPERINTENDENT OF TAXES (1975) 35 STC 445 (SC)
the OIL had its H.O. in the State of Assam and was engaged in
the business of prospecting petroleum and also producing and
transporting crude oil from the State of Assam pursuant to the
prospecting licence and mining lease granted by the State of
Assam. In pursuance of an agreement, OIL supplied crude oil to
the refinery of the IOC situated in Bihar through pipe-lines
constructed and owned by the OIL. The construction of pipe-line
was undertaken by OIL in pursuance of the agreement and for
the specific purpose of transporting crude oil to Barauni in Bihar
from Assam. Delivery of crude oil was taken by IOC after
measurement at its Barauni Refinery. The movement of crude oil
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from the State of Assam to the State of Bihar was an incident of
the contract of sale and therefore the sales to refinery at Barauni
were held to be sales in the course of inter-State trade.
In IOC v. UOI (1981) 47 STC 1 (SC) the appellant agreed to
supply Naptha from its refinery at Barauni in Bihar to IEL factory
at Kanpur in U.P. a pipeline was laid by IOC from Barauni to
Kanpur to its depot and again to the factory fence of IEL. The
source of supply was the seller's refinery at Barauni in Bihar and
the destination was the buyer's factory at Kanpur U.P.. The sales
were held to be inter-State sales as there was a specific clause in
the agreement that "the supply of naptha to the buyer shall be
made from the seller's refinery at Barauni". Under this clause of
the agreement the seller was to make the supply of naptha to the
buyer from its refinery at Barauni in Bihar. Thus, the supply
clause from Barauni in Bihar to Kanpur in U.P. alone is sufficient
to prove that the sales in question were inter-State sales.
Comments:
By mutual consent the agreement to sell can be changed at any
time before the commencement of the movement of goods from
one State to another. Also the nature of transaction depends on
terms of agreement to sell which does not debar a seller to make
an agreement suitable to both the sides.
Decisions on interpretation of section 3(a) of the Act.
In TISCO v. S.R. SARKAR (1960) 11 STC 655 (SC), the majority
view of the court was that where the goods are moved from one
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State to another as a result of a covenant in the contract of sale,
that would be clearly a sale in the course of inter-State trade. The
court further proceeded to hold that even a movement of goods
from one State to another, which is merely incidental to, and
which is not part of, the contract of sale, is also brought within
the fold of section 3(a) of the Act, 1956.
In STATE OF BIHAR v. TELCO (1971) 27 STC 127 (SC), Court
observed that, "if a contract of sale contains a stipulation for
such movement, 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 that contract."
In OIL v. SUPERINTENDENT OF TAXES (1975) 35 STC 445 (SC),
Court held that, "No matter in which State the property in the
goods passes, a sale which occasions 'movement of goods from
one State to another is a sale in the course of inter-State trade'.
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 would be enough if the
movement was in pursuance of and incidental to the contract of
sale."
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In ENGLISH ELECTRIC COMPANY OF INDIA LTD. v. DCTO
(1976) 38 STC 475 (SC), Court observed, that "when a branch of
a company forwards a buyer's order to the principal factory of the
company and instructs them to dispatch 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 purchase and such a nexus is
otherwise inexplicable, then the sale or purchase of the specific
or ascertained goods ought to be deemed to have taken place in
the course of inter-State trade or commerce as such a sale or
purchase occasioned the movement of the goods from one State
to another. The presence of an intermediary, such as the seller's
own representative or branch office, who initiated the contract
may not make the matter different. Such an interception by a
known person on behalf of the seller is the delivery State and
such person's activities prior to or after the implementation of the
contract may not alter the position."
In UOI v. K.G. KHOSLA & CO. LTD. (1979) 43 STC 457, Supreme
Court reiterated and approved the decision in OIL (1975) 35 STC
445 (SC) and held that, if a contract of sale contains stipulation
for the movement of the goods from one State to another, the sale
would certainly be an inter-State sale. But for the purposes of
section 3(a) of the Act, it is not necessary that the contract of sale
must itself provide for and cause the movement of goods or that
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the movement of goods must be occasioned specifically in
accordance with the terms of the contract of sale.
In SOUTH INDIA VISCOSE LTD. v. STATE OF T. N. (1981) 48
STC 232 (SC), Court observed that, if there is a conceivable link
between a contract of sale and the movement of goods from one
State to another in order to discharge the obligation under the
contract of sale, it must be held to be an inter-State sale and that
character will not be changed on account of an interposition of an
agent of the seller who may temporarily intercept the movement.
In BHEL v. STATE OF A.P. (1996) 102 STC 345 (SC), Court
observed that "in the light of the settled legal position, it cannot
be and it has not been seriously disputed that the movement of
goods from the Hyderabad unit of the petitioner-company direct
to the customer's site in the other State are inter-State sales
pursuant to the contracts entered into by BHEL with the
customers/purchasers. The fact that the contracts were entered
into with the head office or the unit having overall responsibility
for execution is a different one or that the executing unit itself
raises the invoices and realizes the price from the customers does
not in any way detract from the position that the inter-State
movement of goods from Hyderabad is pursuant to and a
necessary consequence of the contract of sale. In the instant
case, the goods are tailor-made, manufactured according to
certain specification and designs and the components/equipment
which go into the plant are directly dispatched by the Hyderabad
unit to the customer in the other State and the goods are received
from the common carrier by the customer's representative. The
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movement of such goods from Andhra Pradesh to other States
cannot but be ascribed to contracts of sale entered into by the
head office of the petitioner-company of which the petitioner is
part and parcel. The fact that the contract was not entered into
with Hyderabad unit or that the inter-State movement had taken
place at the instance of another unit of the same company does
not make material difference. It is to be noted that for the value of
the goods dispatched, the debit note is sent by Hyderabad unit to
the executing unit. It may be that the customer does not pay the
amount direct to the Hyderabad unit which manufactures and
dispatches the goods. But in the light of the settled propositions
that the branches and head office constitute one single legal
entity, it does not matter by whom the billing is done or to whom
the payment is made by the customer".
Comments:
From the above decisions, the principle which emerges is, when
the sale or agreement for sale causes or has the effect of
occasioning the movement of goods from one State to another,
irrespective of whether the movement of goods is provided for in
the contract of sale or not, or when the order is placed with any
B.O. or H.O. which resulted in movement 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
result in exigibility of tax under section 3(a) of the Act, 1956 on
the turnover of such transaction. It is only when the turnover
relates to sale or purchase of goods during the course of inter-
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State trade or commerce that it would be taxable under the Act,
1956.
In the below cases sales-in-transit transactions were effected
in between two States, and there was no stipulation that the
subsequent sales under section 3(b) to be eligible for
exemption must occur in between third State.
In EAST INDIA CORPORATION LTD. v. STATE OF T. N. (1975) 36
STC 370 the assessee purchased cotton from dealers outside T.N.
When goods were in transit, the R/R were endorsed in favour of
customer in Madurai which was held to be as inter-State sale.
In CST, U. P. v. MEWALAL KEWAL KISHORE (1976) 38 STC 551
both dealers "A" and "B" were from U. P., "A" entered into an
agreement with "B" under which food grains were dispatched by
"A" outside the State. R/R was obtained in the name of “A” as self
and then endorsed by "A" to "B". The Court held it was transfer of
title to the goods and sale from "A" to "B" was only an inter-State
sale though they were within same State.
In LUCAS ELECTRICAL TRACTOR SERVICE LTD. v. STATE OF
T.N. (1984) 55 STC 286 the assessee purchased batteries from
Calcutta and sold the same in entirety to buyer in T.N. before the
goods were delivered by the carrier. The sales-in-transit allowed.
In CTO v. RAJ. SMALL IND. CORPORATION (1988) 68 STC 101
the respondent, a Government company, purchased coal from
collieries in Bihar for supply to allottees in the State of
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Rajasthan. The supplying colliery charged respondent 2% CST on
the sale of coal to allottees. The claim of the respondent was
effected by transfer of title to documents and fall under section
3(b) of the Act, 1956 and eligible for exemption.
In CHERANADU SSI SERVICE Co-Op SOCIETY LTD. v. STATE
OF T. N. (1993) 90 STC 521 the collieries from A.P. dispatched
coal by rail to Salem in favour of the petitioner who endorsed the
documents of title to various buyers at Salem, who took delivery
at Salem railway station. It was held that, sales of coal by the
petitioners by transfer of documents of title to the goods took
place during the movement of goods from A.P. to T.N. and were
second inter-State sales. Denied exemption Forms not produced.
In RAJENDRA TRADING COMPANY v. CTO (1994) 93 STC 71
where the dealer was registered at Rajasthan, purchased goods
from outside Rajasthan and effected subsequent inter-State sales
by transfer of documents while in transit but did not furnish
Form C held that, it could have obtained from Rajasthan.
In STATE OF T.N. v. VAN VANASPATHY UDYOG (1995) 98 STC
376 where the railways have issued a certificate in favour of
second purchaser it was held a sales-in-transit and eligible for
exemption. The dealer at T.N. had purchased from outside the
State and effected sales-in-transit to dealer within Tamil Nadu.
In STATE OF W.B. v. JOSHI JUTE CORPORATION (1996) 100
STC 17 the dealer at Calcutta placed order on a jute mill at
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Calcutta and transferred documents of title in favour of dealer at
Kerala. On the basis of documents the sales were held liable for
exemption under section 6(2)(b) of the Act, 1956.
In SRI KRISHNA RICE MILLS v. STATE OF A.P. (1997) 104 STC
475 a combined reading of section 6 of the Act, 1956 and rule 12
of the Central Sales Tax (A.P.) Rules, 1957 makes it clear that for
the claim of exemption under section 6(2) of the Act, 1956 a
dealer has to furnish original Form E1 received from the dealer
from whom he purchased the goods and Form C from the dealer
to whom the goods were sold in the course of inter-State sale.
In STATE OF T. N. v. KOTHARI PLANTATIONS & IND. LTD.
(1999) 113 STC 82 under section 6(2) of the Act, 1956, a dealer in
order to claim exemption in respect of second and subsequent
sales, has to necessarily file or produce Form E1 and C.
In STATE OF T. N. v. CHORDIA ELECTRICALS (2000) 120 STC
34 the dealer at T.N. effected sales in transit of goods purchased
from outside the State within Tamil Nadu. As declaration Forms
were not obtained it was held section 9(1) of the Act, 1956 can be
invoked and T.N. was held the appropriate State for levy of tax.
In SUNDARAM FINANCE LTD. v. STO (2002) 125 STC 565 the
dealer registered in Orissa entered into an agreement with
Kirloskar Electric Co. outside the State for purchase of machinery
for supply to a party IAPL at Orissa towards commissioning of
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33/11 KV receiving station by way of sales-in-transit
transactions. The same was declared eligible for exemption.
In K. MOHAN & COMPANY v. STATE OF T. N. (2002) 128 STC
279 goods were sold to a party in Kolkata and documents were
sent through bank. The buyer did not pay and retired the
documents, hence seller made arrangements for sale to another
buyer and the goods were taken delivery from the transporter. It
was held to be a continuous subsequent inter-State sale until
termination of movement is effected by taking delivery under
section 3(b).
In PRIYA CHEMICALS v. W. B. COMMERCIAL TAXES (2003) 132
STC 145 the transactions under section 6(2)(b) has to be proved
by methods envisage in section 6(2). If upon analysis of the facts
and circumstances and the accompanying documents of a
particular transaction it clearly appears that there was a
purchase from a dealer of goods of the nature mentioned in the
section and subsequent sales, the exemption shall be granted.
The dealer in Calcutta purchased goods from A.P. and supplied
within State of W.B.. The same was held eligible to exemption.
In L & T LTD. v. CCT (2003) 132 STC 272 the appellant at A.P.
entered into a contract with Vishakapatnam Steel Plant and
others for erection of specified projects within A.P. got some of
the items specified for supply manufactured at its Mumbai
factory and dispatched directly in favour of the contractees by
transfer of title to the documents, held eligible for exemption.
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In following decisions as regards the sales-in-transit
transactions only two States were involved even though the
exemption claimed was disallowed:
In TISCO v. S. R. SARKAR (1960) 11 STC 655 (SC) where the
property in the goods had passed before the movement
commenced during the course of first inter-State sale, the sale
will not fall under section 3(b) of the Act, 1956 nor will the sale
be covered by section 3(b) of the Act, 1956 in which the property
passed after the movement from one State to another had ceased.
In STATE OF GUJARAT v. CHEM DYES CORPORATION (1991) 83
STC 488 the assessee purchased goods from Bombay and
dispatched them to Rajkot and R/R were handed over to
purchasers at Rajkot. The purchasers after taking delivery of the
goods from the railways would carry out the inspection of the
goods and sales were concluded only after inspection and
approval by the ultimate purchasers. The Court held that one of
the conditions of section 3(b) was sale of the goods and not
agreement of sale. Through the documents of title to the goods
were endorsed during movement of the goods, still the sale had
not taken place and not eligible for exemption vide section 6(2)(b).
In SUNDARAM INDUSTRIES, Karapakkam v. STATE OF T. N.
(1992) 86 STC 554 the claim of exemption under section 6(2)(b)
sales disallowed as the supply was subject to prior inspection.
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In STATE OF T. N. v. N. RAMU BROS. (Electricals) (1993) 89 STC
481 the assessee booked orders for generators at Tamil Nadu. In
turn he purchased the goods from Delhi. The goods were sent by
transporter having their office only at Coimbatore in Tamil Nadu.
The supplier at Delhi also intimated the way-bill particulars,
insurance payable, etc. The assessee informed the purchasers. As
the transporter was not having any office other than at
Coimbatore, the assessee gave letter of authority to the
transporters to effect delivery at the door steps of purchasers. It
was held that there was termination of movement at Coimbatore
and the goods were taken delivery notionally by the assessee from
Coimbatore and that the goods were delivered by the assessee
under his own delivery notes. It was held that exemption is not
admissible under section 6(2) of the Act, 1956.
In TRACTORS & FARM EQUIPMENTS LTD. v. STATE OF T. N.
(1999) 112 STC 300 the petitioner placed order with other
manufacturers in the State for manufacture of tractor parts and
after inspection and approval at manufacture’s premises, the
goods were directed to be dispatched to TFEL’s customers outside
the State. Lorry way-bill and R/R were sent to TFEL after
dispatch. TFEL endorsed these documents and sent to customers
of TFEL. The claim under section 6(2)(b) of the Act, 1956 was
rejected on the ground property in goods passed on to petitioner.
In STATE OF T. N. v. GOPAL ENTERPRISES (1999) 113 STC 46
where documents were not produced as regards the second and
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subsequent inter-State sale from T.N. to Karnataka the dealer
was not entitled to exemption.
In P. U. USHA v. STATE OF KERALA (2007) 5 VST 484,
Explanation 1 to section 3(b) along with section 6(2) makes it
clear that the transfer of documents of title to the goods must be
during the movement from one State of another and not after.
The delivery has to be taken when the movement of the goods
terminates at its destination. It is not permitted for the dealer to
expand the movement of goods beyond the time of physical
handing of goods. In this case the dealer based in Kerala
purchased paper from T.N. and after arrival at Kerala during
March 1990 at parcel office, effected transfer of title to the goods
to another dealer at Kerala during June 1990.
In CINZAC TECHNICAL SERVICES v. STATE OF KERALA (2009)
25 VST 165 the dealer at Kerala claimed exemption in respect of
a boiler manufactured outside the State to an industry in Kerala.
It was held that subsequent sale will not fall under section 6(2)(b)
as boiler can be manufactured only according to the
specifications of the ultimate purchaser. Both first purchaser and
ultimate purchaser were situated in Kerala.
Comments:
In P.U. USHA (supra) case the seller and the purchaser of the
documents of title to goods reside in the same State does not
affect the inter-State character of the sale. The concept of
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duration of the movement is enlarged by the addition of the
period of custody of the goods in the hands of a carrier or bailee
for the purpose of transmission to and delivery at the other State.
Explanation 1 provides for this enlargement. The result is that
any sale which takes place while the goods are on their inter-
State journey, i.e., from the time of delivery to the carrier or
bailee by the consignor until they are unloaded by or on behalf of
the consignee in the other State, is a sale in the course of inter-
Sate trade or commerce. To constitute an inter-State movement,
the two termini of the journey of the goods must be in two
different States. This is provided in Explanation 2. A subsequent
sale contemplated by section 3(b) is one which is effected by
transfer of documents of title to the goods during their movement
from one State to another. Where the property in goods passed
before the commencement of the movement of goods, the sale will
evidently not fall within clause (b) of section 3, nor will the sale in
which the property in the goods passes after the movement from
one State to another has ceased, be covered by the clause (b). The
dividing line between sales or purchases under section 3(a) and
those falling under section 3(b) is that in the former case the
movement is under the contract, whereas in the latter case the
contract comes into existence only after the commencement and
before the termination of the inter-State movement of the goods.
Therefore, it follows that an inter-State sale can either be
governed by section 3(a), if it occasions movement of goods from
one State to another, or under section 3(b) if it is effected by
transfer of documents of title to goods after such movement has
started and before the goods are delivered. In other words, a sale
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which takes place under section 3(a) is excluded from the
purview of section 3(b) and vice versa.
Scheme of section 6 (2) of the Act, 1956:
Section 6(2) was introduced in order to avoid the cascading effect
of multiple taxation. A subsequent sale falling under sub-section
(2), which satisfies the conditions mentioned in the proviso
thereto, is exempt from tax as the first sale has been subjected to
tax under sub-section (1). Thus in order to attract section 6(2), it
is essential that the concerned sale must be a subsequent inter-
State sale effected by transfer of documents of title to the goods
during the movement of the goods from one State to another and
it must be preceded by a prior inter-State sale. It is only then
that section 6(2) may be attracted in order to make the
subsequent sale exempt from levy of sales tax. However, the
proviso to section 6(2) prescribes further conditions of furnishing
certificate in Form E-I or E-II duly filled and signed by the
registered dealer from whom the goods were purchased and
declaration in Form C duly filled and signed by the registered
dealer to whom the goods were sold except where under the sales
tax law of the appropriate State the goods are exempt from tax
generally or is subject to tax generally at a rate which is lower
than such reduced rate as may be notified by the Central
Government, by notification in the official Gazette, under sub-
section (1) of section 8 of the Act, 1956. At present, such rate is
two per cent. It is only on fulfillment of these conditions that the
subsequent sale stands exempted. If these conditions are not
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satisfied then, notwithstanding the fact that the sale is a
subsequent inter-State sale, the exemption would not be
admissible to such subsequent sales.
Constructive delivery:
Explanation 1 to section 3(b): An Explanation may only explain
and may not expand or add to the scope of original section.
Explanation may not be made to operate as exception. Mere
description of certain provision by way of Explanation is not
decisive of its true meaning. Explanation is to explain the
meaning and effect of the main provision and to clear up any
doubt and ambiguity in it. But ultimately it is the intention of the
Legislature which is paramount. Explanation may be in respect of
matters whose meaning is implicit and not explicit in the main
section itself. If it appears that Explanation has widened the
scope of main section, effect must be given to legislative intent.
Provision of section 3(b) read with the Explanation 1 along with
section 6(2) makes it clear that the transfer of documents of title
to goods must be during the movement of goods from one State to
another and not after. The transfer of documents of title to goods
must be during the movement of goods, i.e., before the movement
of goods terminates at its destination. Delivery of goods should be
read with reference to movement of goods from one State to
another. Where the goods reach the destination and there has to
be no further movement of the goods to another State, the
movement of the goods terminates. If the goods are supposed to
be in the movement till actual delivery, then by keeping the goods
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in the possession of the transporter, all the intra-State sales of
such goods can be coloured as subsequent inter-State sales. This
cannot be the intention of the Legislature. No manipulation is
permissible. Whether a particular sale is subsequent inter-State
sale falling under section 3(b) of the Act, 1956 is to be analysed
and determined on the facts of the case. The issue may be settled
by further clarification of the expression "during their movement
from one State to another".
Division Bench of the Delhi High Court in ARJAN DASS GUPTA &
BROS. v. CST, New Delhi (1980) 45 STC 52, laid down the basic
guidelines regarding exemption of sales tax under section 6(2) of
the Act, 1956. The Court held that Explanation 1 to section 3(b)
of the Act, 1956 did not permit the dealer to expand the
movement of goods beyond the time of physical landing of the
goods in the Union Territory of Delhi. The Division Bench of the
Rajasthan High Court in Guljag Industries Ltd. v. State of
Rajasthan (2003) 129 STC 3 distinguished the judgment of Arjan
Dass Gupta & Bros. v. CST, New Delhi (1980) 45 STC 52, and
held that there was no question of any notional or constructive
delivery to the appellant in that case under section 6(2) of the
Act, 1956. The Division Bench of Kerala High Court in P. U. Usha
v. State of Kerala (supra) held that the transfer of documents of
title to goods must be during the movement of goods from one
State to another and not after. The delivery has to be taken when
the movement of goods terminates at its destination. Explanation
1 to section 3(b) does not permit the dealer to expand the
movement beyond the physical landing of the goods. Guljag
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Industries Ltd. v. State of Rajasthan (2003) 129 STC 3 was
distinguished and Arjan Dass Gupta & Bros. v. CST, New Delhi
(1980) 45 STC 52 was followed.
These cases may be distinguished on the facts which are entirely
different. In the case of Arjan Dass Gupta & Bros. (1980) 45 STC
52, on the arrival of consignments in Delhi, the dealer used to
present the R/R before the civil supplies authorities for
endorsement on the R/R, which permit the import of coal within
the Union Territory of Delhi. The R/R so endorsed by the civil
supply authorities used to be endorsed by the assessee in favour
of the purchasing retailers in Delhi. The actual delivery of the
coal wagons in Delhi used to be taken by the purchasing retailers
on payment of railway freight to the railway authorities. The High
Court held that where the documents of title to goods were
transferred after the coal had landed in Delhi, the sales were
intra-State sales within Delhi. In the case of Guljag Industries
Ltd. (2003) 129 STC 3, the assessee had purchased chemicals in
the course of inter-State trade from manufacturers/suppliers
from Gujarat and effected subsequent inter-State sales to various
buyers in the State of Rajasthan which was by endorsing the
goods receipts during their movement from Gujarat to Rajasthan.
Goods passed through the areas where the assessee’s B.O. or
H.O. was located and they were carried to the destination of
subsequent buyers. Facts of the case evidently show that the
documents of title to goods were transferred during the
movement of the goods. The fact that the subsequent buyers
obtained delivery from the same transporter on or about the
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same day, clinches the point of termination of movement in terms
of section 3(b) of the Act, 1956. In the case of P. U. Usha (supra),
the goods reached the destination in March, 1990 and the sales
were effected in May, June and July 1990 and delivery was taken
long after the goods had reached the destination. The sale was
effected after the goods reached its destination and not during
the movement of goods from one State to another. Thus, where
the documents of title to goods were transferred before the goods
reached the destination or before physical landing of the goods on
behalf of the consignee, the sale was held to be subsequent inter-
State sale falling under section 3(b) of the Act, 1956.
Levy and collect tax on subsequent inter-State sale:
Question arises, in which State the CST is leviable one must look
to and apply the test in section 9(1) of the Act, 1956, which reads
as under:
"Section 9. Levy and collection of tax and penalties.- (1) The tax payable by any
dealer under this Act on sales of goods effected by him in the course of inter-State
trade or commerce, whether such sales fall within clause (a) or clause (b) of section
3, shall be levied by the Government of India and the tax so levied shall be collected
by that Government in accordance with the provisions of sub-section (2), in the
State from which the movement of goods commenced:
Provided that, in the case of a sale of goods during their movement from one State
to another, being a sale subsequent to the first sale in respect of the same goods
and being also a sale which does not fall within sub-section (2) of section 6, the tax
shall be levied and collected,-
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(a) where such subsequent sale has been effected by a registered dealer, in the
State from which the registered dealer obtained or, as the case may be, could have
obtained, the form prescribed for the purposes of clause (a) of sub-section (4) of
section 8 in connection with the purchase of such goods; and
(b) where such subsequent sale has been effected by an unregistered dealer, in the
State from which such subsequent sale has been effected."
Section 9(1) of the Act, 1956 confers jurisdiction to make the levy
and collection of the tax on the State from where the movement of
goods commences, and so the determinative test for discovering
the jurisdiction of a particular State, in an inter-State sale, is the
place from where the movement of the goods commenced. The
proviso to section 9(1) was substituted by section 6(a) of the
Central Act 103 of 1976 for the following, with effect from
September 7, 1976:
"Provided that, in the case of a sale of goods during their movement from one State
to another, being a sale subsequent to first sale in respect of the same goods, the
tax shall, where such sale does not fall within sub-section (2) of section 6, be levied
and collected in the State from which the registered dealer effecting the subsequent
sale obtained or, as the case may be, could have obtained, the form prescribed for
the purposes of clause (a) of sub-section (4) of section 8 in connection with the
purchase of such goods."
By the amendment, unregistered dealer was also made liable for
tax in cases of subsequent inter-State sales effected by transfer of
documents of the title to goods during their movement from one
State to another. So far as a registered dealer was concerned,
there was no material change except the introduction of the
words "could have obtained" in the phraseology of the proviso.
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The Supreme Court in STO v. Oriental Coal Corporation (1988)
68 STC 398 has held that the amendment to section 9(1) of the
Act, 1956 in the year 1976 is not procedural. The amendment
imposes a substantive liability on an unregistered dealer. It also
regulates the rights inter se States to levy taxes on such inter-
State sales. The amendment being substantive in nature was
prospective and not retrospective. The amendment also conferred
jurisdiction on an officer in a particular State to levy a tax which
he otherwise could not.
Subsequent sales covered under section 3(a) of the Act, 1956:
In the case of A & G PROJECTS & TECHNOLOGIES LTD. v.
STATE OF KARNATAKA (2009) 19 VST 239 (SC), the appellant, a
registered dealer under the Karnataka Sales Tax Act, 1957, as
well as the Act, 1956, was engaged in execution of electrical
contracts. It was awarded three independent contracts towards (i)
supply of capacitor banks, (ii) execution of civil works and (iii)
creation and commission of capacitor banks at various sub-
stations of the Karnataka Power Transmission Corporation
(KPTC). Pursuant to those contracts the appellant appointed Bay
West as contractor located outside Karnataka for procuring
capacitor banks because the latter had a prior arrangement with
the manufacturers. In that transaction four parties were involved,
namely (i) A & G Projects, (ii) Bay West, (iii) manufacturers of the
equipment and (iv) KPTC being the ultimate consumer. There
were three independent contracts involved in the transaction. The
first contract was between A & G Projects and the KPTC for
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supply of the equipment. The second was between A & G Projects
and Bay West for procurement of equipments. The third contract
was between Bay West and the manufacturers.
A & G Projects claimed exemption under section 6(2) in respect of
the second and third contracts contending that the said sales fell
under section 3(b). According to Revenue all the three contracts
came under section 3(a). The High Court held that the sale of
goods in favour of KPTC was completed when the goods were
appropriated by KPTC before commencement of movement of
goods from the place of manufacturers in Chennai (T.N.) to KPTC
in the State of Karnataka and, therefore, inter-State sale of goods
fell under section 3(a) of the Act, 1956.
The issue for consideration before the Supreme Court was that if
all the three contracts stood covered as inter-State sales under
section 3(a), which State was empowered to levy and collect the
tax. The tax under the Act, 1956, is levied by the Government of
India and is collected by the States. The relevant provisions are
contained in section 9(1); no other provision is relevant on this
question. Section 9(1) specifies the State wherein the CST shall
be levied and collected and the CST has to be levied and collected
in that State and in no other State. The law requires that it
should be levied and collected in the State from which the
movement of goods commenced. In this case, the assessing
authority had categorically held that all the three sales fell under
section 3(a) of the Act, 1956. The movement of goods commenced
from Tamil Nadu. So the competent State to collect CST was T.N.
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and no other State. The case of the appellant regarding
subsequent sales effected during the movement of the goods was
specifically rejected by the two fact-finding authorities, the
assessing authority and the first appellate authority. It was held
by the Supreme Court that the question of taxing such sales
under the proviso to section 9(1) of the Act, 1956 did not arise. It
was essentially a case of facts and application of section 9(1) of
the Act, 1956 in case of inter-State sale covered under section
3(a), whereas proviso to section 9(1) applies only to subsequent
sales covered by section 3(b) and not to sales covered by section
3(a). The nature of transactions was determined by the assessing
authority which was confirmed by the first appellate authority.
The goods were manufactured at Chennai in accordance with the
specifications mentioned in the contract with the respondent and
the goods were delivered to KPTC in execution of the contract.
The goods were specific to the ultimate consumer. The lorry
receipt clearly mentioned the name of the consignee as KPTC.
The sale of goods in favour of KPTC was completed when the
goods were appropriated by KPTC before commencement of the
movement of the goods from manufacturer’s place at Chennai to
KPTC at Karnataka. Therefore, the inter-State sale of capacitor
banks fell under section 3(a) of the Act, 1956. The proviso to
section 9(1) of the Act, 1956 prescribing the State that would be
competent to collect sales tax applies only to subsequent sales
covered by section 3(b) and not to sales covered by section 3(a).
Under the facts of the case, the competent State to collect CST
was the State of T.N. from which the movement of goods
commenced and no other State.
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Comments:
Dealing with the Act, 1956 in case of A & G Projects and
Technologies v. State of Karnataka (2009) 19 VST 239, Hon’ble
Supreme Court observed in nature of obiter dicta has created
mayhem in the sales-in-transit transactions. The view can be
that the subsequent sales be exempt only if contract with
ultimate buyer is executed after goods are dispatched by first
seller. Therefore possible course of action be thought.
‘Obiter dicta’ of SC be followed but not binding:
An ‘Obitum dictum’, as distinguished from a ratio decidendi is an
observation by Court on legal question suggested in a case before
it but not arising in such a manner as to require a decision. Such
an obiter may not have a binding precedent as the observation
was unnecessary for the decision pronounced, but even though
obiter may not have binding effect as a precedent, it cannot be
denied that it is of considerable weight. – DIRECTOR OF
SETTLEMENTS v. M. R. APPARAO 2002 - AIR 2002 SC 1598.
In DIVISIONAL CONTROLLER, KSRTC v. MAHADEVA SHETTY -
AIR 2003 SC 4172 it was observed, ‘Statements which are not
part of the ‘ratio decidendi’ are distinguishable as obiter dicta and
are not authoritative. Mere casual expression carry no weight at
all. Nor every passing expression of a Judge, however eminent,
can be treated as an ex cathedra statement having the weight of
authority’.
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An observation made by a superior court is not binding. What
would be binding is the ratio of the decision. Such ratio should
be arrived at upon entering into the merit of the issues involved
in the case – DADU DAYALU MAHASABHA v. MAHANT RAM
NIWAS AIR 2008 SC 2187.
In MOHANDAS ISSARDAS v. A.N. SATTANATHAN 2000 (125) ELT
206, it was observed, ‘It would be incorrect to say that every
opinion of the Supreme Court would be binding upon the High
Courts in India. The only opinion which would be binding would
be an opinion expressed on a question that arose for the
determination of Supreme court and when though ultimately it
might be found that the particular question was not necessary for
the decision of the case, even so, if an opinion was expressed by
Supreme Court on that question, then the opinion would be
binding on High Court’. Statements which are not necessary to
the decision have no binding authority on another Court, though
they may have some merely persuasive efficacy.
In MUNICIPAL CORPN. v. GURNAM KAUR - AIR 1989 SC 38, it
was observed, ‘Pronouncements of law, which are not part of the
ratio decidendi are classed as obiter dicta and are not
authoritative.’ – similar view taken in UNITED RICELAND v.
STATE OF HARYANA (1997) 104 STC 362.
Precautions by the dealer:
It is a fact that in all cases of E-I and E-II transactions, the
ultimate buyer is known even before goods are dispatched by
original manufacturer/supplier. It is also fact that at least at
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lower level, the Supreme Court’s observation is likely to be
mechanically followed.
In CTT v. DALU RAM GANPAT RAM (2010) 33 VST 433, goods
were booked by rail for transport from U.P. State to other State.
The R/R was obtained by U.P. State seller in his own name i.e.
self. The seller than transferred the R/R/ in name of buyer who
was from the U.P. State. It was held that this is inter-State sale
covered under section 3(b) of Act, 1956 by relying on CST v.
MEWALAL KEWAL KISHOR (1976) 38 STC 551.
To minimize the risk, one must ensure that property in goods
passes during movement of goods and not before movement of
goods. In case of A & G Projects, the L/R was directly in name of
ultimate buyer and hence it was held that property in goods
passed to buyer before movement of goods commenced.
The transport document should be marked as ‘Self’ and then L/R
should be transferred by endorsement in favour of first buyer and
then from first buyer to ultimate purchaser. If these precautions
are taken, a dealer can distinguish his case from A & G Projects
and can establish that the sale is by transfer of documents
during movement of goods from one State to other.
The dealer can of course depend on the case law discussed above
and state that the observation made by Supreme Court is not a
binding precedent, particularly when the statutory provision as
contained in section 3(b) of Act,1956 is entirely different. It may
be noted that, authority is not entitle to call for further
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documentary evidence – see P.A.GEORGE & CO. v. ACST (1998)
110 STC 253, 264 to 266.
Dispatched of goods through agent to identified buyer:
To constitute interstate sales, one of the basic requirements is
that there should be sale. If a person sends goods outside from
its State to its B.O. in another State then it is not sale because
one cannot sell goods to oneself. Similarly if a dealer sends goods
to its agent in another State who stocks and sells goods on behalf
of the dealer, such agent is called consignment agent and such
stock transfer is also not considered as interstate sales since
there is no sales involved in it, sales will take place when such
agent will sell goods. But to prove such stock/branch transfer,
Form is required to be produced as proof.
In HYDERABAD ENGINEERING INDUSTRIES v. STATE OF A.P.
(2011) 39 VST 257 (SC) the assessee registered itself in the name
and style of HEI Prop. Jay Engineering Works Ltd. inter-alia
engaged in manufacturing of electrical fans, sewing machines,
fuel injection parts and accessories etc., claimed exemption in
respect of turnovers of stocks transferred to depot outside the
State. By an agreement dated May 1, 1979, Usha International
Ltd.(UIL), had agreed to purchase the products and sell them as
an independent principal. The assessee had its godown in every
State including Delhi. Pursuant to the agreement, UIL placed
monthly indents on the assessee with instructions to dispatch
the goods of given size and quantity to the named destination,
and the assessee dispatched the goods to its godowns to the
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given destination and sent goods dispatch intimation directly to
the concerned UIL divisional office at the destination, furnishing
size and quantity dispatched with L/R number and name of the
transport company. The assessee claimed exemption by way of
stock transfer that has been rejected by the assessing authority
and also confirmed by the Tribunal and the High Court. Supreme
Court held, that it did not matter how much goods were delivered
to the B.O. which just acted as a conduit pipe before goods
ultimately reached the purchaser's hands. All that mattered was
that the movement of the goods was in pursuance of the contract
of sale or as a necessary incident to the sale itself. The movement
of goods from the assessee's factory to its various godowns
situate in different parts of the country was pursuant to sales
agreement coupled with forecasts which were nothing but indents
or firm orders. Therefore, the transaction between the assessee
and its B.O. was a clear case of inter-State sales and not branch
transfers.
The inter-State movement must be the result of a 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 would be enough if the movement was in pursuance of
and incidental to the contract of sale.
Significant observations by Court:
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Where there is a positive case of inter-state sales, even if the
dealer had procured F-Forms, the same would still be of no
use and he may need to prove that the facts are otherwise –
see Para 19.
Where the agreement was entered with another unit or
movement of goods was at the instance of another unit of same
company does not make any material difference – see Para 32.
B.O. & H.O. constitute one single entity. Who bills or collects
from the customer does not matter - see Para 32.
Even if no firm orders have been provided, the fact that
‘forecasts’ have been provided by the buyer in the beginning
would take the colour of ‘indents’ or ‘firm orders’ - see Para 43.
Even where purchases are made to government departments
who are bulk buyers would not take it out of the purview of
inter-state sales – see Para 44.
Comments:
Decision is distinguishable from others as in the instant case,
buyer of goods was having an agency for the various states
wherein it had the sole selling rights. Nevertheless, it can be
taken as a weapon by assessing authorities who may try to catch
dealers undertaking such transactions. Facts on record should
be evident that:
1. B.O. established at various places be maintained at their own.
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2. Bulk quantities of goods be dispatched without any reference.
3. Excise gate passes be prepared in the name of B.O. name.
4. Transport charges be paid by the factory.
5. Delivery of goods be taken in godown by the staff of B.O.
6. Property in goods should remain with B.O. till they are sold.
7. Goods be delivery by the B.O. to buyers at their own.
8. D/C be issued by the B.O. after the receipt of goods in godown.
9. The goods be appropriated to a particular buyer at the B.O.
10.B.O. be registered under respective State and assessed to tax.
11.The goods should neither be manufactured according to the
specification of a particular customer nor particular goods be
meant for a particular customer - exclude diversion possibility.
12.The goods must be cleared by the B.O. form the respective
places and expenses on account of freight, loading and
unloading charges from factory be bore born by dealer.
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13. Delivery of the goods be made to the customer from the
godown by preparing list, delivery challan and sales invoices
from depot.
14.The in-charge of B.O. must have the full discretion to deliver
the goods in any quantity or to any customer of their choice.
15.B.O. should not acted as a conduit pipe - neither any
agreements nor any correspondences be entrained.
16.B.O. managers should have absolute discretion to supply
goods of any origin from the stock laying at godown of the sales
office situated outside the State.
Friends, above are my personal views the readers who find
contrary, the subject is open for comments and/or debate. It will
be welcomed.
“Every Government has a right to levy taxes. But no Government has the right, in the process of extracting tax, to cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice.” - Nani Palkhivala book on Income Tax Act, 1961 (8th Edition).