M/S. Sahney Steel and Pressworks Ltd.
& ANR Vs. The Commercial Tax Officer & Ors [1985] INSC 196 (10
September 1985)
PATHAK, R.S. PATHAK, R.S.
SEN, AMARENDRA NATH (J)
CITATION: 1985 AIR 1754 1985 SCR Supl. (2)
780 1985 SCC (4) 173 1985 SCALE (2)789
ACT:
Central Sales Tax Act, 1g5, section 3(a) -
Interstate Sales - Goods manufactured according to the specifications received
at the registered office at Hyderabad and all other activities including that
of booking orders, sales despatching, billing and receiving of the sale price
carried out by the branch offices situated outside the State of Andhra Pradesh
- The transactions are inter-State sales within the meaning of section 3(a) of
the Central Sales Tax Act.
HEADNOTE:
M/s Sahney Steel and Press Works Ltd. is a
public limited company having its registered office and factory at Hyderabad.
It is registered as a dealer under the Central Sales Tax Act, as well a under
the Andhra Pradesh General Sale Tax Act. It has branch offices at Amritsar,
Bangalore, Bombay, Calcutta, Coimbatore and Delhi. They are all registered as
dealers under the Central Sales Tax Act and under the related State Sales Tax
Acts. The branches of the company are mainly engaged in effecting sales and
looking after the sales promotion and liaison work. The company manufactures
(a) standard goods according to the company's own designs and specifications,
(b) non-standard goods according to the designs and specifications supplied by
customer. In the course of its normal business, the registered office
despatches both standard and non-standard goods manufactured at the Hyderabad
factory to the branches.
The branch offices situate at Bombay,
Calcutta and Coimbatore receive orders from customers within and from outside
the respective States for the supply of goods conforming to definite
specifications and drawings. Those branch offices then advise the registered
office at Hyderabad to manufacture and despatch the good. On receipt of such
advice from the branch, the goods are manufactured at the Hyderabad factory and
thereafter despatched by the registered office to the branches by way of
transfer of stock. While despatching the goods, sometimes intimation is also
given by the registered office to the customer concerned about the despatch of
the goods to the destination indicated by him. Such goods are 781 booked to
'self' and sent by lorries. The goods received by the branches from time to
time, whether standard goods or non-standards goods, are entered in the stock
accounts of the branches and are kept in stock by the branches for ultimate
delivery to the customers. On the goods reaching the branches, they are
inspected by the customer and accepted by them where the customers are local
parties.
Where delivery has to be effected to
customers of other States, the goods are despatched to them by the branch. The
branches raise bills and receive the sales price. The branches furnish 'F'
forms to the registered office under section 6-A of the Central Sales Tax Act
in the case of stock transfers to the branches.
The sale of non-standard goods was Assessed
to State & sales Tax under the Sales Tax Acts of Maharashtra, West Bengal
and Tamil Nadu. The Commercial Tax Officer, Company Circle-II, Hyderabad,
however, expressed the view that the company was liable to Central & sales
Tax on the turn over of non-standard goods. For the assessment year 1979-80 he
made an assessment order dated May 4, 1981 assessing a turn over of Rs.
1,29,50,248.73 representing what the petitioners claimed to be stock transfers
from the Hyderabad registered office to the branches outside the State of
Andhra Pradesh.
By way of abundant caution the petitioners
had prayed that in the event of their objection to the imposition of Central
Sales Tax being overruled they should be allowed time to collect 'C' forms from
the various customers to whom the branches held effected sales and to submit
them to the Commercial Tax Officer. The Commercial Tax Officer, however, did
not grant the company the further time it sought for that purpose. The Commercial
Tax Officer has also issued notices dated May 2, 1981 seeking to reopen the
Central sales Tax Assessments already completed for the years 1977- 78 and
1978-79. In the original assessments for those years the Commercial Tax Officer
had excluded the disputed transactions relating to transfers of non-standard
goods from the registered office to the branches. Once the Writ Petitions under
Article 32 of the Constitution praying for:
(i) to quash the assessment order dated May
4, 1981 made under the Central Sales Tax Act for the assessment year 1979-80
and the consequent demand of tax in respect of the non-standard goods; (ii) to
restrain the Commercial Tax Officer from reopening the past assessments; (iii)
alternatively, in the event of the transactions being held liable under the
Central Sales Tax Act, to afford opportunity to the company to file 'C' forms
to enable it to avail of the concessional rate of tax envisaged under section
8(1) of the Central Sales Tax Act and (iv) further 782 alternatively to quash
the assessments made under the local Sales Tax Acts for the assessment years
1978-79 onwards in so far as the assessments include the turn over of the
aforesaid stock transfers transferred by the registered office to its branches.
Dismissing the petition, the Court ^
HELD: 1.1 The sale transactions were
inter-state sales in as much as they satisfy the terms of clause (a) of section
3 of the Central Sales Tax Act. [790 B]
1.2 It cannot be said that the Movement of
the goods from Hyderabad to the branch office was only for the purpose of
enabling the sale by the branch office and was not in the course of fulfillment
of the contract of sale.
Even if the buyer places an order with the
branch office and the branch office communicates the terms and specifications
of the orders to the registered office and the branch office itself is
concerned with the sales despatching, billing receiving of the sale price, the
conclusion must be that the order placed by the buyer is an order placed with
the Company, and for the purpose of fulfilling that order the manufactured
goods commence their journey from the registered office within the State of
Andhra Pradesh to the Branch office outside the State for delivery of the goods
to the buyer. Further, both the registered office and the branch office are
offices of the same Company, and what in effect does take place is that the
Company from its registered office in Hyderabad takes the goods to its branch
office outside the State and arranges to deliver them to the buyer. The
registered office and branch office do not possess separate juridical
personalities. The question really is whether the movement of the goods from
the registered office at Hyderabad is occasioned by the order placed by the
buyer or is an incident of the contract. The answer being in the affirmative,
its movement from the very beginning from Hyderabad all the way until delivery
is received by the buyer is an inter-state movement. [787 A- D,F]
1.3 The fact that the goods were despatched
by the branch office situated outside the State of Andhra Pradesh to the buyer
and not by the registered office at Hyderabad makes no difference at all. The
manufacture of the goods at the Hyderabad factory and their movement thereafter
from Hyderabad to the branch office outside the State was an incident of the
contract entered into with the buyer, for it was intended that the same goods
should be delivered by the branch office to the buyer. There was no break 783
in the movement of the goods. The branch office merely acted as a conduit
through which the goods passed on their way to the buyer. It would have been a
different matter if the particular goods had been despatched by the registered
office at Hyderabad to the branch office outside the State for sale in the open
market and without reference to any order placed by the buyer. In such a case
if the goods are purchased from the branch office, it is not a sale under which
the goods commenced their movement from Hyderabad. It is a sale where the goods
moved merely from the branch office to the buyer. The movement of the goods
from the registered office at Hyderabad to the branch office outside the State
cannot be regarded as an incident of the sale made to the buyer. [787 F-H, 788
A-C] English Electric Company of India Ltd. v. The Deputy Commercial Tax
officer & Ors., [1977] 1 S.C.R. 631; Union of India and Another v. K.G.
Khosla and Co. Ltd. and Others, [1979] 43 S.T.C. 457; Tata Engineering and
Locomotive Co.
Ltd. v. Assistant Commissioner of Commercial
Taxes & Anr., [1970] 26 S.T.C. 354 =[1970] 3 S.C.R. 862; State of Bihar
& Anr.,v. Tata Engineering Locomotive Co., Ltd. [1971; 27 S.T.C. 127
=[1971] 2 S.C.R. 849 and Balabhagas Hulaschand and another v. State of Orissa,
[1976] 37 S.T.C. 207 referred to.
[The Court directed: (i) the Commercial Tax
Officer to afford a reasonable opportunity to the Company to collect 'C' Forms
and furnish them to the assessing authority before making an assessment against
the Company in respect of such transactions; (ii) the petitioner Company may
make an application to the assessing authority for deleting the turnover of
sales found to be inter-State sales concerned for re-opening the assessments
made under the State Sales Tax Acts and (iii) if the application is made within
two months from September 10, 1985, the said assessing authority should
entertain the application, notwithstanding any period of limitation prescribed
for such a proceedings and to dispose of the claim in accordance with law.]
ORIGINAL JURISDICTION: Write Petition No.
7337 of 1981.
(Under Article 32 of the Constitution of
India).
Y.S. Chitale and D.N. Misra for the
Petitioners.
N.C. Talukdar, M.C. shandare, Miss A.
Subhashici, M.N. Shroff and B. Parthasarthi for the Respondents.
784 The Judgment of the Court was delivered
by PATHAK, J. The first petitioner, M/s Sahney Steel and Press Works
Ltd.(hereinafter referred to as the Company J, is a public limited company
having the registered office and factory at Hyderabad. The second petitioner,
Shri Bhupendra Singh Sahney, is a Director and shareholder of that company.
The company has branches at Amritsar,
Bangalore, Bombay, Calcutta, Coimbatore and Delhi. The registered office of the
Company at Hyderabad is registered as a dealer under the Central Sales Tax Act
as well as under the Andhra Pradesh General Sales Tax Act.
The Company is engaged in the manufacture and
sale of stampings and Laminations made out of steel sheets which are utilised
as raw material for making electric motors, transformers and similar goods. The
branches of the company are mainly engaged in electing sales and looking after
the sales promotion and Liaison work. The Company manufactures (a) standard
goods according to the company's own designs and specifications, (b)
non-standard goods according to the designs and specifications supplied by
customers. In the course of its normal business, the registered office
despatches both standard and non-standard goods manufactured at the Hyderabad
factory to the branches. Such transfers made by the registered office to the
branches at Bombay, Calcutta and Coimbatore of non-standard goods form the
subject of The instant controversy.
According to the petitioner, the branch
offices situate at Bombay, Calcutta and Coimbatore. which themselves are
registered as dealers under the Central Sales Tax Act and under the related
State Sales Tax Acts, receive orders from customers within and from outside the
respective States for the supply of goods conforming to definite specifications
and drawings. Those branch offices then advise the registered office at
Hyderabad to manufacture and despatch the goods. On receipt of such advice from
branch, the goods are manufactured at the Hyderabad factory and thereafter
despatched by the registered office to the branches by way of transfer of
stock. Hie despatching the goods, sometimes intimation is also given by the
registered office to the customer concerned about the despatch of the goods to
the destination indicated by him. Such goods are booked to 'sheaf' and sent by
lorries. The goods received by the branches from time to time, whether standard
goods or non- standard goods, are entered in the stock accounts of the branches
and are kept in stock by the branches for ultimate delivery to the customers.
On 785 the goods reaching the branches, they are inspected by the customers and
accepted by them where the customers are local parties. Where delivery has to
be effected to customers of other States, the goods are despatched to them by
the branch. The branches raise bills and receive the sales price. The branches
furnish 'F' forms to the registered office under s.6-A of the Central sales Tax
Act in the case of stock transfers to the branches. These are the facts set
forth in the writ petition.
It appears that (the sale of non-standard
goods WAS assessed to State Sales Tax under the Sales Tax Acts o.
Maharashtra, West Bengal and Tamil Nadu. The
Commercial Tax Officer, Company Circle-II, Hyderabad, however, expressed the
view that the company was liable to Central Sales Tax on the turnover of non-standard
goods and rejected the contention of the Company that the pertinent turnover
was not so liable. For the assessment year 1979-80 he made an assessment order
dated May 4, 1981 assessing a turnover of Rs.1,29,50,248.73 representing what
the petitioners claimed to be stock transfers from the Hyderabad registered
office to the branches outside the State of Andhra Pradesh. By way of abundant
caution the petitioner had prayed that in the event of their objection to the
imposition of Central Sales Tax being overruled they should be allowed time to
collect 'C' forms from the various customers to whom the branches had effected
sales and to submit them to the Commercial Tax Officer. The Commercial Tax
Officer, however, did not grant the Company the further time it sought for that
purpose.
The petitioners states that the Commercial
Tax Officer has also issued notices dated May 2, 1981 seeking to reopen the
Central Sales Tax assessments already completed for the years 1977-78 and
1978-79. In the original assessments for those years the Commercial Tax Officer
had excluded the disputed transactions relating to transfers of non-standard
goods from the registered office to the branches.
The petitioners, therefore, pray for the
quashing of the assessment order dated May 4, 1981 made under the Central Sales
Tax Act for the assessment year 1979-80, and the consequent demand of tax, in
so far as the assessment order includes within the assessed turnover the value
of non-standard goods transferred to the branches. The petitioners also pray
for an order restraining the Commercial Tax Officer from reopening past
assessments tor the purpose of including such transfers in the assessable
turnover. Alternatively, the petitioners pray that in the event 786 of the
transactions being held liable to Central Sales Tax an opportunity should be
given to the Company to file 'C' forms to enable it to avail of the
concessional rate of tax envisaged under sub-s.(1) of s.8 read with sub-s.(4)
of s.8 of the Central Sales Tax Act. A further prayer in the alternatives that
the assessment made under the local Sales Tax Acts from the assessment year
1978-79 onwards, in so far as the assessments include the turnover of the
aforesaid stock transfers transferred by the registered office to the branches
should be quashed.
While making the assessment order for the
assessment year 1979-80, the Commercial Tax Officer found that the branch
offices of the company, after procuring orders for the supply of goods with
definite specifications and drawings advised the registered office at Hyderabad
to manufacture and supply the goods in accordance therewith.
After the goods were so manufactured in the
factory at Hyderabad, the registered office despatched the goods to the
branches. The goods were collected by the branch offices and despatched to
various customers according to the orders received earlier. The Commercial Tax
Officer also found that except for the manufacture of goods according to the
specifications received from the customers at the registered office and factory
at Hyderabad, also other activities including that of booking orders, sales
despatching, billing and receiving of the sale price were being carried on by
the branch offices situated outside the State of Andhra Pradesh.
In the opinion of the Commercial Tax Officer
the movement of the goods from Hyderabad to the stations outside the State was
an incident of the contract incorporated in the specific orders procured by the
branch offices, and therefore the transactions were inter-state sales within
the terms of sub- s.(a) of s.3 of the Central Sales Tax Act.
The petitioners challenge the finding of the
Commercial Tax Officer that the transactions in question constitute inter-State
sales. The petitioner contend that when the registered office of the company at
Hyderabad despatched the manufactured goods to its branch office it was merely
a transfer of stock from the registered office to the branch office, and
thereafter the movement of the goods started from the branch office to the
buyer. It is urged that the registered office and the branch office were
separately registered as dealers under the Sales Tax law and transactions
effected by the branch office could not be identified with transactions
effected by the registered office. The movement of the goods from Hyderabad to
the branch office, it is 787 said, was only for the purpose of enabling the
sale by the branch A office and was not in the course of fulfillment of the
contract of sale. We are unable to agree. Even if, as in the present case, the
buyer places an order with the branch office and the branch office communicates
the terms and specifications of the orders to the registered office and the
branch office itself is concerned with the sales despatching, billing and
receiving of the sale price, the conclusions must be that the order placed by
the buyer is an order placed with Company, and for the purpose of fulfilling
that order the manufactured goods commence their Journey from the registered
office within the State of Andhra Pradesh to the branch office outside the
State for delivery of the goods to the buyer. We must not forget that both the
registered office and the branch office are offices of the same Company, and
what in effect does take place is that the Company from its registered office
in Hyderabad takes the goods to its branch office outside tile State and
arranges to deliver them to the buyer. The registered office and the branch
office do not possess separate juridical personalities. The question really is
whether the movement of the goods from the registered office at Hyderabad is
occasioned by the order placed by the buyer or is an incident of the contract.
If it is so, as it appears no doubt to us, its movement from the very beginning
from Hyderabad all the way until delivery is received by the buyer is an
inter-State movement. In English Electric Company of India Ltd. v. The Deputy
Commercial Tax Officer & Ors.[1977] 1 S.C.R. 631 this Court held that when
the movement of the goods from one State to another is an incident of the
contract it is a sale in the course of inter-State sale, and it does not matter
which is the State in which 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. It was also pointed out that the branches had no independent and
separate entity, that they were merely different agencies, and even where a
branch office sold the goods to the buyer it was a sale between the Company and
the buyer. It is true that in that case the goods, on manufacture at the Madras
branch factory, were directly despatched to the Bombay buyer at his risk and
all prices were shown F.O.R. Madras, and the goods were delivered to the Bombay
buyer at Bhandup through clearing agents In the instant case, the goods were
despatched by the branch office situated outside the State of Andhra Pradesh to
the buyer and not by the registered office at Hyderabad.
In our opinion, that makes no difference at
all. The manufacture of the goods at the Hyderabad factory and their movement
thereafter from Hyderabad to the branch office outside the State was an
incident of the contract 788 entered into with the buyer, for it was intended
that the same goods should be delivered by the branch office to the buyer.
There was no break in the movement of the goods. The branch office merely acted
as a conduit through which the goods passed on their way to the buyer. It would
have been a different matter if the particular goods had been despatched by the
registered office at Hyderabad to the branch office outside the State for sale
in the open market and without reference to any order placed by the buyer. In
such a case if the goods are purchased from the branch office, it is not a sale
under which the goods commenced their movement from Hyderabad. It is a sale
where the goods moved merely from the branch office to the buyer. The movement
of the goods from the registered office at Hyderabad to the branch office
outside the State cannot be regarded as an incident of the sale made to the
buyer.
The law was clarified in Union of India and
Another v.
K.G. Khosla and Co. Ltd. and Others. (1979)
43 S.T.C. 457, where this Court observed that a sale would 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, provided, however, that such movement was the
result of a covenant in the contract of sale or was in incident of that
contract. Two cases on opposite sides of the line were considered by this Court
in K.G. Khosla and Co. Ltd.
(supra). In Tata Engineering and Locomotive
Co. Ltd. v. Assistant Commissioner of Commercial Taxes Anr. [1970] 26 S.T.C.
354 =[1970] 3 S.C.R. 862, the appellant carried on the business of
manufacturing trucks in Jamshedpur in the State of Bihar. The sales office of
the appellant in Bombay used to instruct the Jamshedpur factory to transfer
stocks of vehicles to the stock-yards in various States after taking into
account the production schedule and requirements of customers in different States.
The stocks available in the stock-yards were distributed from time to time to
dealers. The transfer of the vehicles from the factory to the various
stock-yards was a continuous process and was not related to the requirement of
any particular customer. Until an appropriation of the vehicle was made by the
stock-yard incharge against a contract of sale out of the stocks available with
him it was open to the appellant to allot any vehicle to any purchaser or even
to transfer the vehicles from the stock-yard in the State to a stock-yard in
another State. It was held on the facts that the sale by the appellant to a
purchaser from its stock-yard was not an inter-State sale. On the other side of
the line is State of Bihar & Anr. v. Tata Engineering & Locomotive Co.
Ltd.
[1971] 27 S.T.C. 127 = [1971] 2 S.C.R. 849.
In that case, the turnover in dispute related to sales made 789 by the company
to its dealers of trucks for being sold in the territories assigned to them
under the dealership agreements. Each dealer was assigned an exclusive
territory and under the agreement between the dealers and the company, they had
to place their indents, pay the price of the goods to be purchased and obtain
delivery orders from the Bombay office of the company. In pursuance of such
delivery orders trucks used to be delivered in the State of Bihar to be taken
over to the territories assigned to the dealers. Under the terms of the
contracts of sale the purchasers were required to remove the goods from the
State of Bihar to other States. The Court observed that if a contract of said
contained a stipulation for such movement, the sale would be an inter-State
sale.
Considerable reliance has been placed by the
petitioner on one of the illustrations given by this Court in Balabhagas Hulaschand
and Another v. State of Orissa [1976] 37 S.T.C. 207, where Case No.II was set
out as follows:- Case No.II. - A, who is a dealer in state X, agrees to sell
goods to but he books the goods from state X to State Y in his own name and his
agent in state Y receives the goods on behalf of A. Thereafter the goods are
delivered to B in State Y and if B accepts them a sale takes place.
it will be seen that in this case the
movement of goods is neither in pursuance of the agreement to sell nor is the
movement occasioned by the sale.
The seller himself takes the goods of State Y
and sells the goods there. This, is, therefore, purely ar. internal sale which
takes place in State Y and falls beyond the purview of section 3(a) of the
Central Sales Tax Act not being an inter-State sale.
It is not clear from this illustration
whether the goods were particular and specific goods earmarked for delivery to
the buyer when they commenced their movement from State X. Apparently not,
because it is pointed out that the movement of The goods was neither in
pursuance of the agreement to sell nor was the movement occasioned by the sale
The case is distinguishable from the present one where particular goods were
manufactured in Hyderabad in satisfaction of an order placed by one buyer who
desired delivery outside the State. The goods moved from the registered office
at Hyderabad as the result of a covenant in the contract of sale or an incident
of that contract that the goods 790 manufactured at Hyderabad according to the
specifications stipulated by the buyer should be the very goods delivered to
him outside the State.
Upon all these considerations, we are of
opinion that the Commercial Tax Officer is right in holdings that the sale
transactions were inter-State sales inasmuch as they satisfy the terms of
clause (a) of s.3 of the Central Sales Tax Act.
Having held that the disputed transactions
are inter- State sales, it is only appropriate that an opportunity should be
give to the Company to collect 'C' Forms from the buyers for the purpose of
obtaining relief under sub-s.(l) of s.8 read with sub-s.(4) of s.8 of the
Central Sales Tax Act. The question whether the transactions could be described
as inter-State sales was in doubt all along, and it is only now that the doubt
can be said to have been finally resolved. Accordingly we direct the Commercial
Tax Officer to afford a reasonable opportunity to the Company to collect 'C'
Forms and furnish them to the assessing authority before making an assessment
against the Company in respect of such transactions. We understand that so far
as the turnover for the assessment year 1979-80 is concerned, the assessment
order has been set aside in appeal and the case has been remanded to the
assessing authority for Granting sufficient time to the Company to file the 'C'
Forms in order to enable it to avail of the concessional rate of tax.
The petitioners have prayed for the further
relief that as the aforesaid transactions have been held to be inter State
sales their inclusion in the assessments made under the corresponding State
Sales Act should be deleted. We give liberty to the petitioner Company to make
an application to the assessing authority concerned for the grant of such
relief, and if the application is made within two months from 10.9.85 we direct
the said assessing authority to entertain the application, notwithstanding any
period of limitation prescribed for such a proceeding and to dispose of the
claim in accordance with law.
The writ petition is dismissed subject to the
directions set forth above. There is no order as to costs.
S.R. Petition dismissed.
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