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2003 DIGILAW 595 (MP)

Mohd. Rafi v. State Of M. P.

2003-04-23

ARUN MISHRA

body2003
ORDER : The petitioner in this writ petition has prayed for the relief that sale price of Tendu leaves does not include forest development cess. His further prayer is that petitioner is liable to pay the sales tax of inter state sale at the rate of 4% not under the M. P. Commercial Tax Act, 1994. Writ of certiorary is sought to quash the demand notice P/2, further command is sought in the nature of writ of mandamus commanding the respondents to accept C Forms and charge Central Sales Tax at 4% only and to refund the excess tax collected with interest. 2. It is averred in the petition that petitioner runs proprietary concern and carries on the business of export of Tendu leaves to various Biri manufactures outside the State of M. P. Petitioner is a resident of District-Sarquja State of Chhattisgarh. Petitioner submits that, therefore, being resident of Sarguja district he cannot sell Tendu leaves in M. P. The petitioner is not having any place of business like go-down for storing Tendu leaves purchased from respondent No. 3 and the Tendu leaves purchased are directly despatched outside the State of M.P. to Biri manufacturers to use as raw material at their manufacturing centers outside State of M. P. for which there are prior orders. Tendu leaves have no other use except for use in manufacture of Biris. 3. It is further averred that for exporting Tendu leaves outside the State the purchasers of Tendu leaves has to file an application with the Forest Department for Registration as an exporter in Form "G" in which place of business, location of the headquarter, etc. are to be disclosed. Transport permits are also required to be issued in accordance with Rule 4 of M. P. Tendu Patta (Vyapar Vinimayan) Niyamavali, 1996. Transport permits are issued for those goods which are purchased in State of M. P. and transported outside the State. Tendu leaves covered by Transport permit cannot be diverted to any other place. Thus, petitioner submits that petitioner is liable to pay Central Sales Tax at the rate of 4% under the Central Sales Tax Act and demand of Commercial tax at the rate of 20% and surcharge 15% thereon under the M. P. Commercial Tax Act is illegal. Tendu leaves covered by Transport permit cannot be diverted to any other place. Thus, petitioner submits that petitioner is liable to pay Central Sales Tax at the rate of 4% under the Central Sales Tax Act and demand of Commercial tax at the rate of 20% and surcharge 15% thereon under the M. P. Commercial Tax Act is illegal. Section 79 of the Commercial Tax Act prohibits levy of sales tax under the State Act where such sale or purchase takes place in the course of inter state trade or commerce. The transaction in question is in course of inter state sale within the purview of section 3 of Central Sales Tax Act, 1956. Section 8 of Central Sales Tax Act prescribes the rate of tax on sales in the course of inter state trade or commerce. The respondents have misconstrued the provisions of law. Reliance is placed by the petitioner on Tata Iron and Steel Co. Ltd., Bombay vs. S. R. Sarkar (1960) 11 STC 655 to contend that State legislature is not competent to levy the tax in the inter state trade or commerce. Petitioner has also relied on various other decisions to be referred later. 4. A return has been filed by respondent No. 3 contending that matter is covered by the decision of this Court in Pataka Biri Manufacturing Co. vs. State of M. P. 2000(33) VKN 524 and on decision of this Court in Maharashtra Timber Laghu Udyog Mahasangh and others vs. State of M. P. and others (1985) 18 VKN 195 in which it has been held that Tendu leaves which are sold within the State of M. P. pursuant to the tender proceedings amount to intra state sale and State Sales Tax and Commercial Tax can be levied on such transaction. Forest Development Cess forms part of sale price. In this regard order R-3/3 passed by this Court in WP No. 3545/94 (M/s Ramesh Traders and ors. vs. State of M. P. and others has been relied upon. 5. Forest Development Cess forms part of sale price. In this regard order R-3/3 passed by this Court in WP No. 3545/94 (M/s Ramesh Traders and ors. vs. State of M. P. and others has been relied upon. 5. Shri H. S. Shrivastava, learned counsel appearing for the petitioner has submitted that the transaction in question has to be treated as in the course of inter state sale as it was mentioned in the condition 19(2) of auction condition P/1 that purchaser can export the Tendu leaves or may use for manufacture of Biris or can put Tendu leaves for any other user however charge of the purchase price and any other amount which may be outstanding is to be cleared first. Learned counsel further submits that as per certificate of registration Annexure P/3 petitioner has exported Tendu leaves under transport permit issued by respondent No. 3, thus, it is implied under the tender conditions P/1 that it is an inter state sale. It is also submitted by Shri Shrivastava that cess does not form part of the sale price. 6. Shri R. S. Jha, learned Dy. Advocate General appearing for respondents has submitted that under the conditions P/1 it is not contemplated nor it was necessary for the petitioner to take out the Tendu leaves outside the State of M. P. It was open to the petitioner to sell them within the State of M.P. or to use Tendu leaves within the State of M. P. for manufacture of Biris or to put them for any other use. There is no stipulation express or implied that destination of goods is outside the M. P. Even the manufactures of State of M. P. could participate in the open auction and purchase Tendu leaves. As such it cannot be said to be a transaction of inter state sale covered under section 3 of Central Sales Tax Act. Transaction concluded within the State of M. P. simply by the fact that petitioner is an exporter and despatches Tendu leaves to various destinations, it cannot become transaction of inter state sale and transit passes are issued for the purpose of every export which can be issued even to a purchaser of M.P. in case he wants to export Tendu leaves to other destination outside the State. He has also relied on decision R-3/3 in M/s. Ramesh Traders (supra) to contend that cess forms part of the sale price. 7. The first question for consideration is whether the transaction in question can be termed to be in the course of inter state sale. Conditions of tender notice P/1 are relevant for that purpose. There is no stipulation in the terms of the tender notice that goods have to be taken outside the State of M.P. Manufacturers of Biris or exporters could participate in the open auction and it was open to the purchasers to manufacture Biris within the State of M.P., thus, I find that there is no stipulation either express or implied, in the conditions of tender notice or other terms and conditions mentioned in Schedule 1 and Schedule 2 of the tender notice to make it a transaction in course of inter state sale. What is necessary under section 3 of Central Sales Tax Act to make it an inter state sale that there be a stipulation either express or implied in the contract itself to take the goods outside the State. Condition No. 19 cannot be read to mean that there is stipulation to take the goods outside State of M. P., condition No. 19 simply prescribes that Tendu leaves cannot be sold, exported or put to any other use until and unless all the charges on Tendu leaves are first cleared, this stipulation cannot be read in the manner to make it transaction in the course of inter state sale, clause 19 deals with clearing the first charge on Tendu leaves then to put Tendu leaves in the use which are permissible. Certificate of registration of the petitioner which authorises the petitioner to take the goods outside the State of M. P. cannot be read as part of the contract or terms or conditions of the tender notice, such registration is necessary for exporting Tendu leaves for every exporter, there has to be express or implied stipulation in the conditions about the destination outside the State of M. P. I find none. Thus, the transaction has to be treated as intra state sale not in the course of inter state sale as contended. 8. Thus, the transaction has to be treated as intra state sale not in the course of inter state sale as contended. 8. I have considered this question in MP No. 1716/1991 (M/s B. S. Sundaravadivel Mudaliar and Sons vs. State of M. P. and others) [2004(1) MPLJ Note 27] decided on 3-4-2003 in which various provisions and decisions have been discussed, thus :- "6. Inter state sale is defined under section 3 of the Central Sales Tax Act, 1956. Section 3 reads thus :- "3. When is a sale or purchase of goods said to take place in the Course on inter state trade or commerce. - A sale or purchase of goods shall be deemed to take place in the course of inter state trade or commerce if the sale or purchase (a) occasions the movement of goods from one State to an there; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." 7. It is necessary that sale or purchase transaction must occasions the movement of goods from one State to another as required under section 3(a). Clause (b) is not attracted to the facts of the instant case. In the tender notice there is no mention nor it was notified that the goods are supposed to be put in inter state sale. Petitioner had purchased it in the open auction in the contract of purchaser; it is not provided that goods have to be taken to the State of Tamilnadu, thus, section 3 of Central Sales Tax Act is not attracted in the instant case and it cannot be said to be a case of inter state sale; the sale was concluded in the State of M. P. and it was open to the petitioner to dispose of the goods in the State of M.P. or to take it out of the State of M. P. to any destination. In State of A.P. vs. National Thermal Power Corporation Ltd. and others (2002) 5 SCC 203 , the Apex Court has laid down in para 24, thus :- "24. In State of A.P. vs. National Thermal Power Corporation Ltd. and others (2002) 5 SCC 203 , the Apex Court has laid down in para 24, thus :- "24. It is well settled by a catena of decisions of this Court that a sale in the course of inter state trade has three essential ingredients :- (i) there must be a contract of sale, incorporating a stipulation, express of implied, regarding inter State movement of goods; (ii) the goods must actually move from one State to another pursuant to such contract of sale, the sale being the proximate cause of movement; and (iii) such movement of goods must be from one State of another State where the sale concludes. It follows as a necessary corollary of these principles that a movement of goods which takes place independently of a contract of sale would not fall within the meaning of inter State sale. In other words, if there is no contract of sale proceeding the movement of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an inter State element. Precedents are legion; we may briefly refer to some of them. In English Electric Co. of India Ltd. vs. CTO 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 sale and it does not matter which is the State in which the property passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. In Union of India vs. K. G. Khosla and Co. Ltd. it was observed that a sale would be an inter State 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 an incident of the contract. Ltd. it was observed that a sale would be an inter State 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 an incident of the contract. Similar view was expressed in Sahney Steel and Press Works Ltd. vs. CTO. In Manganese Ore (India) Ltd. vs. Regional Asstt. CST after referring to Balabhagas Hulashchand vs. State of Orissa it was observed that so far as section 3(a) of the CST Act is concerned, there is no distinction between unascertained or future goods and goods which are already in existence, if at the time when the sale takes place these goods have come into actual existence." 8. I am fortified in my view by the above decision of the Apex Court. 9. Learned counsel for the petitioner has relied upon a decision of Division Bench of this Court in the State of M.P. and others vs. The Bengal Paper Mills Co. Ltd. (1979) 44 STC 347 . The said decision is clearly distinguishable. If there is a sale and that sale occasions the movement of goods from one State to another, the sale becomes an inter state sale within section 3(a) of the Central Sales Act, 1956. The condition of passing of property in the State where the goods are transported is a necessary condition for making the sale an inter state sale. In the peculiar facts of that case it was held that it was a case of inter state sale. Extraction to other state was itself provided under the agreement. It is not the case here. 10. Reliance has also been placed in Orient Paper and Industries Ltd. Orissa vs. State of M. P. and others (1982) 15 VKN 272, wherein the bamboos were purchased for transportation to Brajraj Nagar in the State of Orissa. The petitioner was bound to take immediate delivery of all bamboos made available by the Forest Department at the mutually agreed rail head depots in M.P. for onward transportation to Brajraj Nagar, Orrisa. 11. The petitioner was bound to take immediate delivery of all bamboos made available by the Forest Department at the mutually agreed rail head depots in M.P. for onward transportation to Brajraj Nagar, Orrisa. 11. Another decision relied upon by the learned counsel for the petitioner is in Orient Paper and Industries Ltd. vs. State of M. P. (1997) 30 VKN 324, wherein it has been held that it is immaterial whether sale/purchase has taken place within the M.P. or not. So long as the "movement" of the goods is an "incidence" of sale/purchase, it amounts to inter sale/purchase though according to the Supreme Court it is also not necessary that the contract of sale must expressly provide for movement of the goods and it is sufficient that the movement of goods is "implicit" in the sale. 12. Learned counsel for the respondents has placed reliance on a decision of this Court in Pataka Biri MFG. Co. Ltd. and another vs. State of M.P. and others (2000) 33 VKN 524, decided by esteemed brother Mr. S. K. Kulshreshtha, J. The view has been taken on similar transaction that the sale is intra state sale and merely the goods have been taken out of the State cannot make it inter state sale. The decision in Pataka Biri MFG. Co. Ltd. and another vs. State of M.P. and ors. is on the similar facts involved in the present petition." 9. In Maharashtra Timber Laghu Udhyog (supra) it has been laid down that movement of goods has to be under condition of contract of sale which may be express or implied to make it transaction in course of inter state sale. Similar is the view taken by the Apex Court in State of A.P. vs. National Thermal Power Corporation Ltd. and others (2002) 5 SCC 203 . In my opinion, transaction is intra state sale not that of inter state sale as submitted. 10. Coming to the second and last submission raised by learned counsel appearing for petitioner that cess does not form part of the sale price, submission is equally futile. Cess is included and forms part of the sale price which is payable by a purchaser is held by this Court in Order R-3/3 (M/s Ramesh Traders and others vs. State of M. P.) 11. Cess is included and forms part of the sale price which is payable by a purchaser is held by this Court in Order R-3/3 (M/s Ramesh Traders and others vs. State of M. P.) 11. Section 2(kk) of M.P. General Sales Tax Act, 1958 defines the "purchase price' and section 2(o) "sale price", provisions are quoted below :- "2(kk) "Purchase Price" shall comprise of - (1) the amount payable by a dealer as valuable consideration for the - purchase of goods "simpliciter" : Provided that where goods are purchased together with the packing material or container, then notwithstanding anything contained in this Act, the purchase price of such goods shall be inclusive of the price or cost or value of such packing material or container, whether such price or cost or value is paid separately or not, as if such packing material or container were the parts of the goods purchased; (ii) transport costs, if any; (iii) trade commission, if any, by whatever name, called; (iv) forwarding and handling charges, if any; (v) insurance charges, if any; (vi) local taxes, if any; (vii) excise duty, if any, leviable under the Central Excise and Salt Act, 1944 (No. 1 of 1944); (viii) cost of packing, if any; (ix) any other charges or costs other than those specified above, if incurred or paid in respect of goods so purchased." "2(o) "sale price" means the amount payable to a dealer as valuable consideration for the sale of any goods less any sum allowed as cash discount according to ordinary trade practice but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is separately charged." 12. It is clear that forest development cess charged by the Corporation forms part of the price which is charged by the said respondents from the petitioner. Decision of Division Bench in Central Coalfields Ltd. vs. Commissioner of Sales Tax (1981) 47 S.T.C. 143 has been relied on in Ramesh Traders (supra) in which it was laid down that collection of coal mines welfare cess, stowing duty and resue cess from the purchasers would form part of the sale price and consequently would be includible in turn-over. Decision of Division Bench in Central Coalfields Ltd. vs. Commissioner of Sales Tax (1981) 47 S.T.C. 143 has been relied on in Ramesh Traders (supra) in which it was laid down that collection of coal mines welfare cess, stowing duty and resue cess from the purchasers would form part of the sale price and consequently would be includible in turn-over. Reference has also been made to the decision of the Apex Court in George Oaks (Pvt.) Ltd. vs. State of Madras (1961) 12 S.T.C. 476 , it was held that sale price contained in M.P. General Sales Tax Act was not a sum of money for the article plus tax but a composite sum and, therefore, the total amount charged was held to be rightly treated as part of turn-over. Local taxes forms part of sale price is held by the Apex Court in Deputy Commissioner of Sales Tax vs. Aysha Hosiery Factory (P) Ltd. (1992) 25 V.K.N. 245 and in Central Coalfields Ltd. vs. Commissioner of Sales Tax (1994) 95 S.T.C. 571 . Excise duty forms part of the sale price is the view taken in Sanghi Beverages Pvt. Ltd. vs. Commissioner of Sales Tax (1996) 102 S.T.C. 144 . All the above decisions have been considered in Ramesh Traders (supra) and I find no ground to take a different view. 13. Resultantly, the writ petition is devoid of merit and is dismissed. No order as to costs.