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2015 DIGILAW 553 (ORI)

KALINGA AUTO CENTRE PVT. LTD. v. STATE OF ODISHA

2015-09-22

D.P.CHOUDHURY, I.MAHANTY

body2015
JUDGMENT : Dr. Durga Prasanna Choudhury, J - The captioned revision has been preferred under section 24(1) of the Odisha Sales Act, 1947 (for short 'the Act') against the order dated 28.12.2010 passed by the Odisha Sales Tax Tribunal, Cuttack (in short 'learned Tribunal') in S.A. No. 114 of 1999-2000. FACTS : 2. The factual matrix leading to the case of the petitioner is that the petitioner carries on business in cars, motor vehicle spare parts and accessories being authorized dealer of car produced by M/s. Premier Automobiles Ltd., Mumbai. For carrying on its business, petitioner has three branches; one at Cantonment Road, Cuttack, Odisha; at Bhubaneswar, Odisha and at Mumbai, registered with STOC 150, Ghatkopar Division, New Mumbai. Petitioner, at its Cuttack Branch used to sell other automobile vehicles, namely, Hero Honda motorcycles, components, accessories and spare parts of Premier cars for which it has already paid tax to the Sales Tax Officer and for that used to pay sales tax under Odisha Sales Tax Act, 1947 (for short 'the Act'). Since the petitioner has no sale at Cuttack Branch of cars manufactured by M/s. Premier Automobiles Ltd., Mumbai, did not pay any tax under the Act. It is alleged, inter alia, that the learned Sales Tax Officer, Cuttack-I, Central Circle, Cuttack, the Assessing Officer, issued notice to produce the books of accounts. At the same time, the Assessing Officer got fraud case report against the petitioner. The report says that 176 numbers of cars have been procured from its branch office at Mumbai and sold to consumers at Odisha. According to the petitioner, no sale of such cars takes place in Cuttack because a customer desirous of purchasing Padmini car from the Mumbai under direct billing system, gives a letter of authorization in favour of the branch office situated at Mumbai to receive and to appoint a Transporter to drive down the vehicle from Mumbai to the destination mentioned in the letter of authorisation. While explaining the business, the petitioner explained that after the money is received from the customer, petitioner used to issue a money receipt in acknowledgement of the deposit made by the customer and then sends the said cheque or draft to Mumbai branch office intimating about the purchase of the car by the customer from Mumbai branch. While explaining the business, the petitioner explained that after the money is received from the customer, petitioner used to issue a money receipt in acknowledgement of the deposit made by the customer and then sends the said cheque or draft to Mumbai branch office intimating about the purchase of the car by the customer from Mumbai branch. The manufacturing company delivers the vehicle to Mumbai branch and raises the invoices in the name of Mumbai branch of the petitioner-company. Then the Mumbai branch intimates the petitioner-company over telephone or FAX with regard to the chasis number and engine number of the vehicle received in the name of the customer. Then the branch of petitioner-company in Odisha informs the customer about the consignment of the vehicle from Mumbai to Odisha and asked the petitioner to prepare insurance cover note for transporting and driving down the vehicle from Mumbai to the place of destination. 3. It is also alleged, inter alia, that the petitioner also gets temporary registration number of the vehicle at the office of Regional Transport office, Mumbai. When the vehicle of the customer reaches at the registered office of the petitioner-company at Cuttack, petitioner-company at Cuttack undertakes necessary servicing, washing of the vehicle and then hand over the vehicle to the customer. According to the petitioner, the entire transaction is an inter-State transaction under section 3(a) of the Central Sales Tax Act, 1956 ('C.S.T. Act' in short) and the same is not a intra-State transaction. After verifying the books of accounts and hearing the matter from the petitioner, the Sales Tax Officer without any valid reason, added Rs. 3,99,05,248.81 paise with the gross taxable turn over of the petitioner taking the sale of 176 numbers of cars as intra-State sale. Thereafter the petitioner preferred appeal under sub-section 1 of Section 23 of the Act raising several grounds to support its claim. The First Appellate Authority, Assistant Commissioner of Sales Tax held that the sale in question being inter-State sale is covered under section 3(a) of the Central Sales Tax Act and the same cannot be exigible under the State Sales Tax Act for which directed the deletion of the said amount of Rs. 3,99,05,248.81 paise from its gross turn over and re-assess the tax payable by the petitioner-company. 4. 3,99,05,248.81 paise from its gross turn over and re-assess the tax payable by the petitioner-company. 4. The State preferred Second Appeal before the learned Odisha Sales Tax Tribunal, Cuttack in S.A. No. 114/1999-2000 and the Tribunal after hearing both the parties and relying upon the decisions of the Hon'ble Supreme Court in the case of Balabhagas Hulaschand Vs. State of Orissa, AIR 1976 SC 1016 : (1976) 2 SCC 44 : (1976) 2 SCR 939 : (1976) 37 STC 207 vide order dated 28.12.2010 held that the said transactions are not inter-State transactions and are intra-State transactions for which the above amount said to be deleted, should be added to the gross turn over and fresh assessment should be made. Against that order, petitioner preferred the present revision to set aside the order of the Tribunal and to restore the order dated 30.1.1999 passed by the Assistant Commissioner of Sales Tax, Cuttack-I Range, Cuttack in Sales Tax Appeal No. AA714 CU-I C/97-98. SUBMISSIONS : 5. Learned counsel for the petitioner submitted that the order of the learned Tribunal is erroneous, illegal and arbitrary. According to him, the said order of the Tribunal is couched with conjectures and surmises. He further submitted that the Mumbai branch office is purchasing the cars from the manufacturer at Mumbai and sends the same to registered office at Cuttack for fitting of accessories, preparation of documents and then hands over the motor car to the customer. The customer's cheque is directly issued to the Mumbai office of the petitioner where the manufacturer takes order and delivers the vehicle to its Mumbai office. The petitioner only receives the cars and makes some accessories fitted and delivers the cars to customers with the documents of the cars. So he submitted that at no point of imagination, such transaction can be said to be intra-State transaction. He relied upon the decisions reported in State of Orissa v. Rolta Motors Ltd., reported in (1992) 87 STC 506 ; M/s. Sahney Steel and Press Works Ltd., Hyderabad etc. etc. Vs. Commissioner of Income Tax, Andhra Pradesh-I, Hyderabad, AIR 1997 SC 3968 : (1997) 142 CTR 261 : (1997) 72 ECR 787 : (1997) 228 ITR 253 : (1997) 8 JT 173 : (1997) 6 SCALE 175 : (1997) 7 SCC 764 : (1997) 4 SCR 189 Supp : (1997) 94 TAXMAN 368 ; English Electric Co. etc. Vs. Commissioner of Income Tax, Andhra Pradesh-I, Hyderabad, AIR 1997 SC 3968 : (1997) 142 CTR 261 : (1997) 72 ECR 787 : (1997) 228 ITR 253 : (1997) 8 JT 173 : (1997) 6 SCALE 175 : (1997) 7 SCC 764 : (1997) 4 SCR 189 Supp : (1997) 94 TAXMAN 368 ; English Electric Co. of India Ltd. and Another Vs. The Deputy Commercial Tax Officer and Others, AIR 1977 SC 19 : (1977) SCC 23 : (1976) 4 SCC 460 : (1977) 1 SCR 631 : (1976) 38 STC 475 : (1976) 8 UJ 850 . According to such decisions, in the present case no tax liability under the State Act for distribution of such cars is payable by the petitioner as it is an inter-State sale being exigible under Central Sales Act. So he submitted to set aside the order of the learned tribunal, impugned herein. 6. Learned counsel for the opposite party-State submitted that the Tribunal has discussed all the points and in the peculiar fact and circumstances of the case, rightly had held that it is not a case of inter-State sale but is a case of intra-State sale. According to him, learned Tribunal has referred to the decision of the Hon'ble Apex Court in Balabhagas Hulschand (supra) and come to the conclusion as stated above. 7. He further contended that the learned Tribunal has rightly held that whatever the Padmini car purchased from the M/s. Premier Automobiles Ltd., Mumbai by the petitioner, it is on behalf of the petitioner at his head office at Cuttack although it has got branch office at Mumbai who normally receives cars from the M/s. Premier Automobiles Ltd., Mumbai for which the law of agency having operated in full force, it is intra-State sale. He further stated that according to illustration at II-A given in the decision reported in Balabhagas Hulschand (supra), the sale by the petitioner, is outright intra-State sale inasmuch as the Mumbai branch of the petitioner purchased the goods and removed the goods to Cuttack for sale. He submitted that the decision reported in Rolta Motors Ltd. (supra), Sahney Steel and Press Works Ltd. (supra) and English Electronic Company of India (supra), are not applicable to the facts and circumstances of the case. So he submitted that the decision of the Tribunal, impugned herein, is valid and proper and the same should be upheld. He submitted that the decision reported in Rolta Motors Ltd. (supra), Sahney Steel and Press Works Ltd. (supra) and English Electronic Company of India (supra), are not applicable to the facts and circumstances of the case. So he submitted that the decision of the Tribunal, impugned herein, is valid and proper and the same should be upheld. Point for Determination : 8. After going through the contention of both the parties, there lies only point for determination whether the sale by the petitioner is inter-State coming under the C.S.T. Act or intra-State sale being exigible under the Act. DISCUSSION : 9. We have gone through the submissions made by the learned counsel appearing for the respective parties. Perused the record. It is undisputed fact that the petitioner is a registered dealer of premier padmini cars along with other vehicles. It is undisputed fact that the premier padmini cars are manufactured by M/s. Premier Automobiles Ltd., Mumbai. It is admitted fact that the petitioner has got its registered head office at Cuttack but has branch office at Mumbai and Bhubaneswar, and the cars are purchased by the petitioner-company from M/s. Premier Automobiles Ltd., Mumbai. It is also not disputed that the customers at Cuttack placed orders to purchase the cars from the branch office of the petitioner at Mumbai and the branch office at Mumbai after purchasing the 176 Nos. of such cars from M/s. Premier Automobiles Ltd., Mumbai, sent the cars to its head office at Cuttack after which the same is handed over to the customers after proper documents prepared. 10. Learned Assessing Officer observed that the petitioner has not disclosed the sale of 176 nos of cars while submitting report but showed only sale of Hero Honda motorcycles and other automobile vehicles. There is also report from the Sales Tax Officer (Intelligence) that the petitioner has suppressed the money showing sale of 176 Nos. of such cars in 1995-96. Learned Assessing Officer held that the car being a movable property, cannot be sold completely unless the delivery of car is handed over to the customer. According to him, placing of order with money towards consideration of the car with the M/s. Premier Automobiles Ltd., Mumbai is not sufficient to complete the purchase of the car unless the car is delivered to the customer. According to him, placing of order with money towards consideration of the car with the M/s. Premier Automobiles Ltd., Mumbai is not sufficient to complete the purchase of the car unless the car is delivered to the customer. The Assessing Officer did not believe the documents submitted by the petitioner stating that these documents showing placing of order for purchase and orders through the petitioner from the original manufacturer, are manufactured one for the purpose of this case. Finally he held that the dealer has manufactured documents to show as to give its transaction of cars of inter-State in nature instead of intra-State. 11. First appeal was preferred before the Assistant Commissioner of Sales Tax (ACST in short). After hearing, learned ACST observed that during 1995-96, 176 Nos. of cars have not been included in the turn over by arraying the same as sale of cars as the same was under inter-State trade. He verified the documents again and found that the Mumbai branch of the petitioner has effected purchase of cars from the manufacturer, M/s. Premier Automobiles Ltd., Mumbai and despatched the vehicle to Cuttack for delivery. It is also revealed from his order that the branch office of the petitioner at Mumbai has registered itself as a dealer under Maharashtra Sales Tax Act and has paid local tax up-to-date on sale of such cars to the customers of Odisha. He followed the judgment of Rolta Motors Ltd. (supra) and also the judgment in English Electronic Company of India (supra). After verifying the xerox copies of the documents, he observed that the customers have actually placed orders before M/s. Kalinga Auto Centre (P) Ltd., erstwhile Bombay and through demand draft in favour of Bombay branch, sale invoices were raised by the Bombay branch in the name of respective customers. He further held that simply receiving orders from customers and giving delivery after pre-delivery servicing as per their agreement by the Cuttack branch cannot alter the position. Thus he found the transaction is purely inter-State in nature as per Section 3(a) of the C.S.T. Act and the order of the learned Assessing Officer by adding the sale turn over of 176 Nos. of cars for Rs. 3,99,05,848.61 paise into the gross and taxable turn over of the petitioner is untenable and same has to be excluded. 12. Thus he found the transaction is purely inter-State in nature as per Section 3(a) of the C.S.T. Act and the order of the learned Assessing Officer by adding the sale turn over of 176 Nos. of cars for Rs. 3,99,05,848.61 paise into the gross and taxable turn over of the petitioner is untenable and same has to be excluded. 12. At this stage, the State of Odisha preferred Second Appeal before the learned Tribunal. Learned Tribunal in the Second Appeal after hearing the parties and quoting the decision of the Hon'ble Supreme Court passed the following order : "xx xx xx In the back drop of above law if the facts in the hand are considered, we are of the considered view that the branch office at Bombay was not a authorized dealer of M/s. Premier Auto Mobiles Limited, Bombay. Whatever purchase he had made, it was on behalf authorized dealer which was the respondent having head office at Cuttack. Both the registered office and the branch office were offices of the same company and they did not possess separate juridical personality. The respondent-Cuttack office acted as an authorized agent of the premier padmini cars and could not have been absolved of such legal personality. The law of agency having operate in its full force, we have no hesitation to accept that this case falls under the illustration given in case No. II in the Balbhaguas Hullchand decision. For the reason stated above, such sale being held as intra-State sale the opinion recorded by ld. ACST in this regard is not sustainable in the eye of law. The state having no disputed other concessions, we are to only consider the effect of our fining that the transaction is intra state sale, in the impugned judgment. The ld. ACST has excluded Rs. 3,99,05,848.61 from the gross turnover and the taxable turnover of the appellant towards the sale price of 176 Nos. of car vide para-4 of the impugned order. The said amount is now to be included and the consequential assessment is to be done." 13. The ld. ACST has excluded Rs. 3,99,05,848.61 from the gross turnover and the taxable turnover of the appellant towards the sale price of 176 Nos. of car vide para-4 of the impugned order. The said amount is now to be included and the consequential assessment is to be done." 13. From the above observation of the learned Tribunal, we are of the view that the Tribunal has simply observed that the illustration II in the case of Balabhagas Hulschand (supra)can be applied and the petitioner at Cuttack branch being a authorized agent of premier padmini cars, could not have absolved its responsibility to pay tax to the State Government. Learned Tribunal found that the sale is intra-State without going deep into the matter. Learned Tribunal has not explained in the order as to how illustration II in the case of Balabhagas Hulschand (supra) would apply to the present case. 14. We have gone through the decision of the Balabhagas Hulschand (supra). In the said judgment, following three illustrations have been given by their Lordship. "Case No. I-A is a dealer in goods in State X and enters into an agreement to sell his goods to in State X. In pursuance of the agreement a sends the goods from State X to State Y by booking the goods in the name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category. Case No. II-A who is a dealer in State X agrees to sell goods to B 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 in the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. It will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor in the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. This is therefore, purely an 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. Case No. III-B a purchaser in State Y comes to State X and purchase the goods and pays the price thereof. After having purchased the goods he then books the goods from State X to State Y in his own name. This is also a case where the sale is purely an internal sale having taken place in State X and the movement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property." 15. After analysing the case, their Lordships have observed that there can hardly be a case where once a sale takes place the movement is subsequent to the sale. The facts of the present case is not coming within any of the illustrations as given by their Lordships in the above judgment, because in the present case, the customers booked the vehicles to purchase the same from the petitioner's branch office at Mumbai who purchased the vehicles from the manufacturer, M/s. Premier Automobiles Ltd., Mumbai, sent the vehicles to its head office at Cuttack and the customers took delivery of the same from Cuttack. The customer has no link with the manufacturer but has placed orders to purchase the vehicle from the petitioner's Mumbai branch who after payment of the local tax at Maharashtra despatched the vehicles to its head office at Cuttack where the cars were delivered. It is not the case where sale takes place and subsequently movement to sell takes place. 16. On the other hand, the decision in English Electronic Company of India (supra), Their Lordships have observed : "(1) 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. It does not matter in which State the property in the goods passes. 16. On the other hand, the decision in English Electronic Company of India (supra), Their Lordships have observed : "(1) 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. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasioned the movement of goods from one State to another 'the inter-State movement must be the result of a covenant, express or implied in the contract of state 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 2nd incidental to the contract of sale. (2) Branches have no independent and separate entity. Branches are different agencies. In the instant case, the contract of sale is between the appellant company and the Bombay buyer." 17. With due respect to the above decision, we find that the present fact and circumstances is covered by the facts of the aforesaid decision and we have no hesitation to hold that this is an incident of contract where the vehicle is being booked from the Cuttack office of the petitioner by the customers directly to its branch office at Mumbai and the Mumbai office after procuring the same, sends the vehicle to the Cuttack office where the customer takes delivery of the same. When the vehicle is sent from one State to another State, being an incident of contract, it is truely an inter-State sale. 18. In another decision in Sahney Steel and Press Works Ltd. (supra), Their Lordships have observed : "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. 18. In another decision in Sahney Steel and Press Works Ltd. (supra), Their Lordships have observed : "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. 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 dispatching, 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-statement movement. 1.3 The fact that the goods were dispatched 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. 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 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 dispatched 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." 19. With no disagreement, we are of the considered view that the facts and circumstances of the above case are very much applicable to the facts and circumstances of the present case and accordingly we are not refrained from observing that the transaction in the present case is inter-State sale. 20. It is also reported in Rolta Motors Ltd. (supra) where their Lordships observed in the following manner : "that the expression "sale or purchase occasions the movement of goods" means that either the contract of sale itself should provide for the movement of goods or the movement of goods must be incidental to the contract, there being no possibility of diversion of goods for any other purpose or to any other State. The Tribunal found that appropriation of the goods and delivery under the direct billing system took place at Haryana, that there were direct agreements rescind the contract if any vehicle other than that identified was delivered. The presence of the respondent as an intermediary did not make a difference to the nature of the transactions which were inter-State sales. The Tribunal found that appropriation of the goods and delivery under the direct billing system took place at Haryana, that there were direct agreements rescind the contract if any vehicle other than that identified was delivered. The presence of the respondent as an intermediary did not make a difference to the nature of the transactions which were inter-State sales. The view of the Tribunal was justified." With due respect to the above decision and applying ratio of above decision, we are of the view that in the present case no doubt there is sale of goods, which have moved from Mumbai under Maharashtra State to Cuttack under Odisha State and it is an incidental to the contract. 21. Section 3 of the C.S.T. Act is quoted herein below: "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another; Explanation 1.--Where goods are delivered to a career or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State." 22. Relying upon above settled laws and provisions of C.S.T. Act in the present case undoubtedly, it is inter-State sale. Learned Tribunal has not gone through the decisions properly as noted above, although the same were placed before it. It has only given their finding without appreciating the correct analysis made by the First Appellate Authority. CONCLUSION : 23. Relying upon above settled laws and provisions of C.S.T. Act in the present case undoubtedly, it is inter-State sale. Learned Tribunal has not gone through the decisions properly as noted above, although the same were placed before it. It has only given their finding without appreciating the correct analysis made by the First Appellate Authority. CONCLUSION : 23. We are, therefore, of the considered view that the decision arrived at by the learned Tribunal being illegal and against the principle of law as decided by the Hon'ble Supreme Court and this Court on several occasions, the same is liable to be set aside. In the result the order dated 28.12.2010 passed by the learned Tribunal in S.A. No. 114 of 1999-2000, impugned herein, is set aside and restored the order dated 30.1.1999 passed by the Assistant Commissioner of Sales Tax, Cuttack-I Range, Cuttack, First Appellate Authority in Sales Tax Appeal No. AA714 CU-I C/97-98. I. Mahanty, J. I agree.