Back
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE R. JAYASIMHA BABU AND THE HONOURABLE MR. JUSTICE B. AKBAR BASHA KHADIRI
Kerala State Small Industries Development and Employment Corporation Limited - Appellant
Versus
State of Tamil Nadu - Respondents
Cases (R) Nos. 375 and 376 of 1988
Decided On : 30 September 1997
CENTRAL SALES TAX ACT, 1956 - SECTION 3(A), 6A - INTER-STATE SALE - MOVEMENT OF GOODS - BURDEN OF PROOF - IMPORT OF CEMENT - UNLOADING AT PORT IN NEIGHBOURING STATE DUE TO UNFORESEEN CIRCUMSTANCES - MOVEMENT TO INTENDED STATE OVER LAND - HELD: NOT AN INTER-STATE SALE.
Fact of the Case:
Petitioner, a Kerala-based corporation, imported cement under an import license for the specific purpose of meeting the requirements of Kerala. Due to unforeseen congestion at the intended port of Cochin, the ship was diverted to Tuticorin in Tamil Nadu, where the cement was unloaded and transported over land to Kerala. The petitioner was assessed to Central Sales Tax on the cement, with the authorities holding that the movement from Tuticorin to Kerala constituted an inter-state sale. The petitioner challenged the assessment, arguing that the movement was not occasioned by an inter-state sale but was a result of the fortuitous circumstance of the ship being diverted.
Finding of the Court:
The court held that the movement of the cement from Tuticorin to Kerala did not amount to an inter-state sale. The court reasoned that the sale was a local sale between the petitioner and its customers in Kerala, and the movement of the goods was incidental to the sale and not occasioned by it. The court noted that the goods were imported specifically for Kerala, the unloading at Tuticorin was a fortuitous circumstance, and the movement to Kerala was unavoidable. The court also observed that the customer had no concern with the point from where the movement of the goods would commence and that the price was all-inclusive, not dependent on the distance covered.
Issues: 1. Whether the movement of cement from Tuticorin to Kerala constituted an inter-state sale subject to Central Sales Tax? 2. Whether the burden of proof lies on the Revenue or the dealer to establish the nature of the movement of goods?
Ratio Decidendi: 1. An inter-state sale under Section 3(a) of the Central Sales Tax Act requires a movement of goods from one state to another under a covenant or incident of the contract of sale, resulting in the transfer of property in the goods. 2. The burden of proof under Section 6A of the Act lies on the dealer to show that the movement of goods from one state to another was not occasioned by a sale but by a transfer to another place of business, agent, or principal.
Final Decision: The court allowed the petitioner's revisions, setting aside the assessments and penalties imposed on the disputed turnover.
R. JAYASIMHA BABU, J.
For the assessment years 1982-83 and 1983-84, the petitioner has been assessed to Central sales tax on the cement transported by it from the Port of Tuticorin to the premises of the petitioner's customers in the State of Kerala. The petitioner being aggrieved by the order of the Tribunal, which has upheld that levy, has come up in revisions.
2. Petitioner is an undertaking owned by the State of Kerala and as its name certifies it as a Corporation established for the purpose of promoting small industries development and employment therein in the State of Kerala. It admittedly did not have a regular place of business in the State of Tamil Nadu. The activities of the petitioner which led to the present proceedings arose out of the import of cement by the petitioner between 1982 and December, 1983. According to the respondent, the petitioner established a place of business at Ramaiah lodge in Tuticorin where its Liaison Officer was staying and had used the port as a place of storage of cement and had effected inter-State sales therefrom.
3. It is not in dispute that the cement transported from the Port of Tuticorin to the premises of the customers of the petitioner in the State of Kerala had been imported into India under an import licence granted to the petitioner. The import licence was for the import of 2, 50, 000 metric tonnes of cement. One of the conditions subject to which licence was granted was that
"the quantity of cement imported under the licence shall adjustable against the requirement of Kerala State as may be assessed by the Ministry of Industry, Government of India, New Delhi, for the years 1982-83 and 1983-84. The fact that the cement came to be unloaded at the Port of Tuticorin is not in serious dispute, was purely a fortuitous circumstance. In the normal course, cement would have been unloaded at anyone of the ports in the State of Kerala. The ship had to, according to the petitioner, unload at Tuticorin Port as at that point of time, the Port of Cochin was congested and there would have been considerable delay and additional expense if the ship had to wait for a berth at that port. Tuticorin being the nearest other port to Kerala, the ship had called at that port and the cement was unloaded there for the purpose of being transported over land from that port to the State of Kerala. That the ultimate destination of the imported cement was Kerala was not in doubt at any point of time. The quantity imported was meant for the users in Kerala, and this quantity was to be set-off against the total requirements of that State as assessed by the Government of India.
4. It is also not in dispute that the petitioner had received request for allotment of cement by those in need of the same in the State of Kerala and that such request had been received even before the ship called at the Port of Tuticorin. Along with the request made by those customers of the petitioner, the value of the cement was also paid as advance. Copies of the documents pertaining to one such transaction has been placed before us. It had also been produced by the assessee before the authorities below. These documents show that the Orthodox Syrian Church of India had on January 14, 1983 sought allotment of 1, 000 bags of cement for use in the construction of a building at Markuriakose in Mylapara in Kerala. Along with that request for allotment, a sum of Rs. 13, 000 was paid towards the cost of 200 bags. A receipt dated January 15, 1983 was issued by the Corporation acknowledging the payment. The amount was received as advance cost of cement. A delivery order was issued thereafter by the petitioner on January 15, 1983. That delivery order is addressed to the officer-in-charge of the petitioner at the Port of Tuticorin. It directed him to deliver to the customer 10 tonnes of cement at Rs. 1, 300 per tonne. The amount of Rs. 13, 000 has been received by the petitioner in Kerala on January 15, 1983. The goods were thereafter m
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
