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2012 Supreme(Mad) 3500
High Court of Judicature at Madras
CHITRA VENKATARAMAN & K. RAVICHANDRABAABU, JJ
MRF Limited, Chennai
Versus
State of Tamil Nadu Represented by its Assistant Commissioner (CT), Chennai
Tax Case (Appeal) Nos.2115 of 2006, 1717 of 2008 & 2212 of 2008
Decided On : 13-08-2012
Advocate Appeared:
For the Appellant:N. Sriprakash, Advocate.
For the Respondent: R. Sivaraman, Special Govt. Pleader (Taxes).
The main legal point established in the judgment is that the movement of goods must be an integral part of the sale to be considered an inter-State sale, and the assessment made on the State Trading Corporation of India Ltd. under the Central Sales Tax Act would not foreclose an enquiry into the character of the transaction at the hands of the assessee.
Headnote:
Sales Tax - Assessment of local sale as inter-State sale - Tamil Nadu General Sales Tax Act - [1989-90, 1990-91, 1991-92] - [Entry 126, Section 3(a) of the Central Sales Tax Act] - The court considered whether the transactions in question were inter-State sales or local sales, taxable at 5% at the hands of the assessee as the last purchaser. The court analyzed the application and allocation order, emphasizing the conditions and terms of the allotment, and concluded that the movement of goods was not an integral part of the sale, thus confirming the assessment as local sales under the Tamil Nadu General Sales Tax Act.
Fact of the Case:
The assessee, a company manufacturing tyres and tubes, was assessed for not paying tax on the last purchase of rubber, which was treated as an inter-State sale by the State Trading Corporation of India Ltd. The Assessing Officer concluded that the transaction was a local sale assessable under the Tamil Nadu General Sales Tax Act. The assessee appealed, but the orders were confirmed by the Appellate Assistant Commissioner and the Tamil Nadu Sales Tax Appellate Tribunal.
Finding of the Court:
The court found that the movement of goods was not an integral part of the sale, and thus confirmed the assessment as local sales under the Tamil Nadu General Sales Tax Act. The court also directed the State to verify the tax payment by the assessee and adjust the tax payable accordingly.
Issues: The main issue was whether the transactions in question were inter-State sales or local sales, and whether the assessment made under the Central Sales Tax Act to the State Trading Corporation of India Ltd. would estop the Revenue from making assessment on the assessee.
Ratio Decidendi: The court held that the movement of goods must be an integral part of the sale to be considered an inter-State sale. The court also ruled that the assessment made on the State Trading Corporation of India Ltd. under the Central Sales Tax Act would not foreclose an enquiry into the character of the transaction at the hands of the assessee.
Final Decision: The court confirmed the assessment as local sales under the Tamil Nadu General Sales Tax Act and directed the State to verify the tax payment by the assessee and adjust the tax payable accordingly.
CHITRA VENKATARAMAN, J.
1. The assessee is on revision as against the order of the Tamil Nadu Sales Tax Appellate Tribunal relating to the assessment years 1989-90 and 1990-91.
2. The assessee is a company manufacturing tyres and tubes and is also a dealer. It is seen from the facts herein that the place of business of the assessee was inspected by the Enforcement Wing Officers on 28.12.1989. The various factories and branches were also inspected on the same day. During the course of inspection and verification of records, it was found that the dealers had not paid tax on the last purchase of rubber effected from State Trading Corporation of India Ltd., Madras. However, sales had been disclosed as inter-State sales by State Trading Corporation of India Ltd. and offered for assessment under the Central Sales Tax Act in the assessment of State Trading Corporation of India Ltd. and assessed at concessional rate of 4%, as the sales were covered by Form C.
3. The Assessing Officer pointed out that though the purchases were made locally, by manipulating certain records, treating it to be an inter-State transaction, State Trading Corporation of India (hereinafter referred to as "STC") started paying tax at 4%. On going through the application of allotment of raw rubber by STC and on the allegation made, the Assessing Officer came to the conclusion that the transaction in question was, pure and simple, a local transaction, assessable under the Tamil Nadu General Sales Tax Act. The payment of sales tax at 4% on the 'C' Form produced, did not alter the character of the transaction. He further pointed out that on receipt of the allocation order, the Manager Purchases (Import) of the assessee company, addressed STC, enclosing the Demand Draft towards the value of the consignment allotted, requesting STC to issue delivery order, mentioning the place of despatch. On receipt of the intimation, STC issued delivery orders to the assessee to take delivery of the raw rubber from STC's warehouses at Madras. From the above, the Assessing Officer came to the conclusion that transaction could not be treated as inter-State sale. The assessee resisted the proposal and submitted that it purchased natural rubber locally as well as through STC and that pursuant to the allotment order, there had been movement of goods from Chennai to Kottayam and Goa. The assessment had already been made on STC under the Central Sales Tax Act. Consequently, the question of a change in the character of the transaction as a local sale did not arise. In this connection, the assessee placed reliance on the decision reported in [1993] 90 STC 1 (SC) (Cooperative Sugars (Chittur) Ltd. Vs. State of Tamil Nadu) and [1971] 27 STC 127 (SC) (Tata Engineering and Locomotive Co. Ltd. Vs. State of Bihar) and contended that the title to the goods passed on to the assessee -MRF Limited only on delivery outside the State and consequently, the assessment could not be made under the Tamil Nadu General Sales Tax Act. The Assessing Officer rejected the contention of the assessee and confirmed the assessment. Aggrieved by this, the assessee went before the Appellate Assistant Commissioner, who confirmed the order of the Assessing Officer. The first appellate authority pointed out that a perusal of the purchase order showed the name of the applicant as that of the assessee and it had given the location of various factories. The Appellate Authority pointed out that a consolidated order was made on the basis of the requirements of the assessee company. Therefore, the offer could not be contemplated as indicating inter-State movement of rubber.
4. As regards the allocation order, the first appellate authority pointed out to the remittance slips, which reads as under:
"If remittance is on behalf of an allottee, who is different please give full details of allottees name and address to whom the amount is to be credited in our books".
5. Referring to the remitter's name against Kottayam
