1972 (2) TMI 84 - HC - VAT and Sales Tax

Inter-State Sales Tax Liability Determined in Headquarters' Broker Role

The court held that the sales in question were inter-State sales and subject to Central sales tax under section 3(a) of the Central Sales Tax Act, 1956. ... - Issues Involved:1. Whether the sales in question were liable to Central sales tax under section 3(a) of the Central Sales Tax Act, 1956.2. Whether the movement of goods from Faridabad to Delhi was occasioned by a contract of sale.3. Whether the head office at Delhi functioned as a dealer carrying on sales independently of the factory at Faridabad.Issue-wise Detailed Analysis:1. Liability to Central Sales Tax under Section 3(a) of the Central Sales Tax Act, 1956:The primary issue was whether the sales were liable to Central sales tax under section 3(a) of the Central Sales Tax Act, 1956. The court examined the facts and found that the goods moved from Faridabad to Delhi in pursuance of specific orders placed at the head office in Delhi. The court concluded that the movement of goods from one state to another occasioned the sale, satisfying the requirements of section 3(a). The judgment referenced the case of Messrs. Prem Payari Aggarwal v. Punjab State, which had similar facts and was decided similarly.2. Movement of Goods from Faridabad to Delhi:The assessee argued that the sales took place after the goods reached Delhi and that the head office had the discretion to sell the goods to anyone. However, the Assessing Authority, Deputy Excise and Taxation Commissioner, Revisional Authority, and Sales Tax Tribunal all found that the goods moved from Faridabad to Delhi as a result of orders placed at the head office. The authorities noted that there was no evidence of a godown or stock register at the head office and that the goods were delivered directly to customers from the factory. The Tribunal highlighted that the goods were packed and labeled customer-wise at the factory and moved out of Faridabad based on specific orders.3. Functioning of the Head Office as a Dealer:The court examined whether the head office functioned independently as a dealer. It was found that the head office did not maintain any stock registers or accounts of goods received and sold. The head office primarily performed administrative functions and did not physically possess the goods. The Tribunal concluded that the head office acted more like a broker or promoter rather than an independent dealer. The court agreed with this assessment, noting that the head office's role did not change the nature of the transactions as inter-State sales.Conclusion:The court concluded that the sales in question were inter-State sales and liable to Central sales tax under section 3(a) of the Central Sales Tax Act, 1956. The movement of goods from Faridabad to Delhi was occasioned by specific orders placed at the head office, and the head office did not function independently as a dealer. The court answered the question referred to it in the affirmative, in favor of the department and against the assessee, and left the parties to bear their own costs.