2020 (4) TMI 769 - SC - VAT and Sales Tax

Supreme Court: No Timeframe for Delivery under Central Sales Tax Act

Commercial Taxes Officer Versus M/s. Bombay Machinery Store

The Supreme Court held that tax authorities cannot impose a timeframe for delivery to benefit from Section 6(2) of the Central Sales Tax Act, 1956. ... Time limitation for delivery of goods in case of inter-state sale - benefit of Section 6(2) of CST Act, 1956 - delivery of the respective goods from a carrier when the goods are delivered to a carrier for transmission in course of inter-state sale - validity of two circulars bearing S.No.115B dated 16th September, 1997 and S.No.1132A dated 15th April, 1998, which sought to impose a time limit on retention of goods in the carrier’s godown, beyond which time the revenue was to treat obtaining of constructive delivery of the goods involved - High Court quashed these Circulars. HELD THAT:- The respondent in this case had taken benefit of sub-section (2) on the ground that this was a case involving inter-state sale and the sale took place by way of transfer of documents of title of such goods during their movement from one State to another. It is also the respondents’ case that the requisite forms and certificates were duly furnished pertaining to such sales. On the part of the State, barring retention of the goods in the transporters’ godown at the destination point for a long period of time, default on no other count by the assesses has been asserted - In the two appeals in which the respondent is Bombay Machinery Stores, sales pertained to financial years before the circulars came into subsistence. In these instances of sales, the Commercial Tax officer in the respective orders treated retention of goods beyond 30 days in the transporters’ godown as the cut-off period. After that date, the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State of Rajasthan was held to be local sales and subjected to sales tax under the State Law. As per the aforesaid circulars, retention of goods by the transporter beyond the time stipulated therein (being 30 days as per the later circular) would imply that constructive delivery of the goods has been made by the transporter to the consignee. In such a situation, the transit status of the goods would stand terminated and the deeming provision in first explanation to Section 3 of the 1956 Act conceiving the time-point of delivery as termination of movement shall cease to operate. Sub-clause (1) of the said provision specifies when the goods shall be deemed to be in course of transit and sub-clause (3) thereof lays down the conditions for termination of transit. That condition is an acknowledgment to the buyer or his agent by the carrier that he holds the goods on his behalf. There is no material to suggest such an acknowledgment was made by the independent transporter in these appeals. In such circumstances we do not think the decision of the High Court requires any interference. In the case of Arjan Dass Gupta [1979 (8) TMI 194 - DELHI HIGH COURT] principle akin to constructive delivery was expounded and we have quoted the relevant passage from that decision earlier in this judgment. In our opinion, however, such construction would not be proper to interpret the provisions of Section 3 of the 1956 Act. A legal fiction is created in first explanation to that Section. That fiction is that the movement of goods, from one State to another shall terminate, where the good have been delivered to a carrier for transmission, at the time of when delivery is taken from such carrier. There is no concept of constructive delivery either express or implied in the said provision - the interpretation of the Division Bench of the Delhi High Court given in the case of Arjan Dass Gupta does not lays down correct position of law. In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the 1956 Act, then the proper course would be legislative amendment. The Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. This administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature. The judgements of High Court upheld - appeals dismissed. Issues Involved:1. Whether the tax authorities can impose a limit or timeframe within which delivery of goods must be taken from a carrier for the benefit of Section 6(2) of the Central Sales Tax Act, 1956.2. The legality of circulars issued by the Commissioner of Commercial Taxes, Rajasthan, imposing such a timeframe.3. Interpretation of the term 'delivery' as per Sections 3 and 6 of the Central Sales Tax Act, 1956, and its implications on inter-state sales.Detailed Analysis:Issue 1: Imposition of Timeframe by Tax AuthoritiesThe central issue in these appeals was whether tax authorities could impose a limit or timeframe within which delivery of goods must be taken from a carrier to avail the benefit of Section 6(2) of the Central Sales Tax Act, 1956. The Court noted that the relevant provisions of the Act, particularly Section 3 and its explanations, do not specify any timeframe within which delivery must be taken. The Court held that fixing a timeframe by the State Tax Administration is impermissible, as the statute does not qualify the term 'delivery' with any such limit.Issue 2: Legality of Circulars Issued by the CommissionerThe Court examined the legality of two circulars issued by the Commissioner of Commercial Taxes, Rajasthan, which imposed a timeframe for the retention of goods in the carrier’s godown. The High Court had quashed these circulars, stating that the Commissioner did not have the authority to issue such circulars, as they unduly fettered the quasi-judicial discretion of the assessing authorities. The Supreme Court agreed with this view, stating that the circulars were ultra vires and without any authority of law.Issue 3: Interpretation of 'Delivery'The Court analyzed the term 'delivery' as per Sections 3 and 6 of the Central Sales Tax Act, 1956. The Court rejected the notion of 'constructive delivery' as expounded in the Delhi High Court's decision in Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax, Delhi Administration. The Court emphasized that the statute creates a legal fiction that the movement of goods terminates only when actual delivery is taken from the carrier. There is no scope for interpreting 'delivery' to include constructive delivery, as the legislature has not provided for such an expansive meaning.ConclusionThe Supreme Court upheld the High Court's decision, confirming that the tax authorities cannot impose a timeframe for delivery to avail the benefit of Section 6(2) of the Central Sales Tax Act, 1956. The circulars issued by the Commissioner of Commercial Taxes, Rajasthan, were declared ultra vires and quashed. The Court reiterated that the term 'delivery' should be interpreted as actual delivery, not constructive delivery, in the context of inter-state sales under the Central Sales Tax Act, 1956. The appeals were dismissed, and no costs were ordered.