TaxTMI 
TaxTMI 
2012 (10) TMI 185
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....se of movement of goods into and inside the country; (iii) Whether the sale made to the Deli Metro Rail Corporation in the course of import and consequently exempt from the Delhi VAT Act, 2004, especially Section 7 (c) of DVAT Act, read with Section 5 (2) of the Central Sales Tax Act. 2. The brief facts of the case are that the Appellant, a public limited company, inter alia, is engaged in the manufacture and sale of engineering Goods including power distribution system and SCADA system. It is a market leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. It is a subsidiary of ABB LTD., Zurich, Switzerland, which has operations in over 100 countries and employs about 130,000 personnel. The appellant responded to an Notice Inviting Tenders ("NIT") dated May 15, 2003 issued by Delhi Metro Rail Corporation (DMRC) for supply, installation, testing and commissioning of traction electrification, power supply, power distribution and SCADA systems for Line 3 Barakhamba Road-Connaught Place-Dwarka Section of Delhi Metro Project. 3. As part of the scope of the Contract, the Appellant had to provid....
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....s of law, it (the appellant) submitted its return under the Delhi VAT for the tax period 01.04.05 - 31.04.05, whereby it claimed exemption from payment of VAT in respect of sale effected in the course of import [covered under Section 5(2) of the Central Sales Tax Act r/w Section 7(c) of the Delhi VAT Act] and interstate sale of Goods [subject to CST and exempted from levy of VAT under Section 3 read with Section 7(a) of the Delhi VAT Act]. The Assessing Officer, by order dated 25.11.2005 rejected the referenced exemptions claimed by the appellant and imposed Rs. 45,18,484/- as VAT, Rs. 3,32,258/- as interest and also imposed Rs. 1,20,56,196/- as penalty. The appellant filed an appeal under Section 74 of the DVAT and the same was rejected by an order dated 11.03.08. Aggrieved, the appellant filed appeals, under Section 76(1) of the DVAT Act to the Tribunal constituted under the Act. The appellant filed similar appeals (40 in total) in respect of demand VAT and imposition of penalty in respect of different assessment periods. During the pendency of the appeals, the appellant filed voluminous documents to support its submissions made in the appeal. Further, the appellant filed detaile....
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....rement under Section 3(a) of the CST Act, there should be privity of contract between DMRC and the appellant and specific instructions for inter-state movement of goods should be issued by DMRC. It was argued that the Tribunal's finding is contrary provisions of Section 3(a) of the CST Act as interpreted in a catena of judgments which held that the contract between the parties (DMRC and the appellant) ought to envisage inter-state movement of goods consequential to or as an incident of such contract. If the interstate movement of goods was within the contemplation of the parties and reasonable presumption can be drawn that for the fulfillment of the contract, such interstate movement of goods is necessary, the same would fall under Section 3(a) of the CST Act. It was contended that the inter-state movement of goods was within the knowledge of DMRC, as there was a total ban of setting up/operation of heavy industry in Delhi, hence the goods could only be manufactured outside Delhi and supplied in Delhi. 10. Learned counsel relied on the text of Section 5(2) and 5(3) as well as Section 3, to contend that the movement of goods in either case - from the Appellant's factory within Indi....
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.... its factories in Vadodara, Bangalore, Nashik etc. The movement of these was directly the consequence of the contract with DMRC, and therefore, constituted inter-state sales. 13. The revenue relies on the order of the Tribunal, and contends that appellant did not establish from the record that sales by its foreign suppliers to it and the sales by it to DMRC were inextricably interlinked and integrated. Nothing was pointed out from the records in the form of any sort of condition or clause in the agreement that diversion of the said goods to any other person or for any other use was simply not possible without violating the law. No prohibition in law to supply the goods to other persons, or its use for any other purpose was shown by the appellant to the Tribunal, from the terms and conditions of the Works Contract between it and DMRC. There was nothing to conclude that the entire transaction between the appellant, DMRC and foreign suppliers, was part of one single transaction and inextricably interlinked and integrally connected. Several conditions of the contract above showed that there was no stipulation of transfer of goods till the final payment on satisfaction of the work don....
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....e 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 carrier 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. ************** ****************** 5. When is a sale or purchase of goods said to take place in the course of import or export. (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only i....
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....rm the contractor in time to enable him to make alternative arrangements. ************ ****************** 4.5 The Contractor shall not sub-contract the whole of the Works unless otherwise stated in the Special Conditions of Contract: (a) The Contractor shall not be required to obtain approval for purchases of Materials which are in accordance with the standards specified in the Contract or provisions of labour or for the sub-contracts for which the Sub-contractor is named in the Contract. (b) The prior approval of the Engineer shall be obtained for other proposed Sub-contractors; (c) Not less than 28 days before the intended date of each Sub-contractor commencing work, the Contractor shall notify the Engineer of such intention; and (d) The contractor shall give fair and reasonable opportunity for contractors in India to be appointed as Sub-contractors. The Contractor shall be responsible for observance by all Sub-contractors of all the provisions of the contract. The Contractor shall be responsible for the acts or defaults of any Sub-contractor, his representatives or employees, as fully as if they were the acts or defaults of the Contractor, his representatives or employees....
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....he Engineer shall then carry out the inspection, examination, measurement or testing without unreasonable delay. If the Contractor fails to give such notice, he shall, when required by the Engineer, uncover such work and thereafter reinstate and make good at his own cost." The DMRC issued a letter listing out the approved or authorized list of suppliers which reads as: "TO WHOMSOEVER IT MAY CONCERN This is to certify that following is a list of the approved vendors for 3E21 contract entered into between the DMRC Ltd. and ABB Ltd. On 4th August 2004. 1. 40 MVA Traction Transformer M/s. ABB Limited, Vadodara 2. 15 MVA Power Transformer M/s. Crompton Greaves Ltd., Bhopal 3 66 KV/25 KV Circuit Breakers M/s. ABB Limited, Vadodara 4 66 KV Capacity Voltage Transformer M/s. ABB Limited, Vadodara 5 66 KV Current Transformer M/s. ABB Limited, Italy 6 66 KV/25 KV Isolators M/s. Switchgear and Structural Limited, Hyderabad 7 60 KV/42KV lighting arresters M/s. Elpro International Ltd., Pune 8 Control and Relay panels M/s. ABB Limited, Bangalore 9 SCADA Systems M/s. ABB Limited, Bangalore 10 MV Switchgear M/s. ABB Limited, Nashik 11....
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.... possibility of goods being diverted by the assessee for any other purpose as the goods were imported into India for the consignee. On the contrary in the present case the facts are totally different as also import in the present case was not the direct result of Contract of Sale as there was no contract of sale as such in the present case between the appellant and the DMRC. The reference made to the case of Indian Explosive Ltd. (supra) is also of no help to the appellant as the appellant failed to point out in the present case that there was any term or condition prohibiting diversion of goods after the import. Similarly, in case of Indure Limited and Another (supra), their Lordship did not consider the belated plea raised for the first time before the Apex Court by the Revenue that the goods imported had been subjected to manufacturing process. In the present case the goods imported were also subjected to manufacturing process as stipulated in the terms and conditions of the Work Contract between the appellant and DMRC and as such it cannot be said that the interstate movement of goods or import of goods springs from the terms of the contract of sale or purchase, which is not i....
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....vered u/s 3 (a), 5 (2) of the CST Act and Section 7 (a) and 7 (c) of the DVAT Act, are also applicable. The claim of exemption by the appellant dealer under the heads labour and services which includes the bills of transportation and other allied expenses has not been much emphasis during submission. Otherwise also the claim under the heads labour and services including the bills of transportation and other expenses if not acceptable as the same cannot be at all be termed as labour cost. In fact it is a cost of purchase of goods and has to be included in the purchase expenses in respect of the work contract agreement and enhance subject to levy of tax as deemed sale price of the goods." Question No. 1 and 3: 20. The appellant contended that in terms of the contract, the goods in question were manufactured at its own factories outside Delhi in accordance with the designs, drawings and specifications provided by DMRC under the contract. The Contract stipulated the factory in which the appellant was to manufacture and supply the goods/equipment, to DMRC. Such goods manufactured in appellant's factories located outside Delhi, were to be delivered to DMRC in Delhi, under the Cont....
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....ale 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 would be enough if the movement was in pursuance of and incidental to the contract of sale." 25. In English Electric Company of India Ltd. v. The Deputy Commercial Tax officer and Others [1976] 38 STC 475 (SC), the Court again held that: "when a branch of a company forwards a buyer's order to the principal factory of the company and instructs them to dispatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be sale between the factory and its branch. If there is a conceivable link between the movement of the goods and the buyer's contract, and if in the course of inter-State movement the goods move only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter State trade or commerce as su....
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....e taken place in the course of inter-state movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale..." Question Nos. 1 and 3 are answered in favour of the assessee and against the revenue. Question No. 2: Sale in the course of import 28. In exercise of its powers under Article 286(2) Parliament enacted the Central Sales Tax Act, 1956. Section 3 of the Act prescribes that 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. Section 5(1) states that a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or it effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. In terms of Section 5 (2), a sale or purchase of goods shall be deemed to take place i....
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....rt. The Court held as follows: "....appellant K. G. Khosla & Co., hereinafter referred to as the assessee entered into a contract with the Director-General of Supplies and Disposal, New Delhi, for the supply of axle-box bodies. According to the contract the goods were to be manufactured in Belgium, and the D.G.I.S.D., London, or his representative, was to inspect the goods at the works of the manufacturers. He was to issue an inspection certificate. Another inspection by the Deputy Director of Inspections, Ministry of W.H. & S., Madras, was provided for in the contract. It was his duty to issue inspection notes on Form No. WSB.65 on receipt of a copy of the Inspection Certificate from the D.G.I.S.D. London and after verification and visual inspection. The goods were to be manufactured according to specifications by M/s La Brugeoies. ET. Nivelles, Belgium. ...................... ..................... The next question that arises is whether the movement of axle-box bodies from Belgium into Madras was the result of a covenant in the contract of sale or an incident of such contract. It seems to us that it is quite clear from the contract that it was incidental to the contract that ....
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....aid case would not be applicable to it. 42. In fact, the ground, sought to be raised for the first time before this Court that MS Pipes were put to manufacturing process and thereby converted into distinct end product had not been raised before any of the Authorities earlier. It was not the Respondents case that pipes so imported were not necessary components for the erection and commissioning of the plant. Admittedly, the said pipes were used as components in the Ash Handling Plant in the same condition as they were imported without altering its originality. Thus, the ground which was sought to be raised before us for the first time has not been considered by any of the Authorities and in our opinion rightly so. Thus, we also do not deem it fit and proper to consider the same at this belated stage. 43. Apart from the aforesaid reasons, we are also of the considered opinion that such import would fall within the Constitutional umbrella. It is also to be noted that Company had admittedly imported the goods into India for completion of the Project on Turnkey Basis of N.T.P.C. Thus, by virtue of Article 286 (1) (b) of the Constitution, it would not be taxable. For ready reference, A....