AI Drafter 
TaxTMI 
TaxTMI 
2008 (9) TMI 896
X X X X Extracts X X X X
X X X X Extracts X X X X
....lore are concerned, the petitioner has admitted its liability and filed returns for the assessment years 2002-03, 2003-04, 2004-05, 2005-06 and also 2006-07 under the KST and CST Acts. The petitioner has been duly assessed to tax on the turnover relating thereto. The petitioner has produced the assessment orders passed under section 12(2) of the KST Act and under section 9(2) of the CST Act for the assessment years 2002-03 to 2004-05. For the year 2005-06 the assessment orders have been passed under section 38 of the Karnataka Value Added Tax Act, 2003 (hereinafter for short referred to as, "the KVAT Act") and the orders are also produced. The Assistant Commissioner of Commercial Taxes (Intelligence), South Zone, Bangalore, inspected the business premises of the petitioner-branch in Bangalore and seized certain books of account and documents relating to the assessment years 2002-03 to 2004-05 pursuant to an order of seizure dated January 11, 2007, under section 28(3) of the KST Act. Thereafter, a notice under section 12A of the KST Act came to be issued for reassessment for the period 2002-03 to 2006-07. The petitioner gave a detailed reply. Thereafter, the respondent proceeded ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is they who delivered the machines to the banks. Therefore, as the actual delivery took place at Bangalore it constitutes a local sale and, therefore, the petitioners are liable to pay sales tax under the KST Act and the KVAT Act. That is what precisely the assessing authority has held after reassessment and, therefore, he submits that no case for interference is made out. No doubt the petitioner has an alternative and efficacious remedy by way of a statutory appeal. The total liability now sought to be recovered from the petitioner for the aforesaid period is around Rs. 7.47 crores and the petitioner has to deposit 50 per cent of the same without which the appeal would not be entertained. It is this point which has made them to approach this court. This is a case where the petitioner has paid the tax under CST Act. He is not avoiding payment of tax. He is expected to pay tax either under the CST or KST Act and not both. The question is, is he liable to pay tax under the KST Act. The facts are not in dispute. Even the law applicable is not in dispute. The dispute is regarding application of the law to the admitted facts of the case. Under these circumstances notwithstanding the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany's local representative thereafter takes the delivery of the ATM machines from the bank authorities and after opening the packages and after due verification of the contents as to the quantity and the condition of machines, certify the machines as having been received in good working condition. For the above certification the ATM machines received at the bank premise, a copy of the same given to the bank authorities. (i) The insurance of the ATM machines are taken in the name of the company. Therefore, he concludes by saying: (a) The company is owner of goods until the machines are ultimately delivered to the client bank after due inspection and certification by the local engineers/technicians of the company; (b) The goods are put into the common carrier by the company; (c) The insurance of the goods stands in the name of the company; (d) The freight and all the incidental charges up to the delivery are borne by the company; (e) As the agreement executed by the company with the bank is for the manufacture and supply of machine, the goods were not in existence at the time when the agreements are made and therefore the agreements made are for sale of fut....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... [1976] 38 STC 475 (SC) it is held as under: "When the movement of goods from one State to another is an incident of the contract of sale it is a sale in the course of inter-State trade falling under section 3(a) of the Central Sales Tax Act, 1956. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale 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 interState trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale. ... ...that the appellant was one entity and it carried on business at different branches. Branches are not independent and separate entities. They are different agencies. The c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re inter-State sales and that the turnover of such sales was assessable to sales tax under the Central Act by the sales tax authorities of Faridabad. The question as regards the nature of the sale, that is, whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstance as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale." In the case of Sahney Steel and Press Works Limited v. Commercial Tax Officer [1985] 60 STC 301 (SC) it is held as under: (page 302) "(i) that even if the customer placed an order with the branch office and the branch office communicated the terms and specifications of the order to registered office and the branch office itself was concerned with despatching, billing and receiving of the sale price, the order placed by the customer was an order placed with the company, and for the purpose of fulfilling that order the manufactured goods commenced their journey from the registered office in the State of Andhra Pradesh to the branch outside the State for delivery of the goods to the customer. Both the registered office and the branch office were offices o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all be deemed to take place in the course of interState trade or commerce if the sale or purchase has occasioned the movement of the goods from one State to another or is effected by a transfer of documents of title to the goods during the movement from one State to another. The essence of an inter-State sale or purchase is the movement of goods from one State to another. If the movement of goods from one State to another is a result of a covenant or an incident of the contract of sale, then the sale is an inter-State sale, no matter in which State the property in the goods passes. A sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade. The inter-State movement must be the result of a covenant express or implied in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale 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 en....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payment or for any other valuable consideration, and includes,- (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) a delivery of goods on hire-purchase or any system of payment by instalments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods." Article 366(29A)(d) reads as under: "(29A) 'Tax on the sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of sub-clause (d) of clause (29A), the taxable event is the transfer of the right to use the goods regardless of when or where the goods are delivered for use. What is required is that the goods should be in existence so that they may be used. And further contract in respect thereof is also required to be executed. Given that, the locus of the deemed sale is the place where the right to use the goods is transferred, where the goods are when the right to use them is transferred is of no relevance to the locus of the deemed sale. Also of no relevance to the deemed sale is where the goods are delivered for use pursuant to the transfer of the right to use them, though it may be that in the case of an oral or implied transfer of the right to use goods, it is effected by the delivery of the goods. Article 366(29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of the right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fter the manufacture of such goods, are moved from one State to another for the purpose of delivering the same to the purchaser, it would be an inter-State sale. Because, it is not a transfer of right to use goods, but transfer of goods itself. In the case on hand it is not a case of transfer of right to use the goods. It is also not a case of oral or implied transfer of the rights to use goods. There is a written contract between the parties for manufacture and supply of goods. The branch office at Bangalore, forwarded an order for transfer of goods upon receipt by them from the buyer to their factory at Pondicherry. The goods were manufactured according to the specifications of the buyer. Thereafter the goods were handed over to a carrier who delivered the goods at the buyer's place. The technicians at the registered office at Bangalore took delivery of the consignment at the buyer's place, opened the containers, checked and after it is found to be all right in all respects handed over the goods to the buyer. The buyer in turn has made the payment directly to the factory at Pondicherry. Though the goods for which orders were placed were not in existence at ....