TaxTMI 
TaxTMI 
2010 (2) TMI 1083
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....xable in respect of the petitioners by the Tamil Nadu Sales Tax Appellate Tribunal, Additional Bench, Chennai for the assessment years 1992-93 to 1994-95. While all the petitioners are companies incorporated under the Companies Act, 1956, the petitioner in W.P. No. 11159 of 2004 is engaged in shipping business, which fundamentally involves entering into that of time, voyage and bare boat charter parties and the petitioner in other writ petitions is involved mainly in the business of manufacture and marketing of PVC resin and chemicals, having manufacturing unit at Mettur. During the assessment year 1997-98, the petitioners entered into charter party agreements with charterers, including M/s. Poompuhar Shipping Corporation Limited, providing their vessels on charter. By virtue of the charter party agreement, the petitioners realised charter hire charges in the case of time charter parties and freight earnings in respect of voyage and bare boat charter parties. It is the case of the petitioners, especially the petitioner in W.P. No. 11159 of 2004, that they have also effected sales of certain ships, apart from having miscellaneous sales involving sale of oil drums, fridge, f....
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....9 of 2004 was assessed under section 3A of the Act for the assessment years 1992-93 to 1994-95 by orders dated January 29, 1998, March 26, 1999 and June 30, 1999, respectively. Aggrieved by the said orders of assessment, the petitioner in W.P. No. 11159 of 2004 preferred first appeals under section 31 of the Act before the Appellate Assistant Commissioner (CT) I. During the pendency of the said appeals, the Supreme Court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182; [2000] 6 SCC 12 has held as follows (at page 205 of 119 STC): "The States, in exercise of power under entry 54 of List II, read with article 366(29A)(d), are not competent to levy sales tax on the transfer of right to use goods, which is a deemed sale, if such sale takes place outside the State or is a sale in the course of inter-State trade or commerce or is a sale in the course of import or export." Therefore, based on the said judgment, the first appellate authority has allowed the appeals of the petitioner, holding that the petitioners are not liable. However, the State of Tamil Nadu preferred second appeals before the Tamil Nadu Sales Tax Appellate Tribunal, Additional Ben....
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....taxable transaction as confirmed by the Tamil Nadu Sales Tax Appellate Tribunal. In spite of it, voluminous documents were produced before the respondent/Department on September 17, 2002. However, the respondent/Department has issued a pre-assessment notice dated January 10, 2003 proposing to bring to tax the charter hire charges and freight charges realised during the year 1997-98, apart from the sale proceeds in respect of one ship and other miscellaneous sales. The respondent/Department also proposed to bring to tax the transactions entered into by the petitioner as well as M/s. South India Shipping Corporation Limited, which were amalgamated with effect from April 1, 1996 consequent to the order of this court dated April 17, 1998 approving the scheme of amalgamation in C.P. No. 293 of 1997. For the pre-assessment notice dated January 10, 2003, the petitioner has submitted objections on February 28, 2003 stating that the charter party agreement entered did not result in transfer of right attracting section 3A of the Act; that in all these cases, it is the inter-State transactions outside the State of Tamil Nadu and therefore, the respondent/Department has no jurisdiction; tha....
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....urt in the said case has held that when goods are available, irrespective of the place where they are located, the State in which the agreement has been entered alone has the power to assess the transactions and therefore, the respondent/ Department also relied upon the said judgment of the Supreme Court for making such assessment. It is stated that the transaction is not mere transportation of goods and the leasing of ship cannot be termed as incidental or ancillary to the main business, since the petitioner has no other main business. It is also stated that against the orders of the Tribunal, the Tax Case (Revisions) have been filed and the same has been transferred to the High Court. By relying upon the above judgment of the Supreme Court, supra, it is stated by the respondent/Department that the situs of transaction is Tamil Nadu and therefore, it is well within the powers of the respondent/Department. Likewise, in respect of W.P. Nos. 19375 of 2004 and 6261 of 2005, it is stated that the petitioner in the assessment year 1997-98 has received Rs. 14,49,00,757 towards chartering and hiring charges and have not disclosed the same and therefore, the first respondent i....
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.... the respondent/Department, namely, the Tamil Nadu Sales Tax Appellate Tribunal in respect of the petitioner has rejected the claim of the respondent/Department to impose tax under section 3A of the Act and when ultimately, the State has preferred Tax Case (Revisions) which are pending before the court, in all fairness, the respondent should await the decision of the High Court in the Tax Case (Revisions) and as an authority which is a party to the Tamil Nadu Sales Tax Appellate Tribunal, the respondent/Department is bound to follow the said decision of the Tribunal, which is valid as on date. Even on the merits of the case, it is his submission that such charter hire charges cannot be taxed under section 3A of the Act by relying upon the judgment of the Supreme Court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182; [2000] 6 SCC 12, based on which the Tribunal itself has rejected the claim of the respondents. Per contra, it is the contention of the learned Special Government Pleader that as against the orders of assessment which are challenged in W.P. No. 11159 of 2004, there is an effective right of appeal, while in other cases, viz., W.P. Nos.....
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....ges and hire charges are received by the petitioners. The question which is to be decided of course in the tax case (revisions) pending before this court is as to whether such charges received by way of transactions could be deemed to be a transfer so as to attract tax under section 3A of the Act. Section 3A of the Act, which is as follows, contemplates levy of tax on the right to use any goods and such levy is imposed provided there is a transfer of right: "3A. Levy of tax on the right to use any goods.-(1) Notwithstanding anything contained in sub-sections (2A), (2B), (2C), (3), (4), (7) and (8) of section 3, or section 7A but subject to the other provisions of this Act including the provisions of sub-section (1) of section 3, every dealer referred to in item (viii) of clause (g) of section 2 shall pay, for each year, a tax on his taxable turnover relating to the business of transfer of the right to use any goods for any purpose at the rates mentioned in sub-section (2), (2A) or (2C) of section 3 or, as the case may be, in section 4. (2) The taxable turnover of the dealer, of the business of transfer of the right to use any goods for any purpose, shall, on and from the 1....
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....may be effected by the delivery of the goods." The conclusion arrived at by the Supreme Court is as follows (at page 205 of STC): "35. As a result of the aforesaid discussion our conclusions are these: (a) The States in exercise of power under entry 54 of List II read with article 366(29A)(d) are not competent to levy sales tax on the transfer of right to use goods, which is a deemed sale, if such sale takes place outside the State or is a sale in the course of inter-State trade or commerce or is a sale in the course of import or export. (b) The appropriate Legislature by creating legal fiction can fix situs of sale. In the absence of any such legal fiction the situs of sale in case of the transaction of transfer of right to use any goods would be the place where the property in goods passes, i.e., where the written agreement transferring the right to use is executed. (c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (....
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.... of right to use any goods where such deemed sales take place, the assessee has raised its objection for more scores than one; the more significant of which is the order of the Tribunal in the identical issue of the earlier years. The Supreme Court's decision prevails over the decision of the Tribunal." In Union of India v. Kamalakshi Finance Corporation Ltd. AIR 1992 SC 711, a Full Bench of the apex court, while dealing with the order of assessment passed by the Assistant Collector under the Central Excise and Salt Act, 1944 not following the order of the Collector (Appeals) and also the decision of the Central Excise and Gold Control Appellate Tribunal and upholding the judgment of the High Court which has made some harsh remarks against the Assistant Collector, has held as follows: "7. . . . The position now, therefore, is that, if any order passed by an Assistant Collector or Collector is adverse to the interests of the Revenue, the immediately higher administrative authority has the power to have the matter satisfactorily resolved by taking up the issue to the Appellate Collector or the Appellate Tribunal as the case may be. In the light of these amended provi....
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....e effect to the same, in the following words (at page 484): "The turnover in question relating to what is stated to be lending of cotton is the subject-matter of an appeal before the Appellate Assistant Commissioner of Commercial Taxes. The matter relates to the year 1967-68. For the earlier year, we are told that a similar turnover was considered by the Tribunal, which was of opinion that the transactions amounted to lending and they were not sales. When the appeal in respect of the year 1967-68 is pending, we do not think it desirable and necessary to deal with the matter under article 226 of the Constitution. Normally, the assessee should be compelled to resort to the statutory remedy. In fact, in this case, he has availed himself of it and he must await the result. But an apprehension is expressed on behalf of the assessee that because a tax case has been filed against the Tribunal's decision relating to the year 1967-68, the Appellate Assistant Commissioner might feel that he was not bound by the view of the Tribunal. We consider that in the hierarchy of authorities set up under the Act, the Tribunal is superior to the Appellate Assistant Commissioner, who is bound b....
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.... suo motu powers to call for, rectify the defects, if any, in the orders passed under the provisions of the Act. Of course, as stated by the Supreme Court, in the abovesaid process, there will be some delay in conclusion of the proceedings; for that matter, the assessing officer cannot ignore the directions given by the appellate authority." A Division Bench of the Bombay High Court in Sunflag Iron and Steel Co. Ltd. v. Additional Collector of Central Excise, Nagpur [2003] 162 ELT 105, considering the binding effect of judicial hierarchy, by narrating various judgments, has held as follows: "9. Turning then to the binding nature of the judgments of the CEGAT, we find that the proposition has never been doubted that the judgments of the CEGAT are binding on the revenue authorities. In the case of Morarji Gokuldas Spinning Weaving Co. Ltd. v. Union of India reported in [1981] 8 ELT 429 (Bom), it was pointed out by a learned single judge of this court that an order passed by the Central Government in exercise of its revisional powers (under the law as it stood when no appeal was provided) was binding on the excise authorities. In the case of Collector of Central Excise, Bombay I....
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....d occasion to consider the application of the principle of stare decisis to judgments of Tribunals. Observes the Supreme Court (vide paragraph 24): '24. Consistency is the cornerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the courts have evolved the rule of precedents, principle of stare decisis, etc. These rules and principles are based on public policy and if these are not followed by courts then there will be chaos in the administration of justice, which we see in plenty in this case. This court in the case of S.I. Rooplal v. Lt. Governor through Chief Secretary, Delhi [1999] 7 SCALE 466; 2000 AIR SCW 19 held thus at pages 24-25 of AIR SCW: "At the outset, we must express our serious dissatisfaction in regard to the manner in which a coordinate Bench of the Tribunal has overruled, in effect, an earlier judgment of another coordinate Bench of the same Tribunal. This is opposed to all principles of judicial discipline. If at all, the subsequent Bench of the Tribunal wa....
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.... an elementary proposition that an administrative circular issued by an authority, however high, can never override a binding judgment of judicial or quasi-judicial authority. This is the quintessence of rule of law. " A Constitutional Bench of the Supreme Court in Bhopal Sugar Industries Ltd. v. Income-tax Officer [1960] 40 ITR 618 (SC); AIR 1961 SC 182, under similar circumstances, while upholding the concept of binding nature of the judicial hierarchy, has held as follows: "8. We think that the learned Judicial Commissioner was clearly in error in holding that no manifest injustice resulted from the order of the respondent conveyed in his letter dated March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessments made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of....