TaxTMI 
TaxTMI 
2011 (4) TMI 1235
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....e Minor Forest Produce (Trading and Development) Co-operative Federation Ltd. (for short, "the Federation"), the appellants submitted their tender forms for purchase of tendu leaves and they were allotted forest tendu leave lots and accordingly, purchase agreements were executed under condition No. 7 of the tender notice. The appellants were also required to pay taxes under the terms of the purchase agreement and the appellants' challenge to the imposition of taxes under the terms of the purchase agreement has been dismissed by the learned single judge by the impugned order. Submission on behalf of Shri Ravindra Shrivastava, senior advocate with Shri Anup Majumdar and Shri Ashish Shrivastava, advocates for the appellants in W.A. No. 367 of 2010: The only question for consideration in this group of writ appeals is-whether purchase of tendu leaves by the appellants, who are registered exporters of tendu leaves in the State of Chhattisgarh, is inter-State or intra-State sale? There is a complete State monopoly in the trade and transport of tendu leaves in the State, which is governed under the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (for....
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.... issued in the prescribed manner. Even the excess quantity of the tendu leaves left after export, cannot be sold without permission of the State Government or any authorized officer under section 12(A) of the Adhiniyam, 1964. Thus, from the above, it is manifestly clear that the registered exporters of tendu leaves in the State of Chhattisgarh are required to transport the goods outside the State under an obligation of the statute and contract. There is an inextricable connection between sale of tendu leaves to the registered exporters and movement thereof to outside the State; tendu leaves cannot be moved without transport permit; transport permit facilitates movement of goods from the State of Chhattisgarh to outside the State, and failure to observe the terms and conditions of the transport permit renders the whole transaction of sale incomplete, and therefore, contention of the respondents that exporter is free to transport or dispose of the tendu leaves after he purchases the same from respondent No. 2, is not tenable. The very premise of the impugned order that the provisions of the Adhiniyam, 1964 and the Niyamawali, 1966 do not form parts of the agreement, i.e., contr....
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.... was granted registration by respondent No. 3 as manufacturer and exporter of tendu leaves in the format prescribed under rule 8(2) of the Niyamawali, 1966. At the time of submitting his tender, the appellant was also required to mention its registration number with date of registration, attaching photocopy of the registration certificate. Deputy Commissioner, Income-tax, Allahabad, with whom the appellant is assessed, issued certificate under section 206C of the IT Act in form 27C, directing the conservator of forest not to collect TDS under section 206C(1) of the IT Act, in respect of goods specified in para 2 as they are for manufacture of bidis. However, the learned single judge did not consider the above aspect and the fact that the conservator of forest did not deduct tax as per order dated August 30, 2002 (annexure P/ 11), which clearly demonstrates that tendu leaves sold to the appellant by the respondent was exported out of Chhattisgarh. The case in hand is squarely covered by the decision of the Supreme Court in case of State of Orissa v. K. B. Saha and Sons Industries Pvt. Ltd [2007] 7 VST 214 (SC); [2007] 9 SCC 97, and the learned single judge has wrongly distinguished ....
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....ncorporated the provisions of the Adhiniyam and rules framed thereunder by way of reference. Clause (2) of the purchaser's agreement specifically provides that the agreement shall be deemed to be subject to the provisions of the Adhiniyam, the rules made thereunder and the orders and notifications issued from time to time under the said Adhiniyam and the rules and terms and conditions of the tender notice, including general/other terms and conditions of the tender and instructions for tenderers contained in annexure I of the tender notice, all of which shall form part of the agreement. A conjoint reading of clause 6(1)(a), clause 10 and clause 18 of the purchaser's agreement along with sections 5 and 12A of the Adhiniyam and rules 2(5), 4(3) and 8 read with section 15 of the Adhiniyam, irresistibly leads to the conclusion that the ultimate movement of goods outside the State of Chhattisgarh by an exporter has an inextricable link with that of the sale of tendu leaves inside the State by the Federation to the appellant. In the matters of Tata Iron and Steel Co. Ltd. v. S.R. Sarkar [1960] 11 STC 655 (SC); AIR 1961 SC 65, Singareni Collieries Co. Ltd. v. Commissioner of ....
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....e issued for the purposes of movement of goods, and the appellants are permitted to sell the goods locally. Thus, it is clear that the movement of goods is an incidence of sale agreement and the same occasioned through contract of sale and is clearly an inter-State sale. The learned single judge has, in para 107 of the impugned order, has distinguished the present case from the case of Tata Engineering & Locomotive Co. Ltd. [1971] 27 STC 127 (SC); [1970] 3 SCC 697 on fact with an observation that facts of the aforesaid case were that the dealers were required to remove the articles purchased by them from the State of Bihar to places outside Bihar as per terms of the contract entered into by them with the State, though in the instant case also, the movement of goods occasioned under the law that is incorporated in the agreement for sale and the contract agreement and the tender conditions required the appellants to transport the goods to the destinations outside the State and they are not permitted to sell the same within the State without express permission from the authorities. Submission by Shri Ankit Singhal, Shri Parag Kotecha and Shri Anand Dadariya, advocates for the ap....
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....to route through the forest produce through the forest areas so as to avoid registration of any forest offence or otherwise against the purchaser. Taxes, as leviable on the said tendu leaves, are recovered by the society/Federation. As sales of the tendu leaves are made at the stage when the leaves are attached to the trees, therefore, it cannot be said that the processed tendu leaves or movement thereof is a consequence of sale. The entire transaction of sale of tendu leaves is to be examined in the light of clauses of the agreement, the provisions of the Adhiniyam, 1964 and the Niyamawali, 1966. From examination of the agreement, particularly clauses 4, 5, 6, 7 and 8 of the agreement, it would be evident that possession of the leaves is transferred to the purchasers immediately after the bid is finalized and thereafter, the entire process of bundling, storage and other value addition is the responsibility of the purchasers. From perusal of clauses 7 and 8 of the agreement it is clear that the purchaser can take delivery of the goods against furnishing bank guarantee for the entire purchased leaves. Clause 8 casts a duty upon the purchaser of making payment of leviable tax, inc....
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.... of sale, which is not the case here. It was also brought to the notice of this court that the ratio of law laid down by the Supreme Court in K.B. Saha's [2007] 7 VST 214 (SC); [2007] 9 SCC 97 is under reconsideration of the Supreme Court in the case of "Malay Giri Sandal Wood". Reliance has been placed on the decisions of the Supreme Court in the matters of Virajlal Manilal & Co. v. State of M. P. [1969] 2 SCC 248 and State of Madhya Pradesh v. Chhotabhai Jethabhai Patel and Co. AIR 1972 SC 971. Heard learned counsel for the parties, perused the pleadings of the respective parties and documents appended therewith as also the impugned order. The short question for consideration in these appeals is-whether purchase of tendu leaves by the appellants is an inter-State sale or intra-State sale within the meaning of section 3 of the Central Sales Tax Act, 1956? Section 3 of the Central Sales Tax Act, 1956 (in short, "the Act of 1956") reads as under: "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sa....
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.... would clearly be an inter-State sale. In the case of Ben Gorm Nilgiri [1964] 15 STC 753 (SC); AIR 1964 SC 1752, the transaction of sale sought to be taxed by the Revenue authorities are in tea, which was a controlled commodity in the State of Kerala. Trade in tea, internal as well as export, is carried on through certain defined channels in the State of Kerala. Tea could not be exported otherwise than under a licence. In this judgment it was held as under (pages 759 and 760 of 15 STC): "(8) To constitute a sale in the course of export of goods out of the territory of India, common intention of the parties to the transaction to export the goods followed by actual export of the goods to a foreign destination is necessary. But intention to export and actual exportation are not sufficient to constitute a sale in the course of export, for a sale by export 'involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resul....
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....r under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export, i.e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for determining that question. Each case must depend upon its facts. But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real. In general where the sale is effected by the seller, and he is not connected with the export which actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from....
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....ire those goods to be exported or imported to a foreign country or from a foreign country as the case may be or are required to be transported to a State other than the State in which the delivery of goods takes place; and (3) Where as a necessary incidence of the contract of sale goods sold are required to be exported or imported or transported out of the State in which the delivery of goods takes place." In Balabhagas Hulaschand [1976] 37 STC 207 (SC); [1976] 2 SCC 44, conditions have been enumerated which must be satisfied before a sale can be said to take place in the course of inter-State trade or commerce. In para 15, it has been held thus (pages 215 and 216 in 37 STC): "2. (15) That the following conditions must be satisfied before a sale can be said to take place in the course of inter-State trade or commerce: (i) that there is an agreement to sell which contains a stipulation express or implied regarding movement of goods from one State to another; (ii) that in pursuance of the said contract the goods in fact moved from one State to another; and (iii) that ultimately a concluded sale takes place in the State where goods are sent which must be different fr....
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....e sale/purchase depends on the facts of each case. The principles are well-settled; it is only a question of application of these principles to the facts found in each case. In Co-operative Sugars (Chittur) Ltd. [1993] 90 STC 1 (SC); AIR 1994 SC 1456, the appellant had its sugar factory in the State of Kerala. Due to shortage of sugarcane in that State, it obtained permission from the Government of Tamil Nadu to purchase sugarcane from a specified area in that State with a view to and exclusively for the purpose of transporting it to its factory at Kerala. Whatever was purchased was transported to the appellant's factory in Kerala. In these circumstances, it was held that this is a case where the movement of goods was occasioned by the sale by the farmers or by the purchase by the appellant and as such, an inter-State sale. In K.B. Saha's case [2007] 7 VST 214 (SC); [2007] 9 SCC 97, the respondents were registered dealers under the West Bengal Sales Tax Act, 1994 and the Act of 1956 in the State of West Bengal. They had their registered office outside the State of Orissa. They carried on business in tobacco and kendu leaves. They manufactured bidis at factories situat....
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....cognizes the possibility of a tenderer making purchase for the purpose of export outside India. In A & G Projects and Technologies Ltd. [2009] 19 VST 239 (SC); [2009] 2 SCC 326 also, it has been held that the question whether a particular sale is an inter-State sale or intra-State sale is a mixed question of fact and law. The name given to a transaction by the parties concerned does not decide the nature of transaction and to determine the nature of transaction, settled parameters in this regard by earlier judgments of the Supreme Court have been reiterated. In Virajlal Manilal [1969] 2 SCC 248, while considering the restrictions on transport contained in section 5 of the Adhiniyam, 1966 and rule 4(2)(g) of the Niyamawali, 1966, the Supreme Court observed in paras 10 and 13 thus: "10. The long title of the Act recites that the Act was enacted for regulating 'the trade in tendu leaves' by creating a State monopoly in such trade. Trade in tendu leaves would consist of dealing in those leaves, i.e., their purchase and sale. Transport of the leaves once purchased or sold would not prima facie be an organic or integral part of dealing in those leaves. It is something ex....
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....ficulty as it is conceded that old leaves in the context mean those which were in stock when these rules came into force and not the balance of leaves left unconsumed from year to year. So construed, the restrictions against free transport cannot be held to be unreasonable and the validity of section 5 and rule 9 as also the order of June 4, 1965, except to the extent of its requiring a permit for distribution to the mazdoors, cannot be successfully challenged. So far as the order, dated October 12, 1965, is concerned, it was a mere cancellation of a concession and such cancellation cannot be challenged as a restriction, much less as an unreasonable restriction." In Chhotabhai Jethabhai Patel and Co. AIR 1972 SC 971, the Supreme Court had an occasion to consider the restrictions contained in section 5(2) of the Adhiniyam, 1964 in import of tendu leaves from outside the State or restrictions in its movement within the State. Allowing the appeal of the State against the judgment of the High Court, it was held that the entire provisions of the Act and the rules are consistent with and aimed at the State monopoly in the trade of tendu leaves in case of leaves grown or produced in th....
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..... Ltd. [1979] 43 STC 457 (SC); [1979] 2 SCC 242, it was observed that a sale would be an inter-State sale even if the contract of sale does not itself provide for the movement of goods from one State to another provided, however, that such movement was the result of a covenant in the contract of sale or was an incident of the contract. Similar view was expressed in Sahney Steel and Press Works Ltd. v. Commercial Tax Officer [1985] 60 STC 301 (SC); [1984] 4 SCC 173. In Manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax, Jabalpur [1976] 37 STC 489 (SC); [1976] 4 SCC 124, after referring to Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 (SC); [1976] 2 SCC 44, it was observed that so far as section 3(a) of the CST Act is concerned there is no distinction between unascertained or future goods and goods which are already in existence, if at the time when the sale takes place these goods have come into actual existence." In Maharashtra Timber Laghu Udyog Mahasangh [1985] 18 VKN 195, the members of the Mahasangh purchased timbers on auction held in the State of Madhya Pradesh. They applied for certificate in form C on the ground that movement of timbe....
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....e cause of movement; and (iii) such movement of goods must be from one State to another State where the sale concludes. The movement of goods which takes place independently of a contract of sale would not fall within the meaning of inter-State sale. Where the transaction of sale stands completed within the State and the movement of goods takes place thereafter independently of the contract of sale, the transaction would not be having an inter-State element. Where the movement of goods is the result of a covenant in the contract of sale or is an incident of the contract, the sale may be regarded as an inter-State sale and it is immaterial whether the property in goods passes in one State or another. What is important is that the movement of goods and the sale must be inseparably connected. It is not necessary that there should be an existence of contract of sale incorporating the express or implied provision regarding inter-State movement of goods. The question whether a sale/purchase depends on the facts of each case. The principles are well-settled, it is only a question of application of these principles to the facts found in each case. We propose to examine the contract o....
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....of the unit, in which the leaves have grown, can purchase or transport tendu leaves. Under sub-section (2) of section 5, tendu leaves purchased from the State Government or any officer or agent specified in the said sub-section by any person for manufacture of bidis within the State or by any person for sale outside the State may be transported by such person outside the unit only in accordance with the terms and conditions of a permit to be issued, as provided under the rules. Whereas sub-section (3) of section 5 provides that any person desiring to sell tendu leaves may sell them to the aforesaid Government officer or agent to any depot situated within the said unit. Section 7 empowers the State Government to fix the price, in consultation with the Committee constituted under section 6, at which tendu leaves shall be purchased by it or by any of its authorised officer. Section 11 mandates that every manufacturer of bidis and every exporter of tendu leaves shall get himself registered and every registered manufacturer of bidis and exporter of tendu leaves is to furnish a declaration in the prescribed form and manner. Whereas under section 12A, it is provided that any left....
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.... only by the route specified in the permit and the transport permit is liable for cancellation where it is found that it has been misused or is likely to be misused. The Chhattisgarh State Minor Forest Produce (Trading and Development) Co-operative Federation Ltd., has been appointed as agent of the State Government under section 4 of the Adhiniyam, 1964 for collection, purchase and trade of tendu leaves. The Federation acting in the name of the Governor of Chhattisgarh invites sealed tenders for purchase of tendu leaves. Terms and conditions of tender and instructions for tenderers are published in the tender notice. Tenders are invited for the purchase of lots of tendu leaves to be collected or purchased by the societies, as shown in the Schedule appended to this notice for the relevant contract period as per condition No. 3 of the tender notice. Purchaser's agreement is to be executed as per condition No. 7 of the tender notice. As per condition No. 7(ii), an agreement is to be executed between the successful tenderer before the conservator of forests in form given in annexure IV in respect of every lot within 30 days of the issue of acceptance of his offer by the Fede....
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.... have to deposit security deposit amounting to 25 per cent of the total purchase price of the lots for due performance of the terms and conditions of the purchaser's agreement executed by him. Condition No. 10 provides that the purchaser can remove/transport the leaves from the godown only after full payment of the instalment due has been made. Condition No. 11 provides that if a purchaser commits any breach of provisions of the Adhiniyam, Niyamawali and/or any condition of the purchaser's agreement as a result of which he is punished under section 15 of the Adhiniyam, he shall be liable to be blacklisted for a period up to five years. Tender form for purchase of tendu leaves lots is to be submitted in annexure II made under condition No. 4 of the tender notice. Paragraph 4 of annexure II of the tender notice provides for declaration to the effect that the tenderer holds a certificate of registration as a manufacturer of bidis and/or exporter of tendu leaves under the Adhiniyam, 1964. The purchaser's agreement is executed in annexure IV made under condition No. 7 of the tender notice. Clause 2 of the agreement deals with the parts of the agreement and it pro....
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....orest Department/Federation/primary society/ others on rent, then he will be bound to do so on the rent of Rs. 18 per actual bag but he will not be required to execute the tripartite agreement in annexure VII and can keep the leaves in the godown till April 15, 2011 but if the purchaser wants, he can store the leaves in his own godown under double lock of purchaser and Federation after paying the rent of Rs. 18 per actual bag. The purchaser will have to make the payment of godown rent on the basis of storage capacity of the godown fixed by the Managing Director, District Union by March 15, 2010 in one instalment." Under clause 6(2) if the purchaser makes full payment of the purchaser price of the lot along with due taxes up to the due date of first instalment, he is entitled for rebate of two per cent of the purchase price. Clause 7 of the agreement provides for facility of delivery of leaves against bank guarantee, whereas clause 8 of the agreement provides for payment of taxes, which reads as under: "Payment of taxes: (i) Under this agreement, an instalment shall not be deemed to have been paid unless all taxes due thereon are also fully paid. (ii) The purchaser sh....
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................ (ii) Quantity permitted.........Standard bags/Actual bags (iii) Valid up to............ 4. Quantity covered under the above authority already transported previous to issue of this page. (i) Details of transport permit 4 (subsidiary). Book No....... Page No....... Date ....... (ii) Quantity.........Standard bags/actual bags. 5. Quantity now being transported in the consignment accompanying this permit (give serial number of bag and quantity in each. Standard bags/actual bags). 6. Quantity in balance for transport-standard bags/actual bags. 7. From...........to........... 8. Route of transport............. 9. Place of places for checking................. 10. The permit is valid up to.................(Date) NOTE Unless otherwise authorised by the Divisional Forest Officer in writing period shall not exceed 48 hours. Place ............ Date ............hour ..... ........................... ............. Singnature of the Issuing Officer. CHECKED Place ............ Date ............hour ..... ........................... ............. Singnature of the Checking Officer." It has been vehemently argued....
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....tion as an agent of the State Government appointed under section 4 of the Adhiniyam, 1964 for collection, purchase and trade of tendu leaves in the whole of the State. The tender notice clearly mentions that sealed tenders are invited from persons, registered firms/legal companies for the purchase of said tendu leaves. Rates are to be quoted by the tenderers per standard bag for tendu leaves in form of annexure II as per condition No. 4 of the tender notice, exclusive of value added tax, forest development cess and other taxes/cess. Pre-tender inspection of the area/lot is permitted to the tenderers and leaves are auctioned on "as it is where it is" basis. The green leaves are handed over to the purchaser at the collection centers only. The treatment, transport and godowning, etc., of the delivered tendu leaves are to be done by the purchasers at their own expenses. The amount against sale is payable in one stroke or on four equal instalments at the choice of the purchaser. Where the purchaser opts for payment in instalments, tendu leaves are stored by the purchaser under dual lock system. Condition No. 1(xix) of annexure I appended with the tender notice defines "tax payable" as v....
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....estinations mentioned in the transport permit. The fact that tendu leaves have been sold to the appellants, who are registered exporters and they were issued transport permits for transporting the purchased tendu leaves to the destination outside the State, imputes knowledge to the seller that the goods are purchased with the intention of exporting by the appellants. However, there is nothing in the transaction from which it can be said that the sale and the intended export is part of the same transaction. The knowledge that the goods purchased are intended to be exported does not make the sale and export parts of the same transaction. We further observe that under the Adhiniyam, 1964 and the Niyamawali, 1966 made thereunder, the State Government has monopoly in the trade of tendu leaves. The Legislature with a purpose to achieve the object of the Adhiniyam, 1964, regulates the storage and transport of tendu leaves by imposing restrictions in transporting the tendu leaves by issuing transport permits: TP 1 (main) for transport from collection depot to storage godown, TP 2 for transport from one storage godown to another or to distribution center, TP 3 for transport from distribu....
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....le. In the matters of K.B. Saha's [2007] 7 VST 214 (SC); [2007] 9 SCC 97, there was also stipulation in the contract of sale that tendu leaves are to be exported. We are also conscious of the fact that under clause 8 of the agreement, there is specific mention that the purchasers were required to pay commercial tax/VAT under the provisions of law as amended from time to time, forest development cess and other taxes/cess. The appellants have participated in the tender process and quoted their purchase price keeping in view the aforesaid stipulation in the agreement. The learned single judge, after elaborately considering the arguments advanced by learned counsel for the appellants, has dismissed the writ petitions with the following observations in para 129 of the impugned order (page 272 supra): "129. For the reasons and analysis aforestated, unhesitatingly, I hold that the purchase of tendu leaves was an independent transaction, which was complete in the State of Chhattisgarh. Movement of tendu leaves thereafter was a different transaction and independent of the contract of sale. There is no link between the contract of sale and movement of leaves from the State of....
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....95 under the following heads: 1. Depreciation on vehicle : Rs. 1,41,855 2. Maintenance expenses on tipper : Rs. 3,37,423 3. Consumables : Rs. 4,00,417 : Rs. 8,79,695 The Deputy Commissioner, Commercial Tax, Chittoor Division revised the order of the assessing authority and issued a show-cause notice, dated April 21, 2003, proposing to restrict the deductions allowed by the Commercial Tax Officer on the ground that the petitioner is not eligible for deduction in the turnover under the heads, viz., depreciation on vehicles and tripper maintenance and that the petitioner has not furnished the details of cost of consumables used in the execution of works contract. Though the petitioner has filed its objections, dated June 18, 2003, the Deputy Commissioner has passed order dated July 31, 2003, holding that the assessee is not eligible for exemption under rule 6(2) of the A.P. General Sales Tax Rules, 1957 (for brevity, "the Rules") and liable to tax under section 5(f) of the Act including the amounts which were given exemption by the Commercial Tax Officer, viz., depreciation on vehicles, maintenance expenses on tippers an....
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....erence. The question that falls for consideration in these tax revision cases is whether the dealer, who is executing the works contract, is entitled for the deduction of amounts pertaining to the depreciation on trippers, maintenance expenses of trippers and consumables, used in the execution of works contract under rule 6(2) of the Rules or not? Section 5F of the Act, which deals with levy of tax on transfer of property in goods involved in the execution of works contract, is as follows: "5F. Levy of tax on transfer of property in goods involved in the execution of works contract.-Notwithstanding anything contained in section 5 or section 6, every dealer shall pay a tax under this Act for each year, on his turnover of transfer of property in goods whether as goods or in some other form, involved in the execution of works contract, at the rate of eight paise on every rupee of his turnover." Rule 6(2) of the APGST Rules reads as under: "6. (2) Notwithstanding anything contained in sub-rule (1) the tax under section 5F, shall be levied on the turnover of a dealer who transfers property in goods, whether as same goods or in some other form, involved in the execution of....
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....ansportation of the goods to the place of works has to be taken as part of the value of the said goods and ultimately concluded under conclusion Nos. 4 and 5 as under: "(4) The tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract falling within the ambit of article 366(29A)(b) is leviable on the goods involved in the execution of a works contract and the value of the goods which are involved in the execution of works contract would constitute the measure for imposition of the tax. (5) In order to determine the value of the goods which are involved in the execution of a works contract for the purpose of levying the tax referred to in article 366(29A)(b), it is permissible to take the value of the works contract as the basis and the value of the goods involved in the execution of the works contract can be arrived at by deducting expenses incurred by the contractor for providing labour and other services from the value of the works contract." In State of Jharkhand v. Voltas Ltd. [2007] 7 VST 317 (SC), the Supreme Court agreeing with the view taken by the Patna High Court, held that it is not merely the lab....
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.... advanced by the learned Additional Government Advocate that the rule not having expressly enabled the dealer to claim a deduction of this nature, the assessing officer was not right in permitting a deduction of this nature and the revisional authority was right in allowing the deduction; and, accordingly, answered question No. 1 in favour of the assessee. In the case on hand, we are concerned with the interpretation of rule 6(2)(d), i.e., the charges for obtaining on hire or otherwise machinery and other tools used for the execution of the works contract. Normally ejusdem generis rule will apply to penal statute. Whether the rule ejusdem generis has to be construed in interpreting the rule 6(2)(d) or not and whether the words "or otherwise" used in rule 6(2)(d) is a disjunctive that marks an alternative, which generally corresponds to the word either or not, are the main questions. In para 11.2 of the sale tax manual it has been clarified that the assessing authority depending upon the facts of each case can deduct the amounts which are similar to the categories mentioned in (a) to (i), though had different nomenclature. The Legislature used the words "or otherwise" apparent....
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....the amounts spent by the contractor on such machinery. Otherwise, there is no necessity to use the word "or otherwise" under rule 6(2)(d). In view of the above discussion and conclusions reached by us, the revised order passed by the Deputy Commissioner, dated July 31, 1993, as confirmed by the Sales Tax Appellate Tribunal by order, dated January 30, 2009, are hereby set aside and the order passed by the Commercial Tax Officer, granting exemption under the heads, viz., depreciation on vehicle, maintenance expenses on tipper and consumables, is restored. Accordingly, the tax revisions cases are allowed. There shall be no order as to costs. JUDGMENT The judgment of the court was delivered by AKII KURESHI J.-Draft amendment dated April 22, 2011 is allowed. Amendments shall be carried out forthwith. The petitioners have challenged an order dated March 23, 2011 annexed at annexure A to the petition passed by the Deputy Commissioner of Commercial Tax, State of Gujarat (hereinafter referred to as, "the Assessing Officer"). By the said order the assessing officer framed assessment in the case of the petitioner under the Central Sales Tax Act ("the CST Act", for short) for th....
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....2. MR/OW/MM/BCPB2/02/2005 dated 06.02.2006 Survey, design, engineering, procurement, fabrication, installation and commissioning of "BCP-B2 compressor platform with process platform bridge connected to BLQ2 platform". 3. MR/OW/MM/MHB S4WPP-1/16/2005 dated 21.02.2006 Survey, design, engineering, procurement, fabrication, installation and commissioning of "NH, NE, N2 well platform in Mumbai High North asset BE platform in basin and satellite asset". 4. MR/OW/MM/PRP/ 02 (ICB) 2004 dated 06.05.2005 Survey, design, engineering, procurement, fabrication, installation and commissioning of "pipeline replacement project on turnkey basis". It is the case of the petitioners and with respect to which no dispute has been raised by the respondents that all the above four contracts were indivisible turnkey projects consisting both of supply of goods and rendition of service including labour. To execute such turnkey contracts, the petitioners had arranged for supply of certain parts, equipments and machineries from its Hazira plant at Surat to ONGC at Bombay High, which is situated around 180 kms off the baseline of coast of India and forms part of "exclusive economic zo....
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....nd that the CST Act would, therefore, apply and the petitioners cannot avoid the liability to pay tax at the appropriate rate. The assessing officer also issued a separate notice dated February 17, 2011, proposing to impose penalty on the petitioners and calling upon to show cause why such penalty should not be imposed under the CST Act. The petitioners responded to the said notice by a detailed representation dated February 24, 2011 raising several contentions regarding tax and penalty demands. The petitioners contended that the proposal for levying tax was without authority and that the demand for penalty was not supported by any specific instance of breach. The petitioners sent yet another communication dated March 22, 2011 to the assessing officer contending that before passing the order, following objections may be considered: (1) That the proposal for imposing penalty does not give any specific details of the transactions in relation to which such proposal is made and (2) unless specific notice, regarding the nature of transactions is issued, the petitioners would not be in a position to submit proper reply. The assessing officer, however, by the impugned order turne....
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....y of the petitioners under the contracts came to an end. The title in the goods passed from the petitioners to ONGC only at Bombay High. It is, thus, the case of the petitioners that when the goods were transported from Hazira to Bombay High, there was no inter-State movement since Bombay High is located at a distance of about 180 kms from the shores of India and does not form part of Indian territory. It may be that for the limited purpose of permitting exploitation of the natural resources located there, certain provisions have been made. Nevertheless, sovereignty of the Indian State does not extend to the said region. Counsel further submitted that as and when appropriate notifications are issued under different fiscal statutes such as the Income-tax Act, Customs Act, etc., for the limited purpose indicated in such notifications, such area is deemed to be part of Indian territory. He submitted that in the present case, no such notification has been issued for then purpose of the CST Act and that, therefore, the territory in which Bombay High is located, for the purpose of the CST Act, cannot be considered to be part of Indian territory. Counsel relied heavily on the decision ....
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.... CST Act since the sale occasioned the movement of goods from one Indian State to another. He, therefore, contended that the CST Act was applicable and demand of tax, interest and penalty was, therefore, justified. Counsel relied on the decision in the case of Burmah Shell Oil Storage and Distributing Co., of India Ltd. v. Commercial Tax Officer reported in [1960] 11 STC 764 (SC); AIR 1961 1 SC 315; [1961] 1 SCR 902 to contend that there was no export of goods in the present case. For the same purpose reliance was also placed on the decision of apex court in the case of Madras Marine and Co. v. State of Madras reported in [1986] 63 STC 169 (SC); [1986] 3 SCC 552 and in the case of State of Madras v. Davar and Co. reported in [1969] 24 STC 481 (SC); [1969] 3 SCC 406. Reliance was also placed on the decision of the Bombay High Court in the case of Oil and Natural Gas Corporation Ltd. v. Rt. Hon. Sir Michael Karr reported in [1997] 2 Bom CR 1, wherein learned single judge of the Bombay High Court had occasion to deal with the question of territorial jurisdiction for the purpose of arbitration proceedings. Reliance was placed on the decision of the Punjab High Court in the cas....
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....id to take place in the course of inter-State trade or commerce and reads as under: "Section 3 of the CST Act: When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-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 4 of the CST Act provides when a sale or purchase of goods can be said to take place outside a State and reads thus: "4. When is a sale or purchase of goods said to take place outside a State.-(1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with subsection (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State,- (a) in the case of specific or ascertained goods, at the time the contract of sale is m....
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....as the Central Government may notify, be liable to pay tax under this Act on all sales of goods other than the electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified. Proviso to sub-section (1) to section 6 provides that a dealer shall not be liable to pay tax on any sale of goods which in accordance with the provisions of subsection (3) of section 5, is a sale in the course of export of goods out of the territory of India. From the above statutory provisions following two principal questions, which need to be answered in this petition arise: (1) Whether sale of goods in question can be said to have taken place in course of inter-State trade or commerce since it occasions the movement of goods from one State to another? and; (2) Whether the sale of goods in question is one covered under subsection (3) of section 5 of the CST Act and whether the sale is in course of export of goods outside the territory of India and that therefore by virtue of proviso to sub-section (1) of section 6, no tax can be charged on such sale of goods? Answers to these questions shall have to be gathered from various prov....
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....ndia (hereinafter referred to as the territorial waters) and to the seabed and subsoil underlying, and the air space over such waters. (2) The limit of the territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline. (3) Notwithstanding anything contained in sub-section (2), the Central Government may, whenever it considers necessary so to do having regard to international law and State practice, alter, by notification in the Official Gazette, the limit of the territorial waters. (4) No notification shall be issued under sub-section (3) unless resolutions approving the issue of such notification are passed by both houses of Parliament." Section 5 of the Maritime Zones Act reads as under: "5. (1) The contiguous zone of India (hereinafter referred to as the contiguous zone) is an area beyond and adjacent to the territorial waters and the limit of the contiguous zone is the line every point of which is at a distance of twenty-four nautical miles from the nearest point of the baseline referred to in sub-section (2) of section 3. (2) Notwithstanding anything contained in sub-section (1....
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....itation of the resources of the continental shelf or for the convenience of shipping or for any other purpose; (c) exclusive jurisdiction to authorize, regulate and control scientific research; and (d) exclusive jurisdiction to preserve and protect the marine environment and to prevent and control marine pollution." Section 7 of the Maritime Zones Act pertains to exclusive economic zone and reads as under: "7(1) The exclusive economic zone of India (hereinafter referred to as the exclusive economic zone) is an area beyond and adjacent to the territorial waters, and the limit of such zone is two hundred nautical miles from the baseline referred to in sub-section (2) of section 3. (2) Notwithstanding anything contained in sub-section (1), the Central Government may whenever it considers necessary so to do having regard to International Law and State practice, alter by notification in the Official Gazette, the limit of the exclusive economic zone. (3) No notification shall be issued under sub-section (2) unless resolutions approving the issue of such notification are passed by both houses of Parliament. (4) In the exclusive economic zone, the Union has,- (a) so....
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....rea of foreign ships by the establishment of fairways, sealanes, traffic separation schemes or any other mode of ensuring freedom of navigation which is not prejudicial to the interest of India. (7) The Central Government may, by notification in the Official Gazette,- (a) extend, with such restrictions and modifications as it thinks fit, any enactment for the time being in force in India or any part thereof to the exclusive economic zone or any part thereof; and (b) make such provisions as it may consider necessary for facilitating of the enforcement of such enactment, and any enactment so extended shall have effect as if the exclusive economic zone or the part thereof, to which it has been extended is a part of the territory of India. (8) The provisions of sub-section (7) of section 6 shall apply in relation to the laying or maintenance of submarine cables or pipelines on the seabed of the exclusive economic zone as they apply in relation to the laying or maintenance of submarine cables or pipelines on the seabed of the continental shelf. (9) In the exclusive economic zone and the air space over the zone, ships and aircraft of all States shall, subject to the exe....
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....to the territorial waters of India and to the seabed and subsoil underlying and the air space over, such waters. Maritime Zones Act also envisages contiguous zones of India as the area beyond and adjacent to the territorial waters and the limit of the contiguous zone is the line every point of which is at a distance of twenty-four nautical miles from the nearest point of the baseline referred to in sub-section (2) of section 3. Sub-section (5) of section 5 empowers the Central Government by notification in Official Gazette to extend any enactment relating to any matter referred to in clause (a) or clause (b) of sub-section (4), namely, the security of India and immigration, sanitation, customs and other fiscal matters to the contiguous zone and also make such provisions as it may consider necessary for facilitating the enforcement of such enactment. It is further provided that any enactment so extended shall have effect as if the contiguous zone is the part of the territory of India. Section 6 of the Maritime Zones Act pertains to continental shelf and is described as an area which occupies seabed and subsoil of the submarine areas that extend beyond the limit of its territor....
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....des other purposes, customs and other fiscal matters in relation to such designated area. Sub-section (7) of section 7 authorizes the Central Government by notification in Official Gazette to extend with such restrictions and modifications as it thinks fit, any enactment for the time being in force in India or any part thereof to the exclusive economic zone or any part thereof and make such provisions as it may think necessary for facilitation of the enforcement of such enactment and any enactment so extended shall have effect as if the exclusive economic zone or the part thereof to which it has been extended is a part of the territory of India. From the above provisions it can clearly be seen that though Union of India has certain rights over the exclusive economic zone, the Indian Union does not have sovereignty over such a region. Clause (a) to sub-section (7) of section 7, for example provides that the Union has, over the exclusive economic zone, sovereign rights for the purpose of exploration, exploitation, conservation and management of the natural resources. Sovereign rights are thus for the limited purposes provided therein. Sub-section (4) of section 7 does not sp....
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....n view of the above discussion, it clearly emerges that when the sale of goods took place at Bombay High, for which the goods moved from Hazira to Bombay High, such movement does not get covered within the expression "movement of goods from one State to another" contained in clause (a) of section 3 of the CST Act. It is clear that the goods had not been moved from one State to another since, in our opinion, Bombay High does not form part of any State of Union of India. We may notice that similar issues came up before different courts including the apex court under different fiscal statutes such as the Customs Act, Central Excise Act and the Income-tax Act. The Income-tax Act, 1961 by virtue of sub-section (2) of section 1 extends to the whole of India. In the present form section 2(25A) of the Income-tax Act, 1961 reads as under: "2. (25A) 'India' means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones A....
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....the said notification the provisions of the Income-tax Act were made applicable from April 1, 1983, to the continental shelf and exclusive economic zone. It is important to note that in this case we are concerned with the concept of taxable territory of India under the Income-tax Act, 1961. This is important as it is only by virtue of notification dated March 31, 1983, that the continental shelf and the exclusive economic zone became part of the taxable territory with effect from April 1, 1983. Therefore, the said tax could not have been levied on the income which accrued in the accounting year ending March 31, 1983, when the territory in which it accrued was not the taxable territory to which the Income-tax Act applied. To levy the tax, the income must accrue in the territory to which the Income-tax Act applies. In this case article 297 of the Constitution is not relevant. For the purpose of deciding this matter the only relevant issue is whether the income earned by a non-resident accrued in a taxable territory prior to April 1, 1983. On facts it is clear that the foreign technician had earned salary income before April 1, 1983, by working on the oil rigs, located beyond 12 nauti....
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....lf and exclusive economic zone. Similarly, by notification issued in March, 1983 the Central Government has extended the Income-tax Act, 1961 to the continental shelf of India and exclusive economic zone in respect of income derived by every person from all or any of the activities specified in the notification. By a notification dated February 27, 2010 provisions of Chapter V of the Finance Act, 1994 (pertaining to service tax) have been extended to continental shelf and exclusive economic zone as indicated for the purposes specified in the notification. It can thus be seen that the Central Government has been issuing notifications extending different taxing statutes to designated areas, continental shelf and exclusive economic zone. Such notifications have been issued extending the Income-tax Act, 1961, Customs Act and the Customs Tariff Act, Central Excise Act and the Central Excise Tariff Act, the service tax and the provisions contained in the Finance Act, 1994. However, admittedly, no such notification has been issued extending all or any of the provisions of the CST Act to any of the designated areas, continental shelf or exclusive economic zone. To our mind in absence....
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....s no sovereignty in territorial sense of dominium over the contiguous zone, but it exercises sovereign rights for the purpose of exploring the continental shelf and exploiting its natural resources. In paragraph 79 it was observed that it is a concept of restricted sovereignty linked to the resources sense sans the incidents of territoriality. This is so because, in other respects, the status of the waters in this area as a part of the high seas is specifically recognised and retained in the convention. In this background, the apex court held as under: "85. Reading of sections 6 and 7 of the Maritime Zones Act, 1976 makes it clear that India's jurisdiction over the Maritime Zones Act, 1976 extends to the continental shelf and exclusive economic zone. Consequently, if mineral oil is extracted or produced in the exclusive economic zone or continental shelf and is brought to the mainland, it will not be treated as import and, therefore, no customs duty would be leviable. Likewise, goods supplied to a place in the exclusive economic zone or continental shelf will not be treated as export under the Customs Act and no export benefit can be availed on such supply. Any mineral oi....
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....t can be availed on such supply. It was further held that mineral oil produced in the exclusive economic zone and continental shelf will be chargeable to Central excise duty as goods produced in India. In the present case, however, we are confronted with the situation where the CST Act has not been extended by issuance of notification by the Central Government to the continental shelf or the exclusive economic zone. Coming to the decisions cited by the counsel for the State, we may record that the cases of Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC); AIR 1961 SC 315; [1961] 1 SCR 902, Madras Marine and Co. v. State of Madras [1986] 63 STC 169 (SC); [1986] 3 SCC 552 and State of Madras v. Davar and Co. [1969] 24 STC 481 (SC); [1969] 3 SCC 406, related to the question whether the movement of goods can be stated to be in course of export. Counsel for the petitioners did not pursue this line of arguments in the present petition, confining challenge only to the non-applicability of the provisions of the CST Act contending that since there is no inter-State movement, the CST Act would not apply. We, therefore, need no....
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.... it is not observation of the court but what the court holds in the fact-situation of a given case which is the ratio that can be applied in similar set of facts and circumstances. In the decision of Murli Manohar & Co. [1991] 80 STC 79 (SC); [1991] 1 SCC 377, the apex court was not considering the sale in the nature that we are confronted with. It was not a case where the sale of goods occasioned the movement from the Indian State to a territory which is not part of India and which is for the limited purpose of claiming rights to exploit the natural resources and exploration, etc., the Indian Union claims limited sovereign rights. The learned Government Pleader also referred to section 9 of the CST Act to contend that the State has the power to collect Central sales tax when the jurisdiction over the transaction is within the State. To such preposition there cannot be any dispute at all. The Central sales tax envisages tax collection by the respective States as contained in section 9 of the Act. For application of section 9 of the Act, however, there must first be exigibility to tax of a certain transaction. When we hold that the transaction in question is not exigible to the C....
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....guided by what the circular of the Central Board of Direct Taxes says and, therefore, the remedy provided by way of appeal under the Act is futile and therefore also we are inclined to entertain this petition." In this regard, we may also rely on the decision of the apex court in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai reported in AIR 1999 SC 22, wherein it was observed that jurisdiction of High Court in entertaining a writ petition under article 226 of the Constitution of India in spite of alternative statutory remedy, is not affected specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. In the case of State of U.P. v. Mohammad Nooh reported in AIR 1958 SC 86, the apex court observed that there is no rule with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right appeal has been conferred by statute. Before closing, we may record that counsel for the peti....