TaxTMI 
TaxTMI 
2015 (10) TMI 2405
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 27791, Writ Petition Nos. 27803, Writ Petition Nos. 27805, Writ Petition Nos. 28718, Writ Petition Nos. 28727, Writ Petition Nos. 28731, Writ Petition Nos. 28732, Writ Petition Nos. 28734, Writ Petition Nos. 28849, Writ Petition Nos. 29123, Writ Petition Nos. 29136, Writ Petition Nos. 29142, Writ Petition Nos. 29173, Writ Petition Nos. 29343, Writ Petition Nos. 29420, Writ Petition Nos. 29423, Writ Petition Nos. 29495, Writ Petition Nos. 29542, Writ Petition Nos. 29794, Writ Petition Nos. 29917, Writ Petition Nos. 30023, Writ Petition Nos. 30070, Writ Petition Nos. 30123, Writ Petition Nos. 30409, Writ Petition Nos. 30511, Writ Petition Nos. 30532, Writ Petition Nos. 30620, Writ Petition Nos. 30641, Writ Petition Nos. 30969, Writ Petition Nos. 31046, Writ Petition Nos. 31102, Writ Petition Nos. 31453, Writ Petition Nos. 31886, Writ Petition Nos. 35111, Writ Petition Nos. 35119, Writ Petition Nos. 35127, Writ Petition Nos. 35130, Writ Petition Nos. 35139 of 2012, Writ Petition Nos. 6462 of 2014 JUDGEMENT The orders under challenge, in this batch of Writ Petitions, are the assessment orders passed by the Assistant Commissioner (CT) assessing the petitioners to tax under the A.P.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the tax authorities in Andhra Pradesh lacked jurisdiction to levy tax thereupon; and the Pondicherry tax authorities had exclusive jurisdiction to levy tax on inter-State sales of levy rice from Yanam to the FCI at their godowns at Kakinada. 4. In the assessment orders, impugned in these Writ Petitions, the assessing authority held that, for all practical purposes, the Government of A.P. had treated the Yanam Rice Millers on par with the Rice Millers of A.P.; there was neither an agreement between FCI and the Millers of Yanam nor did FCI have any knowledge of purchase of Paddy by the Yanam Millers or about the Milling or the delivery to be made to FCI; unascertained and standard goods, prone to diversion, were being accepted by FCI only after the goods reached them; as the purchaser was not bound to accept the goods, final appropriation was made in the State of A.P.; as long as there was a possibility of diversion of the goods, before its actual delivery to FCI, there was no sale pursuant to which there was movement of goods; the permission accorded, in the Government memo dated 31.10.1983, is an offer open to any Rice Miller in Yanam enabling him to purchase paddy in A.P. an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rains, including rice and pulses (1st schedule goods), are not liable to tax under the Pondichery Value Added Tax Act; as sufficient paddy was not available for milling at Yanam, and there were restrictions on the movement of paddy from the State of Andhra Pradesh to other States/Union Territories, the rice millers at Yanam expressed their grievance, in the meeting held at Hyderabad on 15.09.1983, to the Government of A.P.; after discussions, between the Commissioner of Civil Supplies of the Government of A.P. and the Commissioner of Civil Supplies of Pondichery, the memo dated 31.10.1983 was issued by the Government of A.P.; the said memo makes no mention regarding payment of Sales Tax either on paddy or on rice; no condition was stipulated therein that the price agreed to, in the said memo, was subject to payment of sales tax either on paddy or on rice; the Yanam rice millers had supplied the milled rice to FCI, Kakinada as per the levy order, after obtaining way bills from the Pondichery Government i.e., the DTO Yanam; they handed over the rice at the FCI godown at Kakinada in the State of Andhra Pradesh; after satisfying itself regarding the quality of rice, FCI, Kakinada made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the A.P. VAT Act did not envisage any differential treatment to the millers of Yanam; the earlier procedure may be continued, and 4% tax be paid to them in the interest of equal justice; the FCI had, thereafter, paid the differential tax of 1% and 2% to the millers of Yanam; there is no difference in the procurement price being paid to rice millers of Yanam and A.P. for the years 2005-06 to 2009-10; the Commissioner of Commercial Taxes, vide circular dated 27.11.2010, had forwarded a note on the issue of Yanam rice millers; he had requested that a show cause notice be issued to the dealers, and necessary action be taken in the matter; he had subsequently clarified, by circular dated 30.04.2011, that all non-resident dealers, whether as principals or as agents, fell within the jurisdiction of the A.P. tax authorities when they had business within the State; in the absence of their having filed their returns, the period of limitation was six years; as the sale of rice to FCI was within the State, the provisions of the Act were attracted, irrespective of the location of the dealer; hence they were liable to pay tax in A.P.; and assessment of tax, on local sales, under the provisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to pay sales tax/VAT to the A.P. Commercial Taxes Department which the rice millers of A.P. were paying; this, by itself, is discriminatory; the essence of the entire agreement, between the State of Andhra Pradesh and the Union Territory of Pondicherry, was to benefit the millers at Yanam; the memo dated 31.10.1983 has the effect of notionally extending the boundary of Andhra Pradesh, to include the adjoining Yanam province, for the administrative convenience of the milling industry located thereat; the procurement rates fixed by the Government, for the State of A.P, became applicable by this order; the District Collector, East Godavari was authorized to fix the quantity to be supplied to FCI; the Yanam Rice Millers, on their own, brought rice to the FCI godowns at Kakinada; the rice so brought was subject to quality/quantity tests at the FCI godown at Kakinada, and only thereafter was it purchased by FCI; the taxes applicable, at the stage of paddy purchase, as "paddy purchase tax" is waived if VAT becomes applicable at the stage of sale of rice; if it was an interstate sale, purchase tax would have been levied and collected; nonpayment of purchase tax is proof of the transactio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioners invoked the jurisdiction of this Court, without availing the appellate remedy under Section 31 of the AP VAT Act. This Court admitted these Writ Petitions nearly two years ago, and they all are pending on its file ever since. In view of statutory embargo, under Section 31 of the AP VAT Act and its first proviso, prohibiting the appellate authority from entertaining an appeal, after the period prescribed therein has expired, the petitioners cannot now be relegated to the alternative remedy of a statutory appeal. The existence of an adequate or a suitable alternative remedy, available to a litigant, is merely a factor which a Court, entertaining an application under Article 226, will consider for exercising discretion to issue a writ. The existence of such a remedy does not impinge upon the jurisdiction of this Court to deal with the matter itself if it is in a position to do so on the basis of the affidavits filed. (S.J.S. Business Enterprises (P) Ltd. v. State of Bihar (2004) 7 SCC 166; Arunima Baruah v. Union of India (2007) 6 SCC 120). 10. In Sumukha Veereswari Rice Mill v. Dy. Commercial Tax Officer-II, Kakinada, E.G. District (1988) 68 STC 187 (AP) the Deputy Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f paddy by the petitioners in Andhra Pradesh constituted inter-State purchases; sale of levy rice, by the petitioners to FCI at Kakinada, constituted inter-State sales from Yanam in the Union territory of Pondicherry; the tax authorities at Yanam in Pondicherry have exclusive jurisdiction to take cognizance of the said transactions; the petitioners have shown details, of their levy rice sales to FCI, Kakinada, in their returns submitted to the Pondicherry tax authorities; the impugned assessment orders are in violation of Article 269 and 286 of the Constitution of India r/w. Sections 3(a) and 9 of the Central Sales Tax Act; and they also contravene the scheme of distribution of powers between the Union and the States under Article 246 r/w. Entries 92-A of List I and 54 of List II of the Seventh Schedule to the Constitution. 13. In examining the scope of Articles 286 and 269, Entry 54 of List II and Entry 92-A of List I of the VII Schedule to the Constitution, it is necessary to briefly refer to the conditions prevalent immediately before the Constitution came into force, and soon thereafter. Before the commencement of the Constitution, around two-thirds of India, as is presently k....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d custom posts even inter-se. (Atiabari Tea Co. Ltd. (1961) 1 SCR 809). This situation posed to the Constitution makers the problem of restricting the taxing power on sales or purchases involving inter-state elements, and alleviating the tax burden on the consumer. They were, at the same time, anxious to maintain the State's power of imposing nondiscriminatory taxes on goods imported from other States, while upholding the economic unity of India by providing for the freedom of inter-state trade and commerce. It was to cure the mischief of multiple taxation, and to preserve the free flow of inter-State trade or commerce in the Union of India regarded as one economic unit without, any provincial barrier, that the Constitution makers adopted Article 286 in the Constitution. (Bengal Immunity Co. AIR 1955 SC 661; The State of Bombay v. The United Motors (India) Ltd. AIR 1953 SC 252). 16. Entry 54 of List II of the VII Schedule to the Constitution, as it originally stood, read as under:- "taxes on the sale or purchase of goods other than newspapers" 17. When Entry 54 in List II of the Seventh Schedule to the Constitution substituted for the words "tax on sales",....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). No law made by the Legislature of a State imposing, or authorizing the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been referred for the consideration of the President, and has received his assent." 19. The object of Article 286 was to place restrictions on the legislative power of the States to impose taxes on the sales or purchases of goods. Four separate and independent restrictions were placed upon the legislative competence of the States to make a law with respect to matters enumerated in Entry 54 of List II. In order to make the ban effective, and to leave no loophole, the Constitution makers considered different aspects of "sales or purchases of goods", and placed checks on the legislative power of the States at different angles. In clause (1)(a) of Article 286 they forged a fetter on the basis of situs to cure the mischief of multiple taxation by the States on the basis of the nexus theory. In clause (1)(b) they placed a ban on the States' taxing power in order to make foreign trade free from any interference by the States by wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly determined what the general law was), or by the fiction created by the Explanation to Article 286(1)(a). The situs of the sale or purchase was wholly irrelevant as regards its inter-state character, as the fiction created for clause (1)(a) could not be used for the entirely foreign and collateral purpose of destroying the inter-state character of the transaction, and converting it into an intra-state sale or purchase. Even when the situs of a sale or purchase was in fact inside a State, with no essential ingredient taking place outside, nevertheless, if it took place in the course of inter-State trade or commerce, it was hit by clause (2). If the sales or purchases were in the course of inter-state trade or commerce, the stream of inter-state trade or commerce caught up in its vortex all such sales or purchases which took place in its course wherever the situs of the sales or purchases may have been. (Bengal Immunity Co. AIR 1955 SC 661). 22. The ban imposed under Article 286(2) looked at the transactions entirely from the point of view of their having taken place in the course of inter-state trade or commerce. Even if such transactions also fell within the category of transac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tside the State; or b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (I). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, (b)......... be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 28. Article 286(2), as it originally stood, did not altogether take away the legislative competence of the States to impose a tax on sales taking place in the course of inter-State trade or commerce, but subjected it to legislation by Parliament. By Entry 92A of List I, introduced by the Constitution (6th Amendment) Act, 1956, the legislative power to tax sales, taking place in the course of inter-State trade and commerce, was vested exclusive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....operty in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by installments; (d) a tax on the 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; (e)... (f).... and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." 32. Instead of 'essential' goods in Article 286(3), as it originally stood, the amended Article 286(3) deals with (a) goods declared by Parliament to be of special importance in inter-State trade, (b) delivery of goods on hire-purchase or like system, and (c) transfer, of a right to use goods, for consideration. This provision was necessary in order to render eff....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin the exclusive competence of Parliament (Art. 269(1)(g) and Entry 92A of List I]; and (2) even though a sale does not take place in the course of inter-State trade or commerce', the power is subject to the conditions imposed by Parliament if the sale relates to goods declared by Parliament to be of special importance, in 'inter-State trade and commerce' (Article 286(3)). The bans imposed by Articles 286 and 269, on the taxation powers of the State, are independent and separate and must be crossed before a State Legislature can impose tax on transactions of sale or purchase of goods. The dimension given to the field of legislation, by the language of an entry in List II of the Seventh Schedule, is subject to the limits of constitutional empowerment to legislate, and cannot cross the barriers created by the Constitution. The power of the State Legislature to enact a law to levy tax by reference to List II of the Seventh Schedule has two limitations: the first arising out of the entry itself, and the second flowing from the restriction embodied in the Constitution. (State of A.P. v. National Thermal Power Corpn. Ltd., (2002) 5 SCC 203; Bengal Immunity Co. Ltd. AIR 1955 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provisions of the CST Act and the A.P. VAT Act. Before doing so, however, it is necessary to examine whether the petitioners, rice millers at Yanam, are bound by the control orders issued by the Government of Andhra Pradesh under Section 3 of the Essential Commodities Act, 1955. III. THE GOVERNMENT MEMO DATED 31.10.1983 IS NOT A CONTROL ORDER: 38. Both Sri P. Balaji Varma and Sri D. Srinivas, Learned Counsel appearing on behalf of the respondents, would submit that, if the petitioners are held to be bound by the arrangement in the memo dated 31.10.1983, it can only mean that the control orders, applicable to dealers in the State of Andhra Pradesh, is applicable to the Yanam Rice Millers also; in such an event, they must be treated on par with rice millers in A.P.; and they would then be liable to pay VAT under the Act. It is, however, contended, on behalf of the petitioners, that the understanding, in terms of the Government memo dated 31.10.1983, cannot be construed as a control order; and the relevant control orders do not provide for levy of tax. 39. Before examining the rival submissions under this head, it is necessary to note the relevant provisions of the control orders, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (I) thereof, the rice, to be sold to FCI/APSCSCL under Para 3, was required to be delivered by the Licensed miller to the purchase officer in such lots, in such manner, at such place, and at such time, as the Government or FCI/APSCSCL or the purchase officer may direct. Para 7 placed restrictions on the sale and movement of rice and, under sub-para (a)(1) thereof, no licenced miller could sell or agree to sell or otherwise dispose of the rice recovered by milling, other than the quantity specified in Para 3, except in accordance with a release certificate issued by the Collector or any officer authorized by the Government in this behalf. Para 7(a)(2) stipulated that, save as otherwise provided in sub-para (1), no licenced miller shall transport rice for sale, from the licensed premises of the rice mill, except in accordance with the release certificate referred to in sub-para (1). Para 8 related to the release certificate and, under sub-para (1) thereof, after delivery of levy rice, every licenced miller could make an application, in the Form set out in Schedule VI, to the Collector, or an officer authorized in this behalf by the Government, for issue of a Release Certificate for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3; Calcutta Gas Co. Ltd. v. The State of West Bengal 1962 Supp (3) SCR 1; Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Belgaum Borough Municipality AIR 1963 SC 906). In the exercise of the powers conferred under Section 3 of the 1955 Act, read with the Government of India, Ministry of Agriculture (Department of Food) Order GSR No. 800 dated 09.06.1978; and G.S.R. No. 452 dated 25.10.1972, the Governor of Andhra Pradesh, with the prior concurrence of the Central Government, made the 1984 Order which extended to the territorial limits of the State of Andhra Pradesh. As the power conferred on the State Government, by the aforesaid provisions and delegation of powers, to make orders under the 1955 Act is restricted to the territorial limits of the State of Andhra Pradesh, and as the 1984 Order specifically so provides, it does not have extra-territorial operation and cannot be made applicable to the Union Territory of Pondicherry. 43. The submission, made on behalf of the respondents, that the petitioners should be treated as rice millers in Andhra Pradesh, the provisions of the Control Orders should be made applicable to them, and they should be held obligated to pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akinada; by their unilateral act of selling rice to FCI at Kakinada, the petitioners had treated the sale as an "intra-state sale"; and, in the instant case, there is no conceivable link between the contract of sale and the movement of goods from one State to another. 47. Section 3, in Chapter II of the CST Act, prescribes when a sale or purchase of goods is 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. As Section 3(b) of the CST Act and the Explanations thereto are not relevant, these provisions need not be referred to. Before examining the scope of Section 3(a) of the CST Act, and whether the sale of levy rice by the Yanam rice millers to FCI at Kakinada falls within its ambit, it is necessary to briefly note the judgments cited by Counsel on either side. 48. In State Trade Corporation of India Ltd. v. The State of Mysore AIR 1963 SC 548, the cement factory, which was required to supply the cement covered by the permit, was named in it. These permits were issued to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the State of Bihar in pursuance to the contract of sale. 50. In English Electric Co. v. Dy. C.T.O. (1976) 4 SCC 460, the appellant sent the goods directly from the Madras branch to the buyer at Bhandup, Bombay. The railway receipt was made in the name of the Bombay branch to secure payment against delivery. There was no question of diverting the goods which were sent to the Bombay buyer. It is in this context that the Supreme Court held:- "............When the movement of goods from one State to another is an incident of the contract, it is a sale in the course of inter-State sale. 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 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 have taken place in the course of inter-State trade or commerce, that the covenant reg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te sale/purchase; it is also not necessary that the contract of sale must expressly provide for movement of goods; and it is sufficient if the movement of goods is implicit in the sale, and the sale and movement of goods are not unconnected and dissociated transactions. 52. In The State of Gujarat v. Bombay Metal Alloys and Mfg. Co. Pvt. Ltd. (1983) 54 STC 45 (Guj), the applicant-company was carrying on business at Bombay, outside the State of Gujarat; they did not carry on any business at any place within the State of Gujarat; the purchase of goods at the public auction was a solitary business transaction entered into by the applicant-company within the State of Gujarat; after the applicant-company's bid was accepted at the public auction, but before the goods were ascertained and specified and put in a deliverable state, the applicant-company instructed the railway administration to despatch the goods from Gujarat to Bombay, and the railway administration agreed to honour such instructions; pursuant to such instructions, the railway authorities despatched the goods to Bombay in two lots after packing, loading and weighing them in motor trucks on two different occasions; tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y and the applicant company in the contract of sale itself providing for the despatch of goods from Sabarmati to Bombay, the movement of goods could not be held to have taken place pursuant to or consequent upon such contract and that, therefore, the purchase could not be held to have been effected in the course of inter-State trade. We are unable to agree, for, as earlier pointed out, the law does not require that for the purposes of attracting the provisions of section 3(a) of the Central Act, the contract of the sale must itself make provision for or occasion the movement of the goods............" ".The law on the point, therefore, is clear. The mere fact that the contract of sale itself does not provide for or occasion a movement of goods, would not be an impediment in the way of holding that section 3(a) of the Central Act applies provided it is established that the movement of goods from one State to another is in pursuance of or incidental to the contract of sale. If there is a conceivable link between the contract of sale and the movement of goods from one State to another which is not otherwise explained, the transaction in question will have to be rega....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale of unascertained or future goods to take place within a State, at the time of its appropriation to the contract of sale by the seller or the buyer, it is evident from Section 4(1) that the deeming provision in Section 4(2) is subject to the provisions contained in Section 3 of the CST Act. If the sale of goods falls within the ambit of Section 3(a) of the CST Act, it would then be an inter-state sale, notwithstanding that, in terms of Section 4(2)(b), the unascertained goods were appropriated to the contract of sale within the territorial limits of the State where the goods were delivered. 55. Section 3(a) of the CST Act covers sales in which the movement of goods from one State to another is the result of a covenant or incident, of the contract of sale, and property in the goods passes in either State. (State of Orissa v. K.B. Saha and Sons Industries (P) Ltd. (2007) 9 SCC 97); Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti (1992) 3 SCC 750; Union of India v. M/s. K.G. Khosla and Co. Ltd. (1979 (2) SCC 242; S.R. Sarkar 1961) 1 SCR 379; Cement Marketing Co. of India v. State of Mysore (1963 (3) SCR 777; State Trading Corporation of India AIR 1963 SC 548; Sing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd., Alleppey A.I.R. 1952 S.C. 366; Ben Gorm Nilgiri Plantations Co. Coonoor (Nilgiris) v. Sales Tax Officer, Special Circle, Ernakulam A.I.R. 1964 S.C. 1752; and State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory A.I.R. 1953 S.C. 333). 57. The question whether the movement of goods, from one State to another, is as the result of a covenant in the contract of sale, or an incident of such contract, will depend on the contract. (State Trade Corporation of India Ltd. AIR 1963 SC 548). To make the sale, one in the course of inter-State trade or commerce, there must be an obligation to transport the goods outside the State. The obligation may be of the seller or the buyer and it may arise by reason of a statute, a contract between the parties, or from mutual understanding or agreement between them or even from the nature of the transaction which linked the sale to such transportation. Such an obligation may be imposed expressly under the contract itself or impliedly by a mutual understanding. It is not necessary that, in all cases, there must be pieces of direct evidence showing such obligation in a written contract or oral agreement. Such obligations are inferable from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pursuant thereto, extended a similar benefit, as was given to the rice millers within the State of Andhra Pradesh, to the rice millers at Yanam in the Union Territory of Pondicherry also. 60. The Government memo dated 31.10.1983 permitted rice millers at Yanam to procure and transport paddy from East Godavari District in Andhra Pradesh to Yanam on a no objection certificate being issued by the Yanam Administration, consistent with the instructions in vogue in Andhra Pradesh on the subject, provided the paddy was purchased at prices not less than those notified by the Government of A.P., and as prevalent in the State of Andhra Pradesh. It required the Yanam rice millers to deliver such percentage of levy (rice) to FCI or APSCSCL as was prevalent in the State of Andhra Pradesh under the Levy Order; and to be bound by the same policy as was applicable to the millers in Andhra Pradesh, in as far as levy rice was concerned. It provided that, subject thereto, levy free eligibility of rice could be disposed of by the Yanam rice millers, after meeting the internal requirements of Yanam, anywhere in the country on the permits issued by the Government of Pondicherry in consultation with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not automatically applicable to the Yanam rice millers. Though the arrangement, in terms of the Government memo dated 31.10.1983, did not obligate the Yanam rice millers to purchase paddy from agriculturists in the State of Andhra Pradesh, they did so, on their own volition, as they required paddy for carrying on the business of milling rice in their rice mills at Yanam. The said arrangement, in memo dated 31.10.1983, enabled the Yanam rice millers to procure paddy from agriculturists in Andhra Pradesh, and transport paddy from Andhra Pradesh to Yanam on a permit issued by the Government of A.P.; for its being milled at their rice mills in Yanam. Having done so on their own volition, the Yanam Rice Millers were thereafter obligated, in terms of the aforesaid arrangement, to transport the prescribed percentage of levy rice from Yanam for its sale and delivery to FCI/APSCSCL at Kakinada. As the sale of levy rice by the rice millers at Yanam to FCI at Kakinada, (the sale transactions brought to tax under the AP VAT Act by the impugned assessment orders), occasioned the movement of goods (levy rice) from Yanam in the Union Territory of Pondicherry to Kakinada in the State of Andhra Pra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed, in the Government memo dated 31.10.1983, is an offer open to any rice miller in Yanam enabling him to purchase paddy in A.P. and to supply rice to FCI at Kakinada under the levy scheme; the assessees have not undertaken to supply rice against any order placed by FCI; such type of offer cannot be treated as a binding contract or an agreement to sell the goods mentioned therein; it is an offer, affording an opportunity to participate in the levy scheme, which does not amount to placing an order for a definite quantity on a definite date; it does not amount to a contract in the strict sense; there is no definite or specific requirement, of a specific quantity of goods, by FCI; it does not create an obligation on the dealer to deliver, or on FCI to. accept; the millers, both from Yanam and East Godavari District, offered their rice stocks for sale at the door steps of FCI; purchase of goods by FCI, and the sale of goods by millers, is completed only after its acceptance by the FCI at its godown premises in Kakinada; there is no agreement between FCI and the millers of Yanam; FCI has no knowledge regarding purchase of paddy by the Yanam millers, or of its milling, or regarding the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Sale of Goods Act, on which reliance is placed on behalf of the respondents, read as under:- "18. Goods must be ascertained.-When there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. 19. Property passes when intended to pass:- (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in Section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 20. Specific goods in a deliverable state:- Wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icultural Produce Market Committee v. Biotor Industries Ltd. (2014) 3 SCC 732 on the demand of the respondent-Company, certain quantity of castor seeds requisitioned by it was transported by the supplier which was received by it within the market area. On its receipt, the consignment was weighed by the Company within the market area. After ascertaining the exact weight of the castor seeds, payment at the agreed rate was made by the Company to the supplier. The High Court held that the sale was not effected till the consignment was received by the respondent-Company and was weighed within the market area. The Supreme Court observed:- ".......... the learned single Judge has rightly rejected the assertion made by the learned counsel on behalf of the Company holding that in case of shortfall or loss or damage during transport, the seller could claim damage from the transporter and that would further demonstrate that the respondent-Company did not become owner of the goods till it took the physical delivery thereof, weighing the same and satisfying itself about the quantity received by it. It was held that it was not a mere formality to find out the quantity by it b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Unless a different intention appears" occurring in Section 19(3). The intention of the parties is the decisive factor as to when the property in goods passes to the purchaser. If the contract is silent, intention has to be gathered from the conduct and circumstances of the case. (Agricultural Produce Market Committee (2014) 3 SCC 732; Hoe Kim Seing v. Maung Ba Chit AIR 1935 PC 182; Agricultural Market Committee v. Shalimar Chemical Works Limited AIR 1997 SC 2502). 69. While para (5) of the 1984 Order, no doubt, required the levy rice, supplied by the Yanam rice millers to meet the prescribed specifications, and enabled FCI not to purchase levy rice which does not fulfill the prescribed quality standards, it also stipulated that, in case any stock of the levy rice offered for sale did not conform to the specifications, it should be reconditioned or rectified by the licensed miller, before being so offered, so as to bring it in conformity with such specifications. Notwithstanding that FCI/APSCSCL were entitled to refuse to purchase levy rice, if it was not of the prescribed standards or quality, the understanding in terms of the memo dated 31.10.1983 obligated the Yanam rice millers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asioned the movement of rice from Yanam in the Union Territory of Pondicherry to Kakinada in the State of Andhra Pradesh. The said sale, in view of Section 3(a) of the CST Act, 1956, is a sale in the course of inter-state trade and commerce. The State Legislature cannot, by law, treat such sales as "sales within the State" as it is within the exclusive domain of the appropriate legislature i.e. Parliament to fix the location of sale by way of a legal fiction or otherwise. The State, where the goods are delivered in the transaction of an inter-State sale, cannot levy a tax on the basis that one of the events in the chain has taken place within the State. (National Thermal Power Corpn. Ltd., (2002) 5 SCC 203; 20th Century Finance Corpn. (2000) 6 SCC 12). 72. Several restrictions were imposed on transportation of paddy from AP to the rice mills at Yanam. The transportation of paddy-was required to be accompanied with a permit issued by the Government of A.P. The details of procurement of paddy was required to be intimated to the District Collector, East Godavari, and its transportation to Yanam could only be on a no objection certificate being issued by the Administrator of Yanam. Wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inada. Sale of levy rice, and the movement of levy rice from Yanam in the Union Territory of Pondicherry to Kakinada in the State of A.P, is in the discharge of the obligations placed on the Yanam rice millers in terms of the understanding in the memo dated 31.10.1983. The fact that the FCI did not place an order on the Yanam millers for supply of rice is of no consequence, as the obligation to transport levy rice from Yanam to Kakinada is inextricably linked to the obligations placed on the Yanam rice millers by the Government memo dated 31.10.1983. It is not even the case of the respondents that the levy rice, transported from Yanam to FCI Kakinada, was diverted for sale elsewhere. What has now been subjected to tax under the A.P. VAT Act is not levy free rice which the Yanam rice millers were entitled to sell anywhere in the country, but levy rice which the Yanam rice millers were obligated to, and had in fact, supplied to FCI at Kakinada. The question whether the levy rice was capable of being diverted is, therefore, wholly irrelevant. 74. Where the movement of goods from one State to another is inextricably connected with the sale/purchase, the purchase and transport are but ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... showing such obligation in a written contract or oral agreement. Such obligations are inferable from circumstantial evidence also. (Bhag Singh Milkha Singh (1974) 34 STC 535 (Pat); Shankerjee Raut Gopalji Raut A.I.R. 1968 Pat. 329 (FB)). While the obligation, to transport levy rice from the rice mills at Yanam to the FCI godowns at Kakinada, may not have been expressly imposed by the contract of sale between the petitioners and FCI, it is implied in the understanding, as reflected in the Government memo dated 31.10.1983, whereby the Yanam rice millers were obligated to deliver a portion of the rice milled by them at Yanam as levy to FCI at Kakinada. The movement of levy rice, from Yanam to FCI or APSCSCL at Kakinada in the State of Andhra Pradesh, is an inter-State movement integral to the scheme of arrangement between the Government of Andhra Pradesh, the Government of Pondicherry and the Yanam rice millers, and the sale of levy rice by the petitioners to FCI, Kakinada is an inter-state sale. 76. In the case of an inter-state sale, Section 9(1) of the CST Act requires the Government of the State, from which the movement of the goods commenced, to collect the tax so levied under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the President of the Yanam Dealers Association, clearly shows that they have collected VAT. 79. It does appear that the petitioners had sought for and were paid by FCI, for the levy rice supplied by them, a higher price than what was paid to rice millers in Andhra Pradesh. The price paid by FCI, for procurement of levy rice, (from rice millers - both in Andhra Pradesh and at Yanam), included the VAT component. While the VAT component was factored into the procurement price prior to 2007-08, it was paid separately for the period subsequent to 2007-08. The VAT component of the procurement price, paid to the rice millers in Andhra Pradesh, was, in turn, paid by them, along with their returns, as VAT to the Government of Andhra Pradesh. On the other hand the Yanam rice millers, having collected the VAT component from FCI along with the procurement price, have retained the said amounts, and have not paid it to the Government of Andhra Pradesh. As the Yanam rice millers were not liable to pay tax under the AP VAT Act, the sale price, which included the VAT component, is, undoubtedly, an excess payment. 80. From the letter dated 05.07.2007, addressed by the President of the Yanam Rice ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....P contending that sale of levy rice to FCI is an inter-state sale not exigible to tax under the AP VAT Act. While these contradictory stands appear to have been taken by the petitioners only to enrich themselves, by retaining the excess amount paid to them by FCI towards the VAT component, the fact remains that acquiescence or consent would not confer jurisdiction on the assessing authority to levy tax, under the AP VAT Act, on inter-state sales. In view of Article 265 of the Constitution, no tax can be recovered which is not permitted by law. The executive can neither levy tax, (National Mineral Development Corpn. Ltd. v. State of M.P., (2004) 6 SCC 281), nor can it take recourse to the process of interpretation of a statute, (Indian Banks' Association v. Devkala Consultancy Service (2004) 11 SCC 1), to levy tax contrary to law. The consent of parties does not, by itself, confer jurisdiction upon a statutory authority. It is not open to the parties to confer, by their agreement, jurisdiction on a Court/Tribunal which it does not possess. The distinction lies in the jurisdiction to decide matters, and the ambit of the matters to be heard by a Tribunal having jurisdiction to de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quired is to be judged in relation to the relief sought, and the conduct complained of must have an immediate and necessary relation to the equity sued for. (Arunima Baruah v. Union of India (2007) 6 SCC 120; Halsbury's Laws of England, Fourth Edition, Vol. 16, pages 874- 876; Snell?s Equity, Thirtieth Edition, Pages 30-32 and Jai Narain Parasrampuria (Dead) v. Pushpa Devi Saraf (2006) 7 SCC 756). The maxim, that predicates a requirement of clean hands, cannot properly be regarded as setting out a rule that is either precise or capable of satisfactory operation. (Arunima Baruah (2007) 6 SCC 120; Spry on Equitable Remedies, Fourth Edition, page 5; Moody v. Cox (1917)2 Ch 71 and Meyers v. Casey (1913) 17 C.L.R. 90). 85. For this Court to refuse to exercise its discretionary jurisdiction, suppression must be of a material fact. Material fact would mean material for the purpose of determination of the lis, the logical corollary whereof would be as to whether it is material for the grant or denial of the relief. If the fact suppressed is not material for determination of the lis between the parties, the court may not refuse to exercise its discretionary jurisdiction. What would be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the circular dated 27.11.2010, directing the assessing authorities to issue show cause notices to the dealers i.e. the Yanam Rice Millers, is the authorization under Rule 59 of the A.P. VAT Rules. He would also submit that the Yanam rice millers have been assessed to R.D. cess; and, therefore, fall within the tax ambit of the A.P. commercial tax department. It is submitted, on behalf of the petitioners, to the contrary that RD cess is leviable on paddy, and not on rice. 88. Placing reliance on Sumukha Veereswari Rice Mill (1988) 68 STC 187 (AP). Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, would contend that the petitioners are "casual dealers" and are, therefore, liable to tax, in respect of intra-state sales, under the AP VAT Act. On the other hand it is submitted, on behalf of the petitioners, that the petitioners cannot be treated as "casual traders" under Section 4(6) of the Act; a "dealer", under Section 2(b) of the CST Act, includes a "casual trader" also; and no notice was issued to the petitioners as "casual traders". As we have held that the subject sales are inter-state sales, and that the assessing authorities lack jurisdiction to le....