TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 513
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.... Delhi and Noida and on an order being placed by the customer located anywhere in the country or in particular from Puducherry, as the present controversy has arisen from Puducherry, via the online portal, the goods corresponding to the purchase order will be transported from one of the warehouses to Puducherry by way of an inter-state sale between the petitioner and the customer on which the Central Sales Tax (CST) is paid by the petitioner in the State where the goods originate in terms of the provisions of the Central Sales Tax Act, 1956, (CST Act). For the purpose of delivery of the goods within the Union Territory of Puducherry, the petitioner has installed a delivery hub in Puducherry, M/s.E-Kart logistics, a division of the petitioner. The delivery hub acts as a sorting facility to sort the deliveries based on the area/street for delivery to the customers. Therefore, the petitioner would contend that there is no sale or inventory holding transactions that are effected from the hub located in the Union Territory of Puducherry. 3. An inspection was conducted by the Intelligence Wing of the Commercial Taxes Department of Puducherry in the business premises of the petiti....
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.... was stated that the form in the State of Karnataka has a provision and this is not relevant for the movement of goods to Puducherry. Further since the unregistered dealer is outside Karnataka, but within Puducherry, the petitioner has to essentially quote the respective TIN code of Puducherry and generate E-Sugam forms. Further, the petitioner encloses the manifest documents along with E-Sugam to prove the genuineness of the transaction i.e., sales to the end customers. Further, it was stated that the transaction is an inter-state sale, where the tax invoice is raised by the seller from where the goods were despatched, discharge the full applicable CST to the concerned State Government and declare the same in their periodical returns. Therefore, it is submitted that the transaction is an interstate sale. With regard to the presence of the delivery hub at Puducherry, it was submitted that in view of the business model, the petitioner has installed courier delivery hub in Puducherry and the hub acts as a sorting facilities to sort the deliveries based on the area/street to deliver to the customer and there is no sale or inventory holding transactions that are effected from such hubs....
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....priation of goods has also been established and for an interstate sale, the situs of the sale is irrelevant. It is further submitted that the movement followed by sale is also an interstate sale and all that is required, is movement and sale should have an integral connection. It is submitted that three contentions have been put against the petitioner and they are primarily the reason for passing the impugned order, firstly because the products have been brought from Bangalore to Puducherry by courier on self basis ; secondly the situs of the sale is a Puducherry, since the sale does not fructify till the consideration is paid, which is done at Puducherry and therefore, it is sale within the State of Puducherry. It is further submitted that the buyer does not choose the courier, who transport the goods and the petitioner having transported the goods on self basis and kept the same in their distribution hub for being sorted and distributed, the sale has been effected only from the distribution hub at Puducherry. The learned counsel reiterated the factual averments set out in the various notices and sought to impress upon the Court that the sale of goods is outside the State of....
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....1985 (4) SCC 173. 8. Mr.R.L.Ramani, learned Senior counsel assisted by Ms.Reena Ishwariya, learned Additional Government Pleader appearing for the respondents submitted that the petitioner is a registered dealer under the PVAT Act and engaged in the sale of consumer goods and durables through the online portal www.flipkart.com. The buyer, who wishes to purchase a particular product logs into the website of the internet provider, www.flipkart.com and chooses a particular product of specific description. The online portal communicates such purchase intention to the petitioner firm which has godowns in six States in the country, despatches the goods to the buyer, who has made the purchase intention order. If the purchase is located in the same State, where the godown from which the goods are to be despatched to him is also located, then the petitioner treats the sale as a local sale. If the purchaser is located in some other State, the petitioner treats the sale as inter-state sale, what is relevant to note that the person who made the order never enters into any direct communication with the petitioner, as his communication is only with the online portal. Even in respect of th....
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.... State and the transport documents mentions the consignor and the consignee, as the same person, that is the petitioner. The movement of goods is triggered on the expectations of possible sale and not on account of contract of sale and it will not partake the character of inter-state sale. It is further submitted that the registration obtained by the petitioner under the PVAT Act is only for courier and logistic operations and the provisions of the Act does not require a registration, if the petitioner is performing only the services of courier parcel agency. 11. Sofar as the decision of the Kerala High Court, which has been relied on by the petitioner in the case of the Flipkart Internet & Ors., vs. State of Kerala in W.P.(C).No.5348 of 2015, dated 20.10.2015, the Court has observed that due to uncertainty with regard to the real nature of transaction in question for instance whether transaction is an intrastate sale or in interstate sale, Intelligence Officer ought ideally, to refer the matter to the Assessing Officer's concern to arrive at a finding. In the said case, Flipkart, was the petitioner and it was the portal which did not have any title to the goods and was only r....
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....d any alternate remedy is not a bar in case of inherent lack of jurisdiction. It is further submitted that the transaction done by the petitioner is not a stock transfer, but an inter-state sale and taxes have been paid by the petitioner in the State from where the goods had occasioned movement. The respondent seeks to split the transaction/movement of goods into two parts, movement of goods from warehouse in the originating State to the delivery hub to Puducherry is being alleged to be a stock transfer and the subsequent movement from delivery hub in Puducherry to the customer in Puducherry is alleged to be a local sale liable to VAT in Puducherry. However, the undisputed fact is the customer first places an order on the petitioner via the website www.flipkart.com and pursuant thereto, the goods are earmarked for the order placed in the originating state, the sale invoices is raised in the originating State and goods are despatched from the warehouses in the originating State to Union Territory of Puducherry, where they are delivered to the customer within Puducherry. The petitioner never stocks the goods for sales in Puducherry and the goods are brought to the delivery hubs only ....
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....r in taxing transactions claimed as interstate sale by levying tax under the PVAT Act, this Court is inclined to examine the correctness of the exercise of jurisdiction by the second respondent. In the event, the Court comes to the conclusion that there are serious disputed questions of fact involved, then the petitioner would be relegated to avail the remedies under the PVAT Act. On the other hand, if the petitioner is able to establish on the available facts admitted by either side that the third respondent lacks jurisdiction to exercise powers under the PVAT Act in relation to the transaction done by the petitioner, then the existence of an alternative remedy under the PVAT is not a bar for this Court to exercise jurisdiction under Article 226 of the Constitution of India. 14. Before venturing into the factual matrix, it would be necessary to take note of the legal position as to which of the transaction would qualify to be termed as an inter-state sale. 15. In Union Of India & Anr vs K. G. Khosla & Co. (P) Ltd. & Others, AIR 1979 SC 1160, the question arose as to whether the Sales Tax authorities in the Union Territory of Delhi and those in Haryana, as to which of the two aut....
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....rs., 1985 (4) SCC 173., one of the questions which was considered is whether a branch office located outside the State would make a difference in the transaction and this question was answered by observing that the branch office merely acted as a conduit through which the goods passed on their way to buyer and it would have been a different matter, if the particular goods had been despatched by the registered office at Hyderabad to a branch office outside the state for sale in the open market and without reference to any order placed by the buyer (emphasis applied). In such a case, if the goods are purchased from the branch office, it is not a sale under which the goods commenced their movement from Hyderabad. It is a sale, where goods moved merely from the branch office to the buyer and the movement of the goods from the registered office at Hyderabad to branch office outside the State cannot be regarded as an incident of the sale made to the buyer. In the said case, it was held that the sale transaction was an inter-state sale inasmuch as they satisfy the terms of clause (a) of Section 3 of the CST Act. 19. In Rukmini Mills Ltd vs. The Government of Tamil Nadu, 1975 (36) STC 425....
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.... sale can be said to take place in the course of inter-state trade or commerce in the following terms:- 15 (2) 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 regrading the movement of the goods from one State to another; (ii) that in pursuance of the said contract the goods in fact move form one State to another; and (iii) that ultimately a concluded sale takes place in the State where the goods are sent which must be different from the State from which the goods move . If these conditions are satisfied then by virtue of Section 9 of the Central Sales Tax Act it is the State from which the goods move which will be competent to levy the tax under the provision of the Central Sales Tax Act. This proposition is not, and cannot, be disputed by the learned counsel for the parties. 21. In Kerala State Small Industries Development and Employment Corporation Ltd., vs. State of Tamil Nadu, 1999 (113) STC 169, the law governing inter-state sale was explained in the following terms:- 18. The law governing i....
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....above to the facts of the present case the sales can be said to be inter-state sales. An attempt to show that some of the factors present in the instant case are present or absent in some case or other in which this Court held the sale to be a local sale or inter-state sale hardly serves any useful purpose. On the facts of the present case the sales are clearly inter-state sales and the State of U.P. had therefore no jurisdiction to assess the petitioners to sales tax under the State Act. As the movement of naphtha commences from Barauni in Bihar, the sales tax payable on the sales of naphtha under the agreement dated February 9, 1970 can be assessed and collected only by the authorities in the State of Bihar on behalf of the Government of India in view of section 9 of the Central Sales Tax Act. 23. From the above decisions, the legal principle that can be culled out for a transaction to qualify as an inter-state sale are (i) a sale which occasions movement of goods from one state to another state; (ii) it is no matter in which state the property in the goods passes; (iii) it is not necessary that the sale must precede the interstate movement in order that the sale may be deemed t....
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....f whether the property in the goods passed in one State or the other, if the effect of such a sale is to have the movement of goods from one State to another, an inter-State sale would ensue and would result in exigibility of tax under Section 3(a) of the Central Act; (xi) It would be enough if the movement was in pursuance of or incidental to the contract of sale; (xii) There must be an agreement to sell, which contains a stipulation express of implied regarding the movement of the goods from one State to another pursuant to a contract, the goods infact move from one state to another; (xiii) concluded sale takes place in the State where the goods are sent which must be different from the State from which the goods move; (xiv) the movement of the sale must have a reasonable and direct link; (xv) movement can be stipulated in the contract of sale specifically or it may be contemplated by the parties as an implied term of contract; even if movement of goods is not specified in the contract and even if it cannot be regarded as an implied term, if such movement is incidental to the contract, then such case also transaction would be an inter-state sale; (xvi) The relationship between th....
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....roduct and places a purchase order. On such placement of purchase order, a bill is generated in the name of the purchaser and the identified package is consigned to Puducherry. Thus, the contract comes into existence, the moment the purchaser logs into the online platform chooses and selects the product and confirms the purchase by activating the necessary option in the online portal. 27. The next event is that a bill is generated in the name of the purchaser for the product identified by him. It is this product along with other products of other similar purchases are consigned from the petitioner's warehouse at Karnataka to the petitioner's depot at Puducherry. 28. In the preceding paragraphs, the legal principle to be satisfied for determining as to whether a transaction is an inter-state sale has been culled out. Thus, the primordial test would be that the sale should have occasioned the movement of the goods or the movement should have been incidental to the sale. The Revenue does not dispute the fact that the goods in question at the time when the purchaser exercises his option to purchase it via online platform are the outside the State of Puducherry that is in Karn....
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....s can be delivered to the purchaser after payment of the purchase price or given open delivery to the purchaser, so that there would not be any dispute thereafter, as to the quality or quantity of the goods contracted for. Therefore, merely because a weigh bill has been drawn in the name of 'self' would not by itself be a reason to disbelieve the nature of transaction and to treat it, as a sale within the State of Puducherry. 31. It was argued by the Revenue that the consignment moves from the State of Karnataka to Puducherry and it is stored in the Depot of the petitioner, where the petitioner admits that they sort out the products and then the products are taken to be delivered to the customers and this activity is stated to be an activity where the petitioner does the sorting and the goods are within the destination of Puducherry and the sale is effected as soon as the delivery boys deliveries the goods to the purchaser and receives cash. In other words, the presence of a depot is sought to be put against the petitioner and to disbelieve the nature of transaction. The petitioner's explanation is that several orders are placed online and for logistic purpose, they ha....
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....aid depot would be a relevant factor. In the preceding paragraphs, the Court has held that the purchase contract comes into an effect the moment, a purchaser exercises the option through the online platform to purchase a particular product. The purchase invoice is generated in the name of the purchaser and this purchase occasions in the movement of the goods, therefore, the situs can be in any either one of the States. The Hon'ble Supreme Court in M/s.Onkarlal Nandla, (supra), held that there is no antithesis between a sale in the course of interstate sale or commerce and the sale inside the State, even in the interstate sale must have a situs and the situs may be in one State or another. 34. The learned Senior counsel for the Revenue referred to the paragraph 12 of the judgment of the Hon'ble Supreme Court in the case of M/s.Keluram Ramkaran vs. State of Orissa (supra), wherein two illustration have been given and case No.2 is referred to as an argument, which will fit the case of the petitioner to hold the transaction as a sale within the State of Puducherry. The said case No.2 is as follows:- "Case No. II-A, who is a dealer in State X agrees to sell goods to B but he ....
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..... Therefore, mere mention of TIN number by giving only the code of Puducherry as assigned by the Commercial Taxes Department that by itself will not be a ground to state that the petitioner has committed an offence. 37. A screen shot of the petitioner's online platform has been produced which further strengthens the case of the petitioner. The platform contains all the relevant details and the purchaser is given the full details including the invoice number, which is in PDF format. The delivery bill number and the shipping details are also furnished. The purchaser is well aware that the shipping of the product is being handled by E-Kart logistic which is a unit of the petitioner handling logistic part of the business and the purchaser is aware about the approximate date of delivery. The cost of shipping the product is separately recovered and mentioned in the platform. Thus, the purchase order contains all the details, which clearly prove that the purchase order has occasioned the movement of goods from the State of Karnataka to Puducherry. The sample copy of the retail invoices/bills raised from Karnataka in the name of the purchaser at Puducherry had been produced, which sho....