TaxTMI 
TaxTMI 
2017 (7) TMI 667
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.....2015 is an assessment order made by respondent No.5 (ETO) for the accounting year 2012-13 under section 29(2) of the Punjab Value Added Tax Act, 2005 (PVAT Act) as it stood at the relevant time. The impugned order dated 18.08.2015 is a tax demand notice directing the petitioner to pay a sum of Rs. 55,21,230/- pursuant to the assessment order. The assessment order assessed the balance tax due at Rs. 1,30,84,500/-. Interest under section 32 of the PVAT Act was levied and penalty under sections 56 and 60 of the PVAT Act was imposed. An assessment was also made under the Central Sales Tax Act, 1956 (CST Act) at Rs. 15,73,000/-. Interest and penalty were also levied and imposed. 3. We would normally have relegated the petitioner to the alternate remedy of filing an appeal. We have, however, entertained this writ petition for two reasons. Firstly, there has been an exponential growth in online trading. The indication is that online trading will increase. There are certain questions of law which have been dealt with in several judgments of the Supreme Court and of certain High Courts concerning the legal issues that arise in these cases. These have neither been noticed nor consider....
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....t set up a warehouse for undertaking any business of sale or purchase of goods in the State of Punjab. 7. It would be useful to refer to the essential features relating to online transactions undertaken between the petitioner and its customers. The customer logs on to the online portal "www.flipkart.com." The customer then selects goods to be purchased. Upon agreeing to purchase the goods, the customer places an order on www.flipkart.com. The order is received by the sellers such as the petitioner. The petitioner provides a pick up confirmation to www.flipkart.com. The petitioner then despatches the good(s) from one of its warehouses. The petitioner has delivery hubs in the State of Punjab. This is necessitated on account of the voluminous transactions of a similar nature. The hubs only facilitate the distribution and delivery of the goods ordered by the customers in the State of Punjab. The goods delivered to the hubs are on account of the transactions that were earlier entered into by the customers' selecting the goods and agreeing to purchase them by logging on to the online portal www.flipkart.com. Delivery boys then pick up the goods from the hubs and deliver them to ....
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.... goods of various sellers, who are registered with the portal. As we mentioned earlier, the customers purchased goods identified by them from various sellers including the petitioner. In respect of the transactions between the customers and the other sellers i.e. the sellers other than the petitioner, the petitioner undertakes transportation and logistic support for such sellers under its brand name "ekart". Such goods are despatched for various customers and are subject to CST in the hands of the sellers in the States from where such despatches take place. In respect of these transactions, the petitioner only acts as a service provider and has no other rights in respect of the goods. 10. The petitioner filed the relevant declaration at the Information Collection Centre (ICC) in accordance with section 51 of the PVAT Act contending that it did not have any taxable turnover in the State of Punjab and also contending that it had paid the CST in respect of the goods so brought into the State of Punjab. The petitioner filed "nil" returns of VAT including for the assessment year in question, namely, 2012- 13. 11. The Excise & Taxation Officer - respondent No.5 issued the first not....
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....om the source of supply to the destination and the remittance of consideration received from the customers. The petitioner by its reply dated 09.06.2015 stated that it had not undertaken any trading/sale/purchase in or from the State of Punjab. The documents sought were furnished under cover of the reply. The petitioner reiterated what it had stated in reply to the earlier show cause notice. 13. This brings us to the impugned assessment order dated 03.08.2015. 14. In the assessment order, the ETO framed and answered seven questions. The first question was whether the petitioner had traded in goods as defined under the PVAT Act. There is no dispute that the articles dealt with by the petitioner fall within the meaning of the word "goods" as defined in section 2(k) of the PVAT Act which reads as under:- ". Definitions 2. In this Act, unless the context otherwise requires, - ...... ..... ..... ...... ...... ...... ....... (k) "goods" means all kinds of movable property, whether tangible or intangible, other than newspapers, actionable claims, money, stocks, shares and securities and includes livestock, growing crops, grass, trees, plants attached to....
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...." For continuously three years the goods were being imported into the State of Punjab on the Tax Identification Number (TIN). The dealer has no stock of the goods with him in his books. Hence, it is very clear that all the goods have been sold in the State of Punjab on which the dealer is liable to pay tax. (emphasis supplied) Question 3: Whether the taxable person be taxed? Online trading is not defined in any of the fiscal statute or in the Constitution of India where definition of business, goods, sales, interstate sales, interstate sales, etc. are defined in respect of conventional trading. The taxable person stated that it has been providing logistics support to Flipkart Internet Private Limited. The data of the Department clearly shows that the taxable person has imported the goods on its TIN. If the goods have been imported by the taxable person, then it would have disposed off also by the taxable person. It is the taxable person who has dispatched the taxable goods to the end consumer. The consumer is in the State of Punjab. Most of the transactions made by the end users are on the basis of cash on delivery. The taxable person has also received the conside....
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....h the documents in the support of imports and also in support of the disposal of such goods. The taxable person failed to produce the documents in support of movement of goods and payments also. Further, they failed to produce any evidence regarding the physical or stock in the books of electronics imported by the taxable person on its TIN. Hence, it is established that the taxable person has suppressed the turnover and evaded the tax to the State's exchequer. d. ...... ..... ..... ...... ...... ...... Further, data pertaining to the year 2012-13 was also checked. The invoices clearly show that WS Retail is a consignor and not a service provider. The goods are being imported into the State from Delhi, Maharashtra, Karnataka, Chennai, West Bengal into the State of Punjab. The goods have been brought into the State by WS Retail on its TIN Number into the State of Punjab from its another TIN Number in other states. After entering the State of Punjab the goods are first unloaded and further delivered to the customers. Consideration was taken by it on "cash on delivery basis" from the customers in the State of Punjab. The dealer is liable to pay tax on such transaction....
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....e check post or information collection centre. The officer Incharge shall return a copy of the declaration duly verified by him to the owner or person Incharge of the goods vehicle to enable him to produce the same at the time of subsequent checking, if any: ..................................................................................... Provided further that no penalty shall be imposed unless the person concerned has been given an opportunity of being heard. .................................................... ...................... ............ (6) (b) If the owner or the person Incharge of the goods has not submitted the documents as mentioned in sub-sections (2) and (4) at the nearest check post or information collection centre, in the State, as the case may be, on his entry into or before exit from the State, such goods shall be detained alongwith the vehicle for a period not exceeding seventy-two hours subject to orders under clause (c) of sub-section (7). (7) (a) The officer detaining the goods under sub-section (6), shall record the statement, if any, given by the consignor or consignee of the goods or his representative or ....
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....nsports the goods without documents or with ingenuine documents, he shall be liable to pay, in addition to the penalty leviable under this section, the tax due on such goods at the VAT rate applicable under this Act. (13) The provisions of this Act shall, for the purpose of levy and collection of tax, determination of interest and recovery of tax and interest, apply to the transporter. Explanation. - (1) For the purposes of this section, where goods are delivered to a carrier, a goods booking agency or any other bailee for transportation, the movement of the goods shall be deemed to commence at the time of such delivery and terminate at the time, such delivery is taken from such carrier, goods booking agency or any other bailee, as the case may be. (2) For the purpose of sub-section (7), service of notice on the representative of the owner or the driver or other person Incharge of the goods vehicle, shall be deemed to be a valid service on the consignor or consignee of the goods" (B) (i) Rule 64 (1) of the PVAT Rules is as follows:- "R-64. Procedure for furnishing information at the Information Collection Centre.- (1) The owner ....
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....M VAT-36 in which the declaration for transport of goods to and from the State of Punjab is to be made. Paragraph 6 of this form requires a TIN to be maintained. On taking instructions from the respondents' officer in Court, Ms. Sudeepti Sharma, the learned Addl.A.G., Punjab, confirmed that if the TIN was not mentioned in FORM VAT-36, the goods would have been seized and the petitioner would have had to undergo the entire procedure prescribed in section 51 read with rule 64. The petitioner, therefore, understandably mentioned its TIN in FORM VAT-36 which had mandatorily to be filled out and submitted at the ICC to ensure the smooth passage of the goods. It was not statutorily required. The requirement was by reason of paragraph-6 of the form requiring the TIN to be mentioned and the authorities' insistence upon the same. 22. In these circumstances, it cannot be said that the petitioner having mentioned the TIN in FORM VAT-36 establishes that it imported the goods on its own account into the State of Punjab and thereafter entered into agreements for the sale of the goods to the customers in Punjab. The requirement of filing the form including the TIN, although an assessee is n....
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.... contract of sale. In the present case, the property in the goods remained with the seller i.e. the petitioner till they reached the buyer and the buyer paid for the same. The transfer of property and payment of consideration occurred in Punjab and the sale had, therefore, taken place in Punjab. The general rule is that the risk follows the ownership irrespective of whether the delivery has been made or not. If the goods are damaged or destroyed, the loss is to be borne by the person who was the owner of the goods at the time of damage or destruction. Thus, the risk or loss is of the seller till the goods are actually delivered to the buyer. 25. The observations and findings are wholly irrelevant in the determination of whether or not a transaction is in the course of inter-state sales under the CST Act. The relevant provisions of Sections 3, 4 and 9 of the CST Act, so far as they are relevant, read 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 sale or purchase- (a) occasions ....
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....r this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2), in the State from which the movement of the goods commenced: Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected- (a) where such subsequent sale has been effected by a registered dealer, in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed for the purposes of sub-section (4) of section 8 in connection with the purchase of such goods, and (b) where such subsequent sale has been effected by an unregistered dealer, in the State from which such subsequent sale has been effected." 26. We will assume that the observations in the assessment order as to ....
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....cer, (1976) 4 SCC 460, the Supreme Court held as under:- "9. The sale as well as the movement of the goods from Madras to Bhandup at Bombay was a part of the same transaction. The movement of the goods from Madras to Bhandup was integrated with the contract of sale for the following reasons. The Bombay branch received the Bombay buyer's order and sent the same to the Madras branch factory. When the Bombay buyer asked for quotation of prices the Bombay branch wrote to the Madras branch and gave all the specifications and stated that the goods were for the Bombay buyer. The Madras branch in reply referred to the order of the Bombay buyer and gave particulars mentioning that the price was F.O.R. Madras, The Bombay branch thereafter wrote to the Bombay buyer reproducing all the particulars, conditions of sale and mode of despatch as stated by the Madras branch and further stated that the goods would be manufactured at the Madras branch factory. ...... ..... ..... ...... ...... ...... ....... 15. The appellant in the present case sent the goods direct from the Madras branch factory to the Bombay buyer at Bhandup, Bombay. The railway receipt was in the name....
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....mmunity Company Ltd. case was handed down it received statutory recognition in the shape of Section 3(a) of the Central Sales Tax Act, which was enacted by Parliament to remove any doubts or misgivings regarding the competence of a State legislature to levy tax on inter-State sales. Section 2(g) of the Central Sales Tax Act defines "sale" thus: " 'Sale', with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods;" Analysing this definition it would appear that it postulates the conditions: "(i) there must be a transfer of property in goods by one person to another; (ii) the transfer must be for cash or for deferred payment or for any other valuable consideration; and (iii) that such a transfer includes a transfer of goods on the hire-purchase or other system of payment by instalments, etc." It would thus be seen that the word "sale" ha....
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....this case is whether or not the term "sale of goods" as used in Section 3 includes an agreement to sell. It has already been pointed out that an agreement to sell is undoubtedly an element of sale. In fact a sale consists of three logical steps - (i) that there is an offer; (ii) that there is an agreement to sell when the offer is accepted; and (iii) that in pursuance of the said agreement a concluded sale takes place. When the statute uses the words "sale or purchase of goods" it automatically attracts the definition of sale of goods as given in Section 4 of the Sale of Goods Act, 1930 which is a statute passed by the same Parliament and is to some extent in pari materia to the Central Sales Tax Act so far as transaction of sale is concerned. Section 4 of the Sale of Goods Act runs thus: "4. (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the bu....
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....which the goods move and when they are accepted and the price is paid the sale takes place. There would, therefore, hardly be any case where a sale would take place even before the movement of the goods. We would illustrate our point of view by giving some concrete instances: "Case No. I-A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category. "Case No. II-A who is a dealer in State X agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter the goods are delivered to B in State Y and if B accepts them a sale takes place. It will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor i....
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....ds to the buyer for a price is an important element of sale and the same is also borne out from Section 4 of the Sale of Goods Act. If Section 4 of the Sale of Goods Act is read along with Sections 3 and 4 of the Act, it would mean an agreement to sell would also be a sale within the meaning of sale provided such agreement of sale stipulates for transfer or movement of goods or movement of goods is incident of the contract of sale and in that case, such movement of goods would be deemed to be occasioned by the sale. It is immaterial that actual sale does not take place at the time of movement of goods and takes place later on. This interpretation of Section 3(a) of the Act if applied to sub-section (2) of Section 5 of the Act, would mean that if an agreement for sale stipulates import of goods or import of goods is incident of contract of sale and goods have entered the import stream, such import would fall within the expression "sale occasions import". In the present case, the import of Carbamite is the direct result of the contract of sale and as such it can be safely held in the present case that sale has occasioned the import." In Hyderabad Engineering Industries vs. State o....
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....rala High Court in Flipkart Internet Private Limited and another. Vs. State of Kerala and others, 2015 SCC Online Kerala 31723 held:- "11. As regards the finding in the impugned orders, that the situs of the virtual shop can be traced to Kerala on an analogy with the decision of the Karnataka High Court in Antrix Corporation Limited v. Assistant Commissioner of Commercial Taxes - [2011 (19) KTR 182 (Kar)], the said finding is legally flawed because, it is well settled that the situs of a sale is wholly irrelevant to a determination of the issue of whether a sale is an inter-state sale or not [See: Union of India v. K.G. Khosla & Co. Ltd. - [(1979) 2 SCC 242]; Oil India Limited v. Superintendent of Taxes - [(1975) 1 SCC 733]; English Electric Company of India Ltd. v. DCT - [(1976) 4 SCC 460]. The most perplexing aspect of the instant case, however, is that WS Retail, the seller responsible for effecting majority of the sales to customers in Kerala, through the online portal of the petitioner, is registered as a dealer under the KVAT Act and, in the returns submitted by the said dealer for the relevant period, they had conceded NIL taxable turnover under the KVAT Act, on the....
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.... 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 inter-state sales is now fairly well-settled although in the application of law to individual cases difficulties continued to arise and each case will have to be decided with reference to its own special facts. That movement of the goods across the borders of State is an essential pre-condition, beyond any controversy only a transaction of sale connected with that movement can be regarded as an inter-State sales. The movement and the sale must have a reasonable direct link. Such 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 the movement of the 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 in such case also such transaction would be an inter-State sale. The tax that is levied is on the transaction of sale. The concept of sale itself being an intangible one,....
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.... 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 Karnataka. Thus, but for the option exercised by the purchaser to buy a particular product displayed in the website of the petitioner, the movement would not have occasioned. This observations is made in the light of the facts as mentioned in the impugned assessment order. ...... ..... ..... ...... ...... ...... ....... 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 th....
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....imately concluded while determining whether it is an inter-state sale or not. Even assuming that the sale was finally concluded in the State of Punjab, so long as the sale caused the movement of goods from another State to the State of Punjab, it would be an inter-state sale. If the petitioner's case, which we have already referred to in some detail, is correct the sales effected by it would constitute inter-state sales and fall within the ambit of the Central Sales Tax, 1956. 32. This brings us to question No.7 framed by the ETO, namely: "If the dealer has acted as a logistics partner, then can we tax him?" The question has not been answered. The assessment order does not hold the petitioner liable for tax in respect of the sales by other vendors to purchasers in respect whereof it rendered services as a logistic provider. As a logistic provider the petitioner only facilitated the transport and delivery of goods by the vendors to the purchasers. It did not have any proprietary interest in these goods. Ms. Sharma, agreed that in respect of such transactions the petitioner is, in any event, not liable to tax under the PVAT Act. 33. The assessment order refers to the mani....