TaxTMI 
TaxTMI 
2021 (4) TMI 499
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.... that the petitioner, a non banking financial company engaged in financing and equipment leasing to industrial consumers and the users had transferred a right to use goods, i.e. imported machineries, in favour of the above four persons during the respective Assessment Years prior to clearance of the goods from the customs barriers. Therefore, the sale was in the course of import within the meaning of Section 5(2) of the Central Sales Tax Act, 1956 and these transactions were exempted from levying tax under Section 3-A(2)(a) of the Tamil Nadu General Sales Tax Act, 1959. 3. The other grievances of the petitioner against the impugned orders are that they have been passed in gross violation of Rule 15(6) of the Tamil Nadu General Sales Tax Rules, 1959. It is submitted that as per the said proviso, before making an order of assessment, the Assessing Authority was required to obtain the concurrence of the Deputy Commissioner having jurisdiction over the petitioner if the assessment results in imposition of tax of one lakh rupees or above or results in enhancement of tax over one lakh rupees. 4. It is the case of the petitioner that these transactions are not liable to tax. It is s....
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....upon the decision of this Court in State Trading Corporation of India Limited Vs. State of Tamil Nadu and Another, (2003) 129 STC 294 (Mad), wherein, while considering the scope of Section 5(2) of Central Sales Tax Act, 1956 read with Section 2(ab) of the Customs Act, 1962, this Court held that for a sale to be one in the course of import it has to be either one which has occasioned the import or has been effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. He further submits that in this case, before the goods were cleared, the respective operating lease agreements had been singed with the above four persons and therefore, there cannot be any levy of tax under the provisions of Tamil Nadu General Sales Tax Act, 1959. 7. The learned Senior Counsel for the petitioner also referred to the following decisions:- i. State of A.P. Vs. National Thermal Power Corpn. Ltd., (2002) 5 SCC 203. ii. State of Tamil Nadu Vs. Karnataka Bank Limited, (2012) 50 VST 93 (Mad). iii. Tata Power Delhi Distribution Ltd. Vs. Commissioner of Sales Tax, Delhi and Others, (2016) 90 VST 1 (Del). 8. He specificall....
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....-sate sale in breach of Section 3 of the CST Act read with Articles 286(2) and 269(1) and (3) of the Constitution cannot be justified. He further submitted that the Hon'ble Supreme Court in the above case held as follows:- 29. In 20th Century Finance Corpn. Case [(2000) 6 SCC 12] the Constitution Bench by reference to the definition of "tax on the sale or purchase of goods" [which too has been inserted as clause (29-A) in Article 366 by the Sixth Amendment] opined that the situs of sale can be fixed either by the appropriate legislature or by Judge-made law and no settled principles for determining situs of sale can be laid down. Further, the State Legislature cannot by law, treat sales outside the State and sales in the course of import as "sales within the State" by fixing the situs of sales within its State in the definition of sale, as it is within the exclusive domain of the appropriate legislature i.e. Parliament to fix the location of sale by creating legal fiction or otherwise. The majority has clearly opined that the State where the goods are delivered in the transaction of inter-State sale, cannot levy a tax on the basis that one of the events in the chain....
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....ote that in these types of cases, the High Court ought not to have entertained the writ petitions filed under Article 226 of the Constitution. We say so for the reason, that, whether a sale originating in a State is an inter-State sale or not is essentially a question of fact to be determined by the authorities under the Act, since it involves the application of the provisions of Sections 3, 5, 6 and 9(1) of the Act to the facts established and hence, it will be a mixed question of law and fact. The facts are required to be brought to the notice of the assessing authority by the appellants and it is for the assessing authority to come to a conclusion, based on those facts whether a particular transaction is intra-State sales which is exigible to the taxes under the VAT Act or inter-State sales, as envisaged under Section 3 of the Act read with Section 6 of the charging provisions therein. It is after such adjudication, the matter can travel from one stage to the other as provided under the Act. 12. The learned Special Government Pleader also submitted that there is no dispute that there is a transfer of right to use as explained by the Hon'ble Supreme Court in State....
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....ugh the petitioner may have an alternate remedy before an Appellate Authority under the provisions of the Tamil Nadu General Sales Tax Act, 1959. 17. In the facts of the present case, the respective Operating Lease Agreements with the respective buyers are on a stamp paper purchased in Chennai indicating that the agreements were signed at Chennai on the date specified therein. 18. The dates of the respective Agreements are after the imported goods sailed from South Korea as is evident from respective Bills of Entries. They were signed before the respective Bills of Entry were filed by the petitioner for clearing the imported goods. The details of the respective Bills of Entry and Bills of Lading are as follows:- Sl. No. Bill(s) Lading date Agreement(s) date Bill(s) of Entry date 1 27.06.2003 23.07.2003 28.07.2003 2 23.07.2003 3 14.02.2004 20.02.2004 23.03.2004 4 23.02.2004 19. In this case, it is not the case of the petitioner that the sale occasioned during import of goods. On the other hand, it is the case of the petitioner that the sales were effected before the goods crossed the customs barriers and therefore not taxable ....
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....f deemed sale was thus introduced under the Act. 26. As a sequitur, Article 286(3) of the Constitution was also amended to read as follows:- "(3) Any law of the State shall, insofar as it imposes or authorizes 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; or (b)a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub- clause (c) or sub- clause (d) of clause (29-A) of article 366 be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as the Parliament may by law specify. 27. Simultaneously, various State Enactments were also enacted their laws to implement the above restrictions in the Constitution of India. Thus, State had to give way to the law of the Parliament. In Tamil Nadu, while a new definition of sale in 2(n) of the Tamil Nadu General Sales Tax Act, 1959 was introduced and a new charging provision in the form of Section 3-A was also introduced. Section 3-A of the Tamil Nadu Sales Tax Act, 1959 incorporated the....
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....in the course of import of goods into territory of India or in the course of inter-State trade or commerce. 29. Thus, by a statutory design, a deduction for determining the taxable turnover in the case of transfer of the right to use goods has been provided to exclude all expenses:- a) incurred in the course of export of the goods out of the territory of India; or b) incurred in the course of import of the goods into the territory of India; or c) incurred in the course of inter-state trade or commerce 30. Likewise, an exporter also cannot be asked to pay tax on the expenses incurred in the transaction involving "transfer of right to use" of goods where such goods are exported to a user situated outside the country. An importer who imports goods and effects transfer of right to use or effects such transaction in the course of inter-state trade or commerce is also given abatement. 31. Though the 46th Amendment to the Constitution of India was of the year 1982, the Central Sales Tax Act, 1956 was amended only in the year 2002 with effect from 11.05.2002. It was synced with the expansion introduced by the 46th Amendment to the Constitution of India u....
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....s of Article 286 inapplicable to the transaction which was deemed to be sales under Article 366 (29-A) of the Constitution. 34. In Paragraph No.32, the Court categorically took a view that all transfers, deliveries and supplies of goods referred in Sub-Clause (a) to Sub-Clause (f) of Clause (29-A) of Article 366 of the Constitution are subject to the restrictions and conditions mentioned in Clause (1), Clause (2) and Sub-Clause (a) of Clause (3) of Article 286 of the Constitution of India. The Court specifically considered "work contract" while making the above referred observations. 35. It further held that the transfer and deliveries that take place under Sub-Clauses (b), ( c) and (d) of Clause (29-A) of Article 366 of the Constitution are subject to an additional restriction mentioned in subclause (b) of Article 286 (3) of the Constitution of India. 36. However, it must be remembered that in the case of "works contract" the goods actually gets amalgamated with the work being executed and therefore such deemed sale as was considered in Paragraph No.30 in Builders Association of India case referred to supra can be understood. 37. Where however like in the present case ....
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....e outside all other States. 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 made; and (b)in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation.--Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places. 41. Under section 2(4) of the Sale of Goods Act, 1930, "documents of title to goods" includes a bill of lading, dock warrant, warehouse keeper's certificate, wharfingers' certificate, railway receipt, multimodal transport document, warrant or order for delivery of the goods and any other document used in the ordinary course of business as proof of the possession or control of the goods, or authorising or purporting to authorise, either by endorsement or by deliver....
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.... Sales Tax Act: (1) The sale or the purchase, as the case may be, must actually take place. (2) Such sale or purchase in India must itself occasion such import, and not vice versa i.e. import should not occasion such sale. (3) The goods must have entered the import stream when they are subjected to sale or purchase. (4) The import of the goods concerned must be effected as a direct result of the sale or purchase transaction concerned. (5) The course of import can be taken to have continued till the imported goods reach the local users only if the import has commenced through the agreement between foreign exporter and an intermediary who does not act on his own in the transaction with the foreign exporter and who in his turn does not sell as principal the imported goods to the local users. (6) There must be either a single sale which itself causes the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally interconnected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite ....
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....Court upheld the decision of this High Court and held that unless the transaction are inextricably bound up with the particular export, it cannot be said to be sale in the course of export. If no particular export was in sight, the sale by the Coffee Board cannot go beyond the description of sale for export. 51. The Court there held that the sale in the course of export comprises of (a) sale; (b) the goods must be exported; and (c) the sale must be a part and parcel of the export. It held that the sale must be integral part of the export transaction before it can be said to have occasioned a particular export. 52. There, the court held that the first sale was by Coffee Board as seller to the export promoter. Thereafter, a separate sale by the export promoter to an overseas buyers. It observed that the Coffee Board did not have any inkling about the 2nd sale when the 1st sale took place. The Coffee Board Sale was a having no connection with the second sale which was in the course of export. 53. The Hon'ble Supreme Court in State of Maharashtra Vs. Embee Corporation Bombay, (1997) 7 SCC190, the Court held that, "It is almost settled by numerous decisions of the Supreme Court....
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....h it is to be transferred, the owner cannot again transfer the same rights to others. 56. In case of regular sale other than those involving deemed sale under the extended definition of sale in Section 2(g) of the Central Sales Tax Act, 1956 and 2(n) of the Tamil Nadu General Sales Tax Act, 1959 there is no difficulty in applying Section 5(2) of the Central Sales Tax Act, 1956. 57. As per the decision of the Hon'ble Supreme Court in BSNL Vs. Union of India, (2006) 3 SCC 1, actual delivery of the goods may not be necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer and must be deliverable and delivered at some stage. 58. If the above principles in BSNL Vs. Union of India, (2006) 3 SCC 1 are applied to the facts of the present case, the petitioner may contending that the extended definition of sale, viz. transfer of the right to use goods took place before actual clearance and there cannot be any levy of tax under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 as the transaction was exempted under Section 5(2) of the Central Sales Tax Act, 1959. 59. It is assumed, at the time of execution of ....
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.... sale of electricity between national thermal Power Corporation Ltd. and Electricity Boards of different States like State of Tamil Nadu, State of Kerala, State of Karnataka and State of Goa. 65. The Hon'ble Supreme Court in State of A.P. Vs. National Power Corporation Ltd. and others, (2002) 5 SCC 203, merely reiterated the principle that if there is no contract of sale preceding the movement of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sales stands completed within the state and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore the transaction would not be having an inter-state element. Commenting on the decision of the Hon'ble Supreme Court in 20th century Finance Corporation Ltd case referred to supra, it was reiterated that the "situs" of the sale or purchase is wholly immaterial as regards the inter-state trade or commerce. In view of Section 3 of the Central Sales Tax Act, 1956, all that have to be seen are whether the sale or purchase (a) occasions the moment of the good fr....
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....P. Electricity Duty Act, 1949 has done. The definition of consumer has been artificially extended to include any person who receives electrical energy (without regard to its consumption) and also to include a person who, receiving the electrical energy in bulk, forwards it onwards for distribution, (without regard to the fact whether it is transmitted outside the State and whether the electricity is or is not consumed within the State). The same definition has been adopted in the M.P. UpkarAdhiniyam, 1981. This definition of consumer shall have to be read down as including within it only such persons who receive the electricity for consumption or distribution for consumption within the State. Without such reading down, the definition of "consumer" would be rendered ultra vires of Articles 286 and 269 of the Constitution read with Section 3 of the Central Sales Tax Act, 1956. 68. While making the above observations, it has perhaps not taken note of the views expressed. In Mafatlal Industries Ltd. and Others v. Union of India and Others, 1997 (89) E.L.T. 247 (S.C.) : (1997) 5 SCC 536, it has been held as under:- "....In the matter of taxation laws, the court permits a gre....
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....tion under Section 3A(2)(a) of the Tamil Nadu General Sales Tax Act, 1959 does not arise. It was concluded that under the supplementary lease agreement, a reference was made to invoice as well as a reference to the master lease agreement. The Court concluded that there was an inextricable link between the Master Agreement and the supplementary lease agreement on the one hand and the import of specific goods based on which the purchase order was placed. The various documents were placed by the Bank particularly the Bill indicating the name of the user as Hindustan Power Plant Ltd. which showed that the import was linked to the purchase order placed on behalf of the said company. It was held that thus, but for the purchase order placed by Hindustan Power Plant Ltd and latter approaching the respondent Bank for financing the import, the question of the bank ever placing any purchase order with the Japanese manufacturers to supply did not arise. The purchase order was placed by the bank with the foreign supplier who in turn showed that the purchase order of Hindustan Power Ltd. with the Japanese firm and import itself was in connection with the Master Agreement between the Bank and ....