TaxTMI 
TaxTMI 
2024 (10) TMI 1124
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....ar Chandra Roy, Advocates for the State of Jharkhand ORDER The order dated 24.11.2014 passed by the Rajasthan Tax Board, by which fourteen appeals have been dismissed and the assessment orders for the years 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 of three companies, namely, (i) Carglsberg India Pvt. Ltd. [Carglsberg] , (ii) United Breweries Limited [United Breweries] , and (iii) Mount Shivalik Industries Ltd. [Mount Shivalik] have been upheld, has been challenged in these fourteen appeals. The said three companies shall collectively be called as "appellants". 2. The issue involved in these appeals relates to demand of central sales tax on movement of goods from the manufacturing units of the appellants situated in the State of Rajasthan to their depots in the State of Bihar and the State of Jharkhand. The impugned order has treated the movement to be arising out of inter-state supply of goods instead of inter-state stock transfers as claimed by the appellants. 3. The appellants hold licenses for manufacture and sale of liquor under the Rajasthan Excise Act, 1950 [the Rajasthan Act] and are also registered dealers under the Rajasthan Value Added Tax Act, 2003 [the RVAT Ac....
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.... cost and risk. Delivery has to be in line with the OFS placed by the Corporation and shall be completed within the period specified by the Corporation. The Corporation also has the right to forthwith terminate any or all OFS placed on the manufacturer and forfeit the deposits on certain conditions. The manufacturer has to deliver the beer at a price indicated by the Corporation but payment for the beer delivered shall be made only after the disposal of beer. 7. Carlsberg established depots in the State of Bihar and obtained Wholesale License 19C [the License]. Clause 5A of the License requires Carlsberg to maintain a minimum stock of liquor at its depots in the State of Bihar as prescribed by the Commissioner from time to time and to recoup the stock within seven days in case the stock goes below the minimum limits. 8. Carlsberg alleges that in order to comply with the requirement of maintaining a minimum stock of beer at the local depots in the State of Bihar and also to ensure delivery of beer to the Corporation within the validity period prescribed in the OFS, it effected inter-state stock transfers of beer from its factory in the State of Rajasthan to its depots in the State....
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....ure 1. (page 17). (ii) A certified copy of the license granted by the concerned Excise Commissioner/competent authority of the concerned State. (iii) Details of executives and/or representatives to deal with the Corporation to be given in its letter head as per the format in Annexure 2 (page 18) and 3 (page 19) respectively. (iv) An agreement as in the format in Annexure 4 (page 20-24) duly executed by the authorized signatory of the manufacturer/supplier in a stamp paper of denomination page Rs. 100/- (v) If the manufacturer is not the owner of the brands proposed to be supplied, then a copy of the agreement between the manufacturer / supplier and the owner of the brand. (vi) Certified copy of the latest audited accounts and annual report. If such accounts pertain to a period other than the recently concluded financial year, reasons for not submitting the certified accounts of such year shall be indicated. (vii) An attested/notarized copy of the registered partnership deed/Memorandum and Article of Association (latest) of the manufacturer (viii) Security Deposit of Rupees Five Lacs in the form of Bank Draft. ***** 6. Order for Supply (OFS) 6.1 Manufactu....
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....hout fail. However Corporation shall charge a fee for extending validity of each OFS as under: (1) For first 3 days or part thereof - Rs 500/- per OFS (2) For every next 3 days and part thereof - Rs 1000/- per OFS However, these rates may be revised by the MD from time to time. 6.6 Repeated lapse of supplies against OFS without valid reasons may result in reduction of quantity sourced and may also attract other penalties that the Corporation may specify from time to time. 6.7 In respect of supplies from within State or outside the State, the manufacturer/supplier or their authorized representatives shall, after the issue of OFS., deposit the Import Fee, Excise Duty and other applicable duties/ fees for their respective brands with the Excise Department and obtain required transport permit to ensure delivery. Manufacturers/Suppliers may please take note that they are responsible for remitting/ depositing the correct quantum of duties/ fees and that they are liable for any short payment of duties (The Corporation shall be entitled to recover any short payment of duty from them, should such instances occur). 6.8 In case the supplies are not effected against any OFS a....
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....h depots as specified by the corporation. 2.3 The Manufacturer shall bear transit losses as defined in clause 8.2 of LSP 2008-09. The Manufacturers shall not claim for shortages, if any, arising from the difference between the quantities as dispatched it and the stocks actually delivered. 2.4 Delivery shall be in line with the Orders for Supplies placed by the Corporation and shall be completed within the period specified by the Corporation. Short supplies, if any, shall not be carried forward beyond the validity period of the Order for Supplies. ***** 4. CANCELLATION OF ORDERS 4.1 The Corporation shall, without prejudice to its legal rights, have the right to forthwith terminate any or all Order for Supplies placed on the Manufacturer and forfeit deposits, if any, if the Manufacturer or any of his representatives, workers, employees etc. ***** 5. PRICE 5.1 The Manufacturer shall deliver the Liquor at a price as may be indicated by the Corporation. 5.2 Any difference due to price reduction on account of revision in price by the Manufacturer or due to a change in duties shall be borne by the Manufacturer. 5.3 The Manufacturer shall communi....
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....of Rajasthan treated the movement as one arising out of inter-state supply of goods, while the appellants treated it as inter-state stock transfers. The relevant portions of the order passed by the Rajasthan Tax Board are reproduced below: "Amidst rival contentions of the counsel, what transpires is that all essential conditions of section 3(a) of the CST Act are witnessable in the present case. On the authority of M/s TELCO Vs Assistant Commissioner, (supra) they could be deduced from Agreement to sale (supply) of beer between BSBCL and the appellants, necessitating and occasioning movement of beer from appellants manufacturing units in Rajasthan to Bihar on the premise of same transaction. The interstate movement of beer in instant cases was preceded by Agreement to sale and interstate sale related to it was inextricably interwoven with corresponding beer movement from district Alwar, Rajasthan to Patna, Bihar. The facts here are distinguishable from those of Central Distilleries and Breweries (supra), on the authority of case applicable in present scenario, that is M/s Indian Oil Corpn. Ltd., (supra). It is manifest that interstate movement of beer from Alwar to Patna ....
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....nsidered and action taken by BSBCL. We find that in terms of Clause 3.1 (iv) of the LSP, an Agreement was struck between the two parties to the issue, the BSBCL and the appellant company, the introductory part of which is reproduced as under: ***** 4. This Agreement entered into between the BSBCL and the appellant companies having manufacturing units in Alwar, Rajasthan and the branches at Patna in Bihar and Ranchi in Jharkhan is the cause celebre in the present context, enabling appellants' beer sales in the State of Bihar (or, Jharkhand) through the instrument called 'Order for Supply' issued by the BSBCL to the apellant's branch at Patna in Bihar. 5. The appellant assesses hold that above Agreement not as an Agreement for Sale of beer but an Agreement for distribution of beer in the State of Bihar. 6. Agreement to Sale or contract to sale, or in opinion of the appellants an Agreement to Distribution was implemented when OFS was issued by BSBCL, leading to import of beer from the manufacturing units of the appellant assesses and supply of which was as usual shown as having been stock transferred to Patna (or, Ranchi) branch of the appellants which is turn sold beer to t....
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....s of section 4(3) of the Sale of Goods Act. In this connection, reliance has been placed on the decision of the Tribunal in M/s. Keltech Energies Ltd. vs. State of Maharashtra and others [2024 (7) TMI 540 - CESTAT New Delhi] as also on the decision of the Karnataka High Court in M/s. BASF India Ltd. vs. State of Karnataka and others [2022 (11) TMI 434 - Karnataka High Court] ; (iv) The intention of the parties cannot be ignored. The OFS is clearly intended to be the contract of sale in terms of the Sale of Goods Act. In this connection, reliance has been placed by the learned counsel for the appellants on the following decisions: (a) Tata Engineering & Locomotive Co Limited vs. Assistant Commissioner of Commercial Taxes and another [(1970) 1 SCC 622] ; (b) Kelvinator of India Ltd. vs. The State of Haryana [(1973) 32 STC 629 (SC)]; (c) State of Andhra Pradesh vs. Coromandel Paints & Chemicals Limited [(1995) 98 STC 82 (AP)] ; and (d) Central Distillery & Breweries Ltd. vs. Commissioner of Trade Tax, U.P., Lucknow [(1999) 115 STC 296 (All) ]. (v) The judgment of the Supreme Court in Kelvinator of India is applicable to the present case. 16. Shri Arijit Pr....
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....o show that the liquor manufactured by the appellants in the State of Rajasthan is earmarked for sale in the two States (as sale of the liquor with the aforesaid hologram/label can only be for the Corporation). In fact, in view of the said requirement, the said liquor cannot be sold to anyone outside the State even during transit; (v) The provisions also demonstrate that the liquor arrived from the State of Rajasthan to the two States not because of own volition of the appellants, but pursuant to and/or incidental to the said Master Agreement read with the Liquor Policy; (vi) The Master Agreement read with the Liquor Policy is clearly an agreement to sell; and (vii) The liquor manufactured by the appellants and sold to the Corporation could only be under the aforesaid Policy and on the terms contained in it. The said Policy indisputably contemplates supply to be made from the factory of the appellants situated in the State of Rajasthan. In such a situation, the contract of supply must be deemed to have contained a covenant that the goods would be supplied in the two States from a place situated outside the State. A sale under such a contract would clearly be an inter-state sa....
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....n the goods passes in either State. With a view to find out whether a particular transaction is an inter-State sale or not, it is essential to see whether there was movement of the goods from one State to another as a result of prior contract of sale or purchase. ***** 23. It is an accepted position in law that a mere transfer of goods from a head office to a branch office or an inter-branch transfer of goods, which are broadly brought under the phrase 'Branch transfers' cannot be regarded as sales in the course of inter-State trade, for the simple reason that a head office or branch cannot be treated as having traded with itself or sold articles to itself by means of these stock transfers." (emphasis supplied) 22. What transpires from the aforesaid decision of the Supreme Court in Hyderabad Engineering is that for a sale to be in the course of inter-state trade or commerce under section 3(a) of the Central Sales Tax Act, there must be a sale of goods and such sale should occasion the movement of the goods from one State to another. To find out whether a particular transaction is a inter-state sale or not, it is essential to see whether the movement of the goods from on....
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....through the instrument called "OFS" issued by the Corporation to the branches of the appellants in the State of Bihar and the State of Jharkhand; and (v) The analysis of facts and legal position indicate that interstate sale of beer under section 3(a) of the Central Sales Tax Act had taken place in which the Master Agreement acted as a contract to sell and caused the inter-state sale that occasioned the movement of beer from the State of Rajasthan to the State of Bihar or the State of Jharkhand. 25. The contention of the learned counsel appearing for the appellants is that the movement of the goods from the State of Rajasthan to their depots in the State of Bihar had not occurred under the Master Agreement, incidental or otherwise since the clauses of the Master Agreement do not specify that the liquor manufactured by the appellants in the State of Rajasthan must be supplied to the depots of the Corporation on an inter-state basis. The submission of the learned senior counsel for the State of Rajasthan is that the movement of goods from the State of Rajasthan to the State of Bihar or the State of Jharkhand was occasioned by the Master Agreement as can be seen from the clauses of....
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....unal has failed to appreciate the nature of the agreement executed between the Delhi Administration and the dealerrevisionist. The agreement, that has been referred to above, was not an agreement of purchase of any quantity of rum. The agreement was merely to grant a licence to the dealer to supply rum to the retail vends in Delhi. The orders for the actual purchase and sale were to be placed subsequently by the Collector at fortnightly intervals and the licensee was required to keep a buffer stock of atleast two truck loads at warehouse within the territory of Delhi. Clause 18 of the agreement required the dealer to have a licensed premises within the State of Delhi for which purpose it could be allowed the user of a bonded warehouse established by the Government on payment of the specified rent and furnishing of a security deposit. Clause 16 specifically stated that by virtue of this agreement, the Government does not guarantee purchase of any specified quantity of 50 degree up rum during the year or during any portion of it and the licensee shall not be entitled to any compensation or relief on the ground that the sufficient orders were not placed. Thus, any transfer of goods fr....
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.... the present case, however, it has not been so established. ***** 7. The judgment of the Honourable Supreme Court in State of Tamil Nadu v. Cement Distributors (P.) Ltd. [1975] 36 STC 389 seems to be more appropriate to the issue in question. In that case the dealer, i.e., Cement Distributors Pvt. Ltd. was acting as an agent of the State Trading Corporation. Under the cement control order all manufactures were required to sell cement to the State Trading Corporation. On November, 22, 1961 the Regional Cement Officer of the State Trading Corporation in Tamil Nadu authorised the dealer M/s. Cement Distributors Pvt. Ltd. to sell the quantity of cement mentioned in the authorisation note to persons directed by the Regional Cement Officer of the State Trading Corporation, Calcutta. The factory which were to supply the cement was mentioned as the Dalmiapuram Factory. In pursuance of the said authorisation, the cement was despatched from Dalmiapuram to Calcutta. Subsequently, the Regional Cement Officer, Calcutta authorised the dealer to supply the cement to Executive Engineer, Howrah Division, Calcutta. The question was whether the sale of cement to the said Executive Engineer was in....
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....Delhi could not be treated as a movement of goods occasioned by any sale or purchase. The sale, as stated above, took place only when any order was actually placed by the Collector of Central Excise, Delhi. As stated above, the assessing officer has not probed further into the matter to find out if there was no buffer stock at Delhi and the goods were transported from the distillery only on receipt of the orders. Therefore, there is no evidence to show that the supply of rum to the Delhi Administration in the three years resulted in any inter-State sales taxable in State of U.P. The findings of the authorities below are based on a misconception about the nature of the agreements dated 27th of December, 1984 which, as stated above, did not bring about any sale or purchase. The Tribunal's finding, therefore, that the disputed turnover was taxable as inter-State sales suffers from a legal error and is hereby set aside. I hold that it is not established that the turnover, referred to above, represented inter-State sales and it was, therefore, not taxable as inter-State sales under the Central Sales Tax Act." (emphasis supplied) 29. The Agreements that were considered by the Allah....
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....ent case the sales are clearly interState 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." (emphasis supplied) 32. The clauses of the Agreement between the parties in Indian Oil Corporation clearly specified the quantity, the place of origin, the place of supply and the manner in which the sale was to be effected. This is unlike the Master Agreement executed between the parties in the present appeals. Thus, the decision of the Supreme Court in Indian Oil Corporation would not help the State of Rajasthan. The Rajasthan Tax Board was, therefore, not justified in placing reliance upon the said decision nor was it justified in holding that the decision of the Allahabad High Court in Central Distillery and Breweries would not be of any aid to the appellants because of this decision of the Supreme Court. It i....
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.... mention the quantity of the goods supplied and it was only to ensure prompt delivery of goods as and when called upon that BASF India transferred the goods and stocks to its depots, the Karnataka High Court held that the open purchase order would not constitute any contract for sale and that only the purchase orders issued from time to time for supply of goods would constitute a contract between the parties. Thus, the sales effected pursuant to such purchase orders would be an intra-state sale and not inter-state sale. The relevant portions of the judgment of the Karnataka High Court in BASF India are reproduced below: "3. Brief facts of the case are, petitioner is in the business of manufacture and sale of automotive paints. It is a registered dealer under the provisions of K-VAT Act (Karnataka Value Added Tax Act, 2003 - 'K-VAT Act' for short). Its manufacturing unit is situated near Mangaluru in Karnataka. It has warehouses (Branch offices) in Maharashtra, Tamilnadu, Haryana and Uttarakhand. 4. Petitioner manufactures automotive paints for original equipment manufacturers and supplies to Tata Motors, Mahindra and Mahindra, Maruti Udyog Ltd., etc., who procure raw materials ....
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....e Authorities in the case of Maddala Thathiah and Kelvinator, we are of the considered view that the Open Purchase Orders do not constitute any Contract. The Purchase Orders issued from time to time for supply of goods constituted Contract between parties. Thus, the sale effected pursuant to such Purchase Orders is an Intra-State sale in that State. We say so because, whilst Goods were stored in various States, the ownership and title of goods vested with the assessee. Pursuant to the Purchase Orders received from time to time, assessee has delivered the goods from its depot in that State to the respective purchasers." (emphasis supplied) 34. It would also be pertinent to refer the decision of the Supreme Court in Kelvinator of India. Distribution Agreements had been executed between Kelvinator of India on the one hand and Spencer & Co. Ltd., Leonard Refrigerators, and Gem Refrigerators on the other hand. 35. It was sought to be contended by the learned counsel for the appellant in Kelvinator of India that the aforesaid three distribution Agreements did not constitute a contract of sale and even otherwise the movement of goods from Faridabad to Delhi cannot be said to have been ....
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....king to all the facts of the case, we have no doubt that the arrangement between the parties was that refrigerators would be sold by the appellant to the distributors after they had been transported to the sales office and godown of the appellant on Alipore Road, Delhi so that no liability to pay tax under the Act would arise. It cannot, in the circumstances, be said that the transport of the refrigerators from Faridabad to Delhi was in pursuance of contracts of sale between the appellant and the distributors." (emphasis supplied) 36. The Supreme Court held that the orders which were placed in Delhi by the distributors and the acceptance by Kelvinator of India resulted in the agreement of sale. It is seen that though the Agreements under consideration before the Supreme Court in Kelvinator of India were more specific, but still the Supreme Court held that they would not amount to contract of sale. The decision of the Supreme Court in Kelvinator of India would clearly apply to the facts of the present case. 37. The Central Sales Tax Appellate Authority in Northern Coal Field also observed as follows: "17. There is one more aspect to be considered. Though the revisional au....
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....andup, Bombay. The railway receipt was 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. 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 to 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 to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale. 16. When a branch of a company forwards a buyer's order to the principal factory of the company and instructs them t....
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....context that the Supreme Court held that the movement of the goods from Madras to Bombay was part of the same transaction. The Supreme Court, therefore, held that the Bombay branch merely acted as an intermediary between the Madras factory and the buyer. 41. In ABB Limited, the Supreme Court observed: "10. On facts, therefore, it was rightly held by the High Court that the inter-State movement of goods was within the contemplation of the parties and it can be reasonably presumed that such movement was to fulfil the terms of the contract and therefore the transaction was covered by Section 3(a) of the CST Act. The law on this issue was also considered by the High Court in correct perspective after noticing the case of TISCO Ltd. v. S.R. Sarkar (AIR 1961 SC 65) that where the goods moved from one State to another as a result of a covenant in the contract of sale it would be clearly a sale in the course of inter-State trade. The conclusion of the High Court on this issue also finds ample support from the following case laws which were noticed by the High Court in (1) Oil India Ltd. v. Supt. of Taxes (1975 SCC (Tax) 167), (2) English Electric Co. of India Ltd. v. CTO (1977 SCC (Tax)....
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.... and the State of Jharkhand have created Corporations to facilitate and regulate retail sale of beer in their States. 48. Under the Liquor Policy, the Corporation is the wholesaler for all kinds of liquor, including beer. A manufacturer desirous of supplying beer to the Corporation for subsequent distribution shall have to submit documents, including the Master Agreement. The Corporation issues OFS on the depots of Carlsberg in the State of Bihar based on the stock requirements of the Corporation, but the Corporation has the right to decide the quantity for which OFS can be issued and the Corporation is also under no obligation to procure any specified minimum quantities of any brand of beer during the currency of the contract. This apart, the Corporation is not under any legal compulsion to procure all or any brand produced by the manufacturer simply because they have signed the Master Agreement. The OFS indicates the validity date within which the manufacturer has to complete the delivery and if the manufacturer does not supply the entire quantity indicated in the OFS within the validity period, the order for the remaining quantity lapses automatically. The stocks have to ....
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.... required to maintain a buffer stock of atleast two trucks without any guarantee of any purchase by the Delhi Administration, it established a warehouse at Delhi from where liquor would be supplied as and when the Delhi Administration placed orders. The movement of the goods from Meerut in the State of Uttar Pradesh to Delhi was, therefore, held not to be in pursuance of any transaction of sale. The sale, it was held, took place only at Delhi when an order was actually placed by the Collector of Central Excise, Delhi. The High Court, therefore, concluded that the Agreements did not bring about any sale. 52. The Karnataka High Court in BASF India noticed that manufacturing unit of the petitioner was situated in the State of Karnataka but it had warehouses in the States of Maharashtra, Tamil Nadu, Haryana and Uttarakhand. The writ petitioner had contended that after it received purchase orders, it transferred the stock to its godowns near the manufacturing unit of the customers and supplied the paint as and when the indent was received. The Karnataka High Court, in such circumstances, held that the purchase orders issued from time to time for supply of goods actually constituted a c....
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....y with the requirement of maintaining a minimum stock at the local depots in the State of Bihar and also to ensure the delivery of beer to the Corporation within the validity period prescribed in the OFS, it has to effect inter-state stock transfer of beer from its factory in the State of Rajasthan to its depots in the State of Rajasthan from time to time through Form-F, depending on estimation of market demand and that it is only when OFS is placed by the Corporation on the depots of the appellants in the State of Bihar that the goods are sold. Thus, it is the OFS that concludes the contract of sale between Carlsberg and the Corporation. The movement of goods from the State of Rajasthan to the depots of Carlsberg in the State of Bihar, therefore, cannot be said to have been occasioned by reason of any sale agreement. The appellants treated the sale from its depots in the State of Bihar to the Corporation in the State of Bihar as sale and paid local VAT. 55. There can, therefore, be no manner of doubt that the movement of goods from the manufacturing units of the appellants situated in the State of Rajasthan to the depots of the appellants in the State of Bihar or the State of Jha....