TaxTMI 
TaxTMI 
2025 (1) TMI 335
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....T Act and holding that inter-state sale had taken place, which would be leviable to tax under the CST Act with interest and penalty. 2. It needs to be noted that the State Tribunal set aside the order of the Assessing Officer in regard to two categories of transactions and allowed the branch transfer claim of CMS Computers. However, in regard to the third category of transaction, the State Tribunal remanded the matter to the Assessing Officer to examine the issue afresh in the light of the observations made in the order. 3. CMS Computers claims to be a dealer in computer systems and peripherals and also carries out manufacturing, trading, leasing and works contract activity across India. The case set up by CMS Computers is as follows: (i) It had filed regular returns under the provisions of the Maharashtra VAT Act, 2002 [the MVAT Act] and the CST Act in the State of Maharashtra. In the returns filed under the CST Act, it claimed stock transfer of goods, other than by way of sale under section 6A of the CST Act which would not be leviable to central sales tax in the State of Maharashtra; (ii) The said CST returns were taken up for assessment by the Assessing ....
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....re merely transferred inter-state without there being any covenant for such inter-state movement in the contract and used in execution of works contract, it will be a local sale in the State of execution of works contract. 3. Trading/resale of servers, computers 8,31,52,930/- Remanded to the Assessing Officer The Assessing Officer to verify documents such as lorry receipts/ dispatch proof to determine whether the movement is against any pre-existing order and re-determine the allowability of stock transfer. 4. Trading/resale of printers and networking items 5,60,00,672/- Remanded to the Assessing Officer The Assessing Officer to verify documents such as lorry receipts/ dispatch proof to determine whether the movement is against any pre-existing order and re-determine the allowability of stock transfer. 6. It is against the aforesaid order of the State Tribunal that the present appeals have been filed by the State of Maharashtra. 7. It is seen that the decision of the State Tribunal relates to three matters, namely, maintenance material for consumption in the Annual Maintenance Contract; consumables for printing and card personalization; and tradi....
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....s been reported before the termination of the Contract will have to be rectified by the Vendor before handling over the systems to LIC. (8) ***** (9) ***** II. Repair outside the Office Premises ***** III. Technical Support: ***** IV. Preventive Maintenance (PM): ***** V. Support for Upgradations/Feasibility Support: ***** VI. Third Party Maintenance: ***** IX. Exclusion of certain parts from AMC (a) The AMC is on comprehensive basis and ALL PARTS will be covered under AMC except the following: (1) Print head & print cartridges for Dot Matrix Printers (2) Toner cartridges and drum for laser printers (3) Ink Ribbons, Print Bands and spools for Line Printers. (4) Laptop Battery. ***** XII. List of items under AMC * The Manager (IT)/RM (IT)/Secretary (IT) CO, as the case may be, will communicate to the Vendors, details about the systems to be covered under AMC at the respective offices * The Vendors should maintain proper Inventory of various systems provided and/or maintained by them at va....
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.... 12. Penalties in addition to the Breakdown charges are summarized as under: Condition not satisfied Penalty If PM is not done for a particular quarter 20% of the QMC for those machines will be deducted If minimum number of resident engineers, as envisaged in point VIII-'Density of Service engineers' above, are not available during the quarter and or contact details of one or more engineers not provided at the beginning of the quarter. The availability of the number of service engineers would be reckoned on the 'basis of the daily login to the hardware complaint tracking module by the Vendor's service engineers. Penalty of 10% of quarterly AMC will be deducted Vendor not making the spares available as envisaged in VII-'Stocking of Spares/Immediate replacement of faulty parts/equipment'. 5% of total breakdown penalty in addition to the regular breakdown charges will be deducted. If Vendor's Zonal Account Manager for LIC does not plan/attend Monthly meetings with RM (IT) A penalty of Rs. 1000/- for every monthly meeting not attended will be deducted from the QMC payable by ZO for Hardware in respect of Zonal Office subject to a maximum of 5% of QMC ....
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....rom Appellant in this State, the movement is not as a result of sale or purchase as AMC contract itself does not envisage separate purchase but only maintenance by replacement. Even if the branch requisitions a part not in its inventory from the Appellant, yet this movement is without any covenant in the agreement and will be internal between Appellant and his branch. 18. We do not therefore agree with the view that there is interstate sale in the AMC agreement entered into by Appellant with the customer." (emphasis supplied) 11. Ms. Rama Ahluwalia, learned counsel for the State of Maharashtra, submitted that when the name of the customer in whose favour the consumables will be used at the branch office is given in the stock transfer note, it clearly implies that the transfer of the consumables to be used in the Annual Maintenance Contract is as a result of a pre-existing order and thus central sales tax has been correctly levied by the Assessing Officer. In support of this contention, learned counsel placed reliance upon the following decisions: (a) Hyderabad Engineering Industries vs. State of Andhra Pradesh (2011) 4 SCC 705; (b) English Electric ....
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....ck transfer. 15. To appreciate the issue that has been raised, it would be appropriate to examine section 3 of the Central Sales Tax Act and the relevant portion is reproduced below: "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 the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." 16. The provisions of section 3 of the Central Sales Tax Act were examined by the Supreme Court in Hyderabad Engineering and the relevant portion of the judgment is reproduced below: "20. For a sale to be in the course of inter-State trade or commerce under Section 3(a), two conditions must be fulfilled. There must be sale of goods. Such sale should occasion the movement of the goods from one State to another. A sale would be deemed to have occasioned the movement of the goods from one State to another within the meaning of clause (a) of Section 3 of ....
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.... has the effect of occasioning the movement of goods from one State to another, irrespective of whether the movement of goods is provided for in the contract of sale or not, or whether the order is placed with any branch office or any head office which resulted in the movement of goods, 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). 19. It is seen that CMS Computers has clients at various places in the country. It undertakes an Annual Maintenance Contract for the maintenance of computers, scanner and printers. To appreciate the contentions that have been advanced, it would be appropriate to examine the relevant clauses of the Annual Maintenance Contract. It reveals that though the contract has been executed by the head office of CMS Computers and the Life Insurance Corporation of India, but CMS Computers is required to carry out onsite comprehensive maintenance of the computer systems and all the tools, test equipment and fixtures required for the onsite comprehensive maintenance of equipments have to be provided by CMS Computers. During the period....
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....om the stockyards. An issue arose as to whether sale took place in different States where the stockyards were situated. The Supreme Court noticed that the sales office of the appellant in Bombay instructed the Jamshedpur factory to transfer vehicles to the stockyard in various States after taking into consideration the requirement of customers in various States. The stocks at the stockyards were distributed to the dealers from time to time. The Supreme Court found that the transfer of vehicles from the factory to various stockyards was a continuous process and was not related to the requirement of any particular customer. The stockyard appropriated the vehicles to the contract of sale out of the stocks available with it. Until such appropriation was made, the vehicles could be sold to any customers and, therefore, it was concluded that the transaction of sales of vehicles cannot be treated as inter-state sale from Jamshedpur factory but they were local sale in the State where the stock yards were located. 21. It needs to be noted that the Annual Maintenance Contract in the present case, does not speak about specific goods that are to be replaced or sold. Some of the spares may b....
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....he factory of the appellant was situated in Madras. The buyers order was sent by the Bombay branch to the Madras branch, which quoted the price FOR Madras. The Bombay branch then wrote to the Bombay buyer quoting the FOR Madras price and also informed that the delivery would be ex-works Madras. The Bombay buyer then placed an order with the Bombay branch. The Bombay branch instructed its Madras factory to dispatch the goods directly to the buyers and the goods were then sent to the buyer under these instructions. It is in this 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. 24. Learned counsel for the State of Maharashtra also placed reliance upon the following paragraphs of the judgment of the Supreme Court in Hyderabad Engineering: "13. It is further submitted that the assessing authority was not justified in relying on the letters of allocation issued by UIL as a contract of firm commitment for purchase of goods manufactured by the assessee. According to Shri Baga....
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....der Section 3(a) of the Central Act. 25. In the instant case, the assessing authority and the Tribunal have recorded a finding of fact that there were prior contracts between Usha Sales Ltd. and the assessee and in pursuance of those contracts, the goods moved from the assessee's factory at Hyderabad to its Branch offices to be delivered to Usha Sales Ltd. or their nominees. In order to appreciate the contention canvassed, it is necessary to set out certain clauses from the sales agreement. ***** 30. From the above Clauses in the agreement, what can be inferred is that the assessee has undertaken to supply their manufactured products to UIL or to its nominees at the agreed price at any of the assessee's godowns at the option of UIL. A contract of sale of goods would be effective when a seller agrees to transfer the property in goods to the buyer for a price and that such a contract may be either absolute or conditional. If the transfer is in presenti, it is called a 'sale'; but if the transfer is to take place at a future time and subject to some conditions to be fulfilled subsequently, the contract is called "an agreement to sell". When the time in the a....
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....t of sale or as necessary incident to the sale itself. Further, the sales agreement is for a period of five years. If there is short supply of the goods than what was indented for, then the same could be adjusted in the subsequent dispatch. Therefore, to contend that there was no firm order placed by UIL with the assessee and accordingly, it would not come within the purport of Section 3(a) of the Central Act and they are mere branch transfers, cannot be accepted." (emphasis supplied) 25. Paragraph 47 of the aforesaid judgment of the Supreme court in Hyderabad Engineering interprets clause 8 of the Agreement and provides that if this clause is read with other clauses of the Agreement then it would mean that there is a stipulation for the movement of goods from the factory to the godowns in different States to be delivered and it is because of these covenants that the assessee is obliged to move the goods from its factory to the godowns situated in other States to fulfill its parts of the contract. This judgment would, therefore, not come to the aid of the State of Maharashtra for the simple reason that the clauses of the present Annual Maintenance Contract which are stated to....
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....entered into at Mumbai this 1st day of June, 2005, BETWEEN DEVELOPMENT CREDIT BANK LTD., a Joint Stock Corporate Office at 154, S.V.P. Road, Dongri, Mumbai - 400 009 and having its Central Administrative Office at 204, Raheja Centre, Nariman Point, Mumbai - 400 021 (hereinafter referred to as 'the Bank') (which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include its successors and assigns) of the First Part: and M/s. CMS COMPUTERS LIMITED, having their registered office at 201, Arcadia, Nariman Point, Mumbai 400 021 and its office at CMS House, Plot # 91, Street No. 7, MIDC Marol, Andheri (E), Mumbai 400 093, (hereinafter referred to as 'the Company', which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include its successors and assigns) of the Other Part: WHEREAS: (A) The Bank is carrying on the business of Banking in its various branches, extension counters and other offices in India. (B) The Bank is catering to various banking needs and is providing banking services to its various customers. (C) The Bank is now interested in arran....
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....the Company, appropriate charges for services rendered as per Annexure-'II' attached hereto. The Bank shall pay the said amount to the Company within ten days of submission of the bill to the bank of the services rendered in the previous month along with proper proof of the quantum of the Statements of Accounts generated. It is hereby agreed that the Bank will pay no additional charges in the event of the company being required to take up any additional work for completion of the task enumerated above. 4. The company shall perform the services in a competent and professional manner and shall deploy its Technology and Systems to ensure that uniform quality of printing is generated; the Company shall employ for such purpose such personnel who may be relied upon for not committing a breach of the terms of this agreement. 5. This agreement is entirely an arrangement between the Bank and the company for the smooth functioning of the Bank's job of periodically printing the Statements of Accounts for its various customers and therefore, it shall be the entire discretion of the Company as to the salary, other perks to be paid, or any other terms of employment, inter-se, b....
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....ormat on mutual consent. 4. You Telecom will make the payment within 15 days from the date Invoice submitted. 5. You Telecom will give advance notice of 15 days for any changes in the print format. 6. You Telecom will give prior notice of 60 days for any change in Pre-printed stationery. DUTIES AND OBLIGATIONS OF CMS COMPUTERS LTD. 1. CMS shall print the monthly Bills and other print jobs in a manner and fashion as set or as per instructions given to them by You Telecom from time to time. 2. CMS shall upon receipt of the Data from You Telecom proceed to deal with the Data as set and complete the printing work. 3. CMS shall ensure that there are no discrepancies in the process of printing the Data as received from You Telecom and shall maintain the highest amount of consistency, confidentiality and Diligence in the discharge of their duties and obligations under this Agreement. 4. CMS shall ensure that in the course of usage, all errors by CMS related to print work should be rectified immediately at the cost of CMS, so as to facilitate minimal interruption of the printing process. You Telecom shall permit 2% was....
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....rinted stationery ("0.05 Paise per colour), Cost of plain stationery 80gsm ("0.45 paise / A4) and manual Stuffing 1 @ 0.25 paise per envelope, Cost of envelope in one colour C-6 @0.58 paise All taxes extra as applicable of the said financial year. A sum stated in the Cost Structure." (emphasis supplied) 36. The relevant portions of the finding of the State Tribunal in respect of printing and card personalization are as follows: "23. Printing of account statement or personalization of cards as per data provided by the customer in this case would be a works contract and fits into the observations made by Hon'ble Apex Court in Anandan Vishwanathan 73 STC 1 (SC) ***** Here printing is done for the data supplied by the client. Once the printed, the property does not remain that of Appellant. There are confidentiality clauses in the agreement about data so provided by the client and once printed, the printed material is only for client and is not a marketable commodity. ***** 25. The agreement that the paper ink and toner specify the size, quality and colour make them specific goods for the execution of works contract is n....
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....before us, it is seen that the customer is not concerned about how or from where the goods are procured so long as he gets the printed material as on required sized and quality of paper. Even if the dispatches from Appellant are marked for use in contract for a particular customer, it is an internal matter between the Appellant and the branch, as mere paper or ink is not sold to the customer. 32. We are therefore unable to uphold the conclusion of the Assessing Authority that there is interstate sale of paper, ink and toner in printing contract executed by the Appellant outside the State." (emphasis supplied) 37. Learned counsel for the State of Maharashtra submitted that CMS Computers has its own printing machines and data card personalization machines at different places. It undertakes the job of bill printing and preparing debit cards and credit cards and for this purpose it is centrally purchasing all consumable items from the State of Maharashtra and sending them to the depots or at the client offices in other States. The consumables are transferred as and when required and these are then used by the branches for printing of bills and prepaid cards. The inter-st....
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....e goods from the State of Maharashtra to the place where printing is done. In fact, being standard goods, they can be procured from any place. 41. The findings recorded by the State Tribunal are in conformity with the two Agreements referred to above. The two Agreements do not place an obligation upon CMS Computers for transfer of the consumables only from the State of Maharashtra to the branches offices of CMS Computers in other States and it is open to CMS Computers to purchase these standard items from any place, whether it be in the State of Maharashtra or in a State where the branch offices are situated. 42. Learned counsel for the State of Maharashtra has placed reliance upon the judgment of the Supreme Court in Durga Projects. This judgment lays down that it is open to the State legislature to provide uniform rates of tax on goods involved in the execution of works contract. 43. What has to be seen in the present case is whether the movement of consumables from the State of Maharashtra to the branch offices of CMS Computers in other States is as a result of the two Agreements. This can only determine whether it would be a inter-state works contract or not. In the pr....
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....005-2006 and ITC 28/2005-2006 c) Pg 575 to 587 - Stock transfer invoice TT5001062 dated 20.8.2005 to New Delhi branch for Rs. 78,47,935.90 and Rs. 5,46,217/-. Pg. 589 to 605 - Invoices raised by Delhi branch on National Information Centre, invoice No. VD/5000559/24.8.2005 for Rs. 61,28,143.81/- which contain mostly the items transferred above. 48. These are sample documents that have been cited. From (a) and (c), it is seen that the goods supplied are not merely standard goods but is a whole configuration of a system with specialized requirement of computer and its compatible parts and peripherals and the amount is considerable. These sample documents belie the averment of the Appellant that goods transferred to branches are merely standard goods namely computers and peripherals. A high end computer or a whole system with compatible parts to meet the requirement of an institutional purchaser will not be standard goods - particularly when these machines are imported and not available off the shelf. 49. In (b) large amount of supplies are made to institutional buyer like State Bank of India mainly against two purchase orders. 50. Where spe....
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....ter of trading of printers in networking items, remanded the matter to the Assessing Officer to verify the documents such as lorry receipts/dispatch proof to determine whether the movement was against any pre-existing order and then to re-determine the allowability of stock transfer. 48. Learned counsel for the State of Maharashtra submitted that the Assessing Officer had rightly held the transaction to be inter-state sale where orders were placed on the dealer in the State of Maharashtra and subsequent dispatches to branches in other States was only to handover the goods to the customer. Learned counsel also submitted that the goods were sent as per specifications and, therefore, they are on the basis of pre-determined orders. 49. Learned counsel appearing for CMS Computers, however, contended that the State Tribunal committed no error in remanding the matter to the Assessing Officer to examine this issue in the light of the observations made in the order. 50. The submissions advanced by the learned counsel for the State of Maharashtra and the learned counsel appearing for CMS Computers on this issue have been considered. 51. It is seen that the Assessing Officer has n....