TaxTMI 
TaxTMI 
2026 (8) TMI 787
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....rit Petition No.3704 of 2009 under Article 226 of the Constitution of India has been filed by the petitioner seeking for an appropriate relief to be issued holding the action of respondent No. 1 in levying tax by its order dated 03.02.2009 on the inter-state stock transfer of goods being exigible to tax under Section 3(a) of the Central Sales Tax Act, 1956 (for short the 'CST Act, 1956') and the demand raised also being arbitrary, contrary to law, without jurisdiction and also in violation of principles of natural justice. 5. Vide the impugned order, respondent No. 1 has demanded a tax liability amounting to Rs. 43,48,84,477/- from the petitioner on the inter-state stock transfers of vehicles. 6. The facts of the case, in brief, are that the petitioner is a public limited company carrying on the business of manufacture and sale of light commercial vehicles and three wheelers in its factory situated at Zaheerabad, Medak District, Andhra Pradesh. The petitioner is a registered dealer under the Provisions of APGST Act, 1957, CST Act, 1956 and APVAT Act, 2005, and is an assessee on the rolls of the respondent No. 1 herein. The petitioner's unit at Zaheerabad, Medak District was e....
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....identified to be sold to any particular dealer and the vehicles are dispatched in the most routine fashion for the purpose of sale by RSOs. That there is no appropriation of vehicles in favour of a particular dealer at the time of dispatch of vehicles from the State of Andhra Pradesh. Furthermore, when any customer approaches the authorized dealer for purchase of a vehicle, the authorized dealer in turn approaches the RSOs with the amount of consideration for the purpose of purchase of vehicle and the authorized dealer thereafter conducts a pre-delivery inspection of the identified vehicle at RSO based on the customer's demand and after such pre-delivery inspection, the vehicle is delivered duly mentioning engine number and chassis number. 9. The said sale is concluded at the RSOs in the respective States in favour of the dealer and the respective branches having accounted for the stocks so received from the Zaheerabad factory, also issue declaration in form F confirming and corroborating such accounting of the stock in the Branch Books. The RSO's in others states have been discharging the tax liability in the respective states on their sales of vehicles which were stock transfe....
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....e turnover of inter-state sales in the absence of filing of declarations in Form-C. In response to the revised show cause notice dated 16.10.2008 though the petitioner requested time for production of declarations in support of its claim of branch transfers, export sales and inter-state sales, respondent No. 1 without considering the request of the petitioner has confirmed the levy through order dated 18.12.2008. 13. It is this demand of sales tax liability by respondent No. 1 which is under challenge in the instant Writ Petition. 14. Learned counsel for the petitioner, firstly argued on the factual aspect of the transaction that the petitioner is having its plant situated at Telangana State and the respective RSOs across the country which act as its branches, who are in substance, the automobile dealerships operate within an arms-length distance with the petitioner. The RSOs merely send an estimate of predictable amount of sales to the petitioner's 'Sales Support Group', which is located in Mumbai which creates an APO exercise, which further recommends the petitioner in Telangana State an estimated amount of vehicles which may be required to be manufactured and despatched to....
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....at Jamshedpur and the final steps in the matter of such completion were taken at the stockyards. Even if the appellant took into account the requirements of the dealers which it naturally was expected to do when the vehicles were moved from the works to the stockyards it was not necessary that the number of vehicles allocated to the dealer should necessarily be delivered to him. The appropriation of the vehicles was done at the stockyards through specification of the engine and the chassis number and it was open to the appellant till then to allot any vehicle to any purchaser and to transfer the vehicles from one stockyard to another. Even the Assistant Commissioner found that on some occasion vehicles had been moved from stockyard in one State to a stockyard in another State. It is not possible to comprehend how in the above situation it could be held that the movement of the vehicles from the works to the stockyards was occasioned by any covenant or incident of the contract of sale. As regards the so-called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment. Even on the assumption that any such or....
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....e said judgment, the Hon'ble Supreme Court also opined that the question as to whether the agreement to sell is in respect of ascertained or unascertained goods, or existing or future goods, makes no difference whatsoever so far as the interpretation of Section 3(a) of the CST Act, 1956 is concerned. 19. Learned Special Government Pleader further placed reliance on the decision of the Hon'ble Supreme Court in the case of English Electric Co. of India Ltd. vs. Deputy Commercial Tax Officer (1976) 4 SCC 460 wherein it was held that 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. The relevant paragraph supporting this contention, for ready reference is reproduced hereunder, viz., "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 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 ....
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....e and the fact that the contract emanated from correspondence which passed between the Bombay branch and the company could not make any difference." 20. Having heard the contentions put forth on either side and on perusal of records, the question of law which arises for consideration is, "whether the action of respondent No. 1 in demanding tax liability for the transactions made by the petitioner under Section 3(a) of the CST Act, 1956 is illegal and arbitrary in the eyes of law?" 21. Upon a careful examination of the modus operandi disclosed by the petitioner's own pleadings and the material relied upon by the respondent No. 1, we are unable to accept the petitioner's characterisation of the impugned transactions as a branch stock transfer simpliciter falling within Section 6A of the CST Act, 1956. We are also not persuaded by the submission that this exercise is a mere 'sales prediction' bearing no legal consequence. Whatever nomenclature the petitioner chooses to ascribe to the document, its function and effect for the purposes of Section 3(a) of the CST Act, 1956 and an instrument which originates in dealer-level demand, is aggregated at a central planning stage, and dire....