Case Law Details
Steel Authority of India Ltd Vs State of Odisha (Orissa High Court)
Orissa High Court held that assessee has discharged its initial burden of showing that the transaction was only a branch transfer, whereas, the Department has been unable to prove the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale. Accordingly, Central Sales Tax not leviable.
Facts-
The present revision petition by the Petitioner-Assessee was registered as a result of a reference made by the Odisha Sales Tax Appellate Tribunal referring the question that whether the Tribunal was justified in holding that goods manufactured by sale in its Rourkela Steel Plant and despatch from the plant to different branches outside the State of Odisha under the time-bound supply scheme and the demand registration scheme be treated as transactions of interstate sales coming within the purview of Section 3(a) of the Central Sales Tax Act, 1956 (CST Act).
Conclusion-
Held that the Assessee has discharged its initial burden of showing that the transaction was only a branch transfer, the Department has been unable to discharge its burden of showing that in fact the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale occasioned by a concluded contract. Consequently, the Court is not persuaded that the matter pertaining to 1988-89 should again be sent to the Tribunal for verification of each transaction to determine whether it is an interstate sale as contended by the Department. The Court notes that nearly 35 years have already elapsed since the year 1988-89 and these proceedings cannot interminably carry on.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1.The present revision petition by the Petitioner-Assessee, Steel Authority of India Ltd. (SAIL) pertains to the year 1988-89. The present revision petition was registered as a result of a reference made by the Odisha Sales Tax Appellate Tribunal, Cuttack (Tribunal) by the order dated 26th July, 1993 referring the following questions for adjudication:
(i) Whether in the facts and in the circumstances of the case, the Tribunal was justified in law in holding that goods manufactured by sale in its Rourkela Steel Plant and despatch from the plant to different branches outside the State of Odisha under the time bound supply scheme and the demand registration scheme be treated as transactions of interstate sales coming within the purview of Section 3(a) of the Central Sales Tax Act, 1956 (CST Act) ?
(ii) Whether in the facts and in the circumstances of the case, the Tribunal has ignored the fact of absence of any conceivable links with the customers and the despatch of the goods to the Branch?
2. Initially, the above case was registered as SJC No.97/94 and subsequently re-registered as TREV No.147 of 2001.
3. At the outset, it must be noted that the central plank of the submission of learned counsel for the Petitioner-SAIL was the judgment of the Supreme Court of India in Tata Engineering and Locomotive Co. Ltd. v. The Assistant Commissioner of Commercial Taxes AIR 1970 SC 1281 which dealt with more or less similar branch transfers which according to the Sales Tax Authorities in Bihar, were ‘interstate sales’. The time bound supply scheme (TBSS) and the demand registration scheme (DRS) in the present case are admittedly more or less similar to the ‘stock transfer authorization’ that formed subject matter of the above decision. Reference may be made to paras 10, 11 and 12 of the said judgment which give an idea of the kind of system that was followed in the above case:
“10. A new form of dealership agreement (Ext. 1) was introduced by the appellant after the promulgation of the Control Order. Clause 1 (a) of this agreement provided that “the company agrees to sell and supply from its works at Jamshedpur in the State of Bihar or from its depots and stockyards outside the State of Bihar to the dealer” the. vehicles which shall allotted to the dealer by the company at its discretion for resale in accordance with the provisions of the agreement. Clause 11 (b) is reproduced below :
“The dealer shall mail to the Company on the 15th of each month, or so so that the Company will be in receipt thereof by the 20th of each month, his firm order for purchases to be effected during the next succeeding month and his estimated requirements of the said vehicles for the two months following the next succeeding month, for the said vehicles.
11. In the communication which has been referred to before sent to the Assistant Commissioner it had been emphasised that although the above clause regarding the firm order was included in the dealership agreement, in fact no firm orders were called for in view of the Control Order. It was maintained that during the 8 6 8 relevant period sales were effected from the stockyards alone, the procedure adopted being as follows: The sales office of the appellant in Bombay, after taking into account the production schedule requirements of individual States, the Government directives and other relevant factors. instructed the factory at Jamshedpur to transfer stocks of vehicles to the stockyards in the various States. The instructions for transfer were given by the sales office by Stock Transfer Authorisation in which the model of the chassis and the number of units were mentioned along with the name of stockyard to which the same were to be transferred. Pursuant to the Stock Transfer Authorisation the works prepared a Stock Transfer Memo which indicated the quantity of the vehicles to be transferred to the stockyard specified in the, Memo. This memo was signed by the transport contractor appointed by the appellant for transportation of the vehicles to the stockyards. On receipt of the vehicles at the stockyard any deficiency in or damage to the vehicles was noted by the stockyard incharge. Unless the damage to the vehicles was set right they were not appropriated to any contract of sale.
12. The stocks available in the stockyards were distributed from time to time to dealers taking care to ensure that the overall supply to the dealers in any State would be in proportion to the number of orders pending with the dealer on May 1, 1963 or on the basis of the off-take by the dealer during the year ending September 30, 1962 as required by the Control Order. For this purpose allotments were made to the dealer for each month by an allocation letter by the sales office. It is claimed that the transfer of the vehicles from works to the various stockyards was a continuous process and was not related to the requirement of any particular customer whether a dealer or a corporation or a private individual. These vehicles were transferred by way of stock to the stockyards or depots from where the transactions of sale were effected. It was pointed out that there was no connection between the Stock Transfer Authorisation and the allocation letter. The vehicles were delivered to the dealers as and when they were available in the stockyards irrespective of whether or not allocation for the dealers had been made or notified to them. There bad been many instances where the vehicles had been actually delivered from the stockyards prior to the issue of the allocation letter. The vehicles delivered to the dealer from the stockyard were accounted for against the allocation over the period. It was the stockyard incharge who appropriated the required number of – vehicles to the contract of sale out of the stocks available with him and put down the vehicle engine and chassis number in the delivery challan. This was done after a delivery order had been, addressed by the sales office at Bombay to the stockyard in-charge for delivery of stated number of vehicles of specified model to a particular dealer. Till such appropriation of vehicles through specification of the engine and chassis numbers, it was always open to the company to allot any vehicle to any purchaser or to transfer the vehicles from the stockyard in one State to a stockyard in another State.”
4. As far as the present case is concerned, the case of the Assessee is that it undertakes stock transfers to its branches located outside the State of Odisha and that the goods are then offered for sale customers in those respective States. Sales tax is then collected at such place of sale as per law of that State and deposited with the said State.
5. Emphasis was laid by learned counsel for the Petitioner on what he termed as ‘standard goods’ and ‘non-standard goods’. He submitted that in the present case for the year 1988-89 what was transferred to the branches were all ‘standard goods’ in respect of which they may have been a booking under the TBSS. The Court’s attention was drawn to the proforma of registration form filled up by the customer placing a demand for supply of iron and steel materials. Clause 5 of the said form reads as under:
” It is noted that registration of the above demand will not be construed to mean any commitment on your part to supply materials.”
6. Relying on the observations of the Supreme Court in Tata Engineering and Locomotive Co. Ltd. (supra) it was submitted that once the Assessee discharges the initial burden of showing that the transaction was nothing but a branch transfer, it was for the Department to demonstrate that the movement of goods from Odisha to outside of Odisha was a result of the concluded contract arrived at between the Petitioner and the ultimate customer. According to learned counsel for the Petitioner, in none of the transactions has the Department been able to produce any materials to show that there was a concluded contract with the customer pursuant to which the movement of goods took place from Odisha to the branch outside Odisha.
7. It must be noted at this stage that in Tata Engineering and Locomotive Co. Ltd. (supra) the Supreme Court agreed with the dealer that the movement of the goods was not pursuant to any concluded contract and therefore, could not be termed as ‘interstate sales’.
8. Sunil Mishra, learned Additional Standing Counsel for the Department on the other hand submitted that for the immediate succeeding years i.e. 1989-90, 1990-91, 1991-92, 1992-93 and 1993-94, the matters had travelled up to the Central Sales Tax Appellate Authority, New Delhi (CSTAA) which remanded the matter to the Tribunal by the order reported as Steel Authority of India Ltd. v. State of Odisha, 2010 (30) VST 334 (CSTAA-DEL). He pointed out that even in Tata Engineering and Locomotive Co. Ltd. (supra) and several other decisions of the Supreme Court, it had been emphasized that there has to be a verification of ‘each transaction’ before concluding that the transaction did not amount to an interstate sale but was only a branch transfer as contended by the Assessee. He submitted that inasmuch as similar transactions under the same scheme i.e. TBSS was already subject matter of the order of the CSTAA and some of those matters on remand had been decided by the Tribunal in favour of the Department, after which SAIL has taken it in appeal to the CSTAA, the present matter should also be sent back to the Tribunal for a fresh determination whether the transactions in question for 1988-89 were interstate sales as contended by the Department or merely inter branch transfers as contended by the Assessee.
9. The above submissions have been considered. There can be no manner of doubt that an AO is required to examine each transaction forming the subject matter of the assessment proceedings to determine whether it amounts to a branch transfer as contended by the Assessee or an interstate sale as contended by the Department. Therefore, the decision in any particular year, even involving the same Assessee and the same scheme, need not necessarily form a precedent for a subsequent year since the transaction in each subsequent year will have to in any event be examined on a case by case basis. Therefore, there need not be any apprehension entertained by the Department that if the Court for the present year i.e. 1988-89 decides that the transactions in question do not amount to interstate sales then in all subsequent years ipso facto, without anything more, all the transactions for those years will also be termed only as branch transfers and not interstate sales.
10. The Court also notes that in its order in Steel Authority of India Ltd. (supra) the CSTAA did not agree with the Department that the TBSS itself was in the nature of an offer of sale. The relevant observations of the CSTAA in this regard read as under:
“18. Before closing the case, we may mention that in the written submissions filed on behalf of the State of Orissa, a stand has been taken that the TBS Scheme itself is in the nature of offer for sale and it has all the nuances of an agreement to sell. It is difficult to construe the scheme itself as constituting an offer of sale or having the attributes of a sale agreement. The TBS Scheme, it must be noted, is a broad framework within which the regulated transactions have taken place. Though the offer and ultimate agreement owe their origin to the scheme, it is wrong to characterize the scheme itself as spelling out an agreement of sale. The mere fact that the objective of the scheme is stated to give commitment to the customers regarding supply of materials against firm orders does not lead to the necessary inference that the offer and acceptance resulting in agreement of sale would have come into effect before the goods were dispatched from the steel plant. A general statement of the objective does not control the operative clauses of the scheme and the actual modalities of the transactions.”
11. From the Assessee’s point of view, sufficient documents have been placed on record in support of its contention that all the transactions forming subject matter of the assessment proceedings for 1988-89 were in fact branch transfers and nothing more. On the other hand, the Department has not been able to point out even a single document which would raise a legitimate doubt that the transaction being a concluded contract pursuant to which there was a movement of goods from the Rourkela Steel Plant, Odisha to its branch outside Odisha. In other words, while the Assessee has discharged its initial burden of showing that the transaction was only a branch transfer, the Department has been unable to discharge its burden of showing that in fact the transaction was not merely a branch transfer but was a movement of goods by way of interstate sale occasioned by a concluded contract. Consequently, the Court is not persuaded that the matter pertaining to 1988-89 should again be sent to the Tribunal for verification of each transaction to determine whether it is an interstate sale as contended by the Department. The Court notes that nearly 35 years have already elapsed since the year 1988-89 and these proceedings cannot interminably carry on.
12. For the aforementioned reasons, the questions framed are answered in favour of the Assessee and against the Department. The impugned order of the Tribunal and the corresponding orders of the First Appellate Authority and the AO are hereby set aside. In other words, it is held that for the year 1988-89 the transactions in question were branch transfers not amounting to interstate sales. It is clarified that this finding of the Court for the year 1988-89 will not preclude the Department from demonstrating for any of the subsequent years that the transactions forming subject matter of the assessment proceedings in any of those years do not amount to branch transfers but were in fact inter-state sales.
13. The revision petition is accordingly disposed of. An urgent certified copy of this order be issued as per rules.
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