This is in reference to recent Supreme Court ruling in the case of Commercial Taxes Officer Vs M/s Bombay Machinery Store whereby the apex court held below: –
‘There is no concept of constructive delivery either express or implied in section 3 of Central Sales Tax Act”. Hence, benefit cannot be denied under section 6(2) of the Central Sales Tax basis departmental circulars.’
Brief facts of the case
- The assessee had purchased electricity motors and its parts out of the State and sold them to purchasers within the Kota region of the State of Rajasthan
- These goods had remained with the transport company upon arrival in Kota for more than a month.
- For such sales, they obtained the benefit of exemption u/s 6(2)
- Quantum of sales for the year 1994-95 effected through the same process was Rs.3,15,639/- and for 1995-96 it was Rs.2,60,93/-
- The Commercial Tax Officer, Kota (CTO) rejected the claim of benefit under Section 6(2) on the basis two departmental circulars bearing S.No.115B dated 16th September, 1997 and S.No.1132A dated 15th April, 1998. Hence, accordingly levied tax along with interest and penalty was imposed under the State Act.
- Above referred Circulars sought to impose a time limit on retention of goods in the carrier’s godown, beyond which time the revenue was to treat obtaining of constructive delivery of the goods involved
- The Appeal filed by the assessee was allowed by the Deputy Commissioner (Appeals), Commercial Taxes, Kota and accordingly demand raised was quashed.
- Upon further appeal before Tax board, the order of Commissioner (Appeals) was upheld.
- The above order of Tax board was challenged by the revenue by filing two revision petitions before the Rajasthan High Court
- The High court quashed above referred two circulars and upheld the order passed by Board
- The above High court judgment was further challenged by Revenue before the Supreme Court
Relevant legal provisions
- Section 3 of Central Sales Tax Act.
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.
Explanation 1 – Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
- Section 6. Liability to tax on inter-State sales-
(1)…
(1A)…
(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods, –
(a) to the Government, or
(b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act:
Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,-
a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased
a. containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and
b) if the subsequent sale is made –
i. to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or
ii. to the Government, not being a registered dealer, a certificate referred to in clause (b) of section (4) of section 8:
Question of Law before the Supreme Court
Whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or time-frame within which delivery of the respective goods has to be taken from a carrier when the goods are delivered to a carrier for transmission in course of interstate sale ?
Judgement pronounced
- In this set of appeals we have already indicated that transfer of documents of title were effected subsequent to the goods reaching the location within destination State. But when the goods are delivered to a carrier for transmission, first explanation to Section 3 of the 1956 Act specifies that movement of the goods would be deemed to commence at the time when goods are delivered to a carrier and shall terminate at the time when delivery is taken from such carrier. The said provision does not qualify the term ‘delivery’ with any timeframe within which such delivery shall have to take place. In such circumstances fixing of timeframe by order of the Tax Administration of the State in our opinion would be impermissible.
- The High Court under the judgment rightly held that there is no place for any intendment in taxing statutes
- We are of the view that the interpretation of the Division Bench of the Delhi High Court given in the case of Arjan Dass Gupta does not lays down correct position of law whereby legal fiction has been created under Explanation I to section 3 of “Constructive delivery”
- In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the 1956 Act, then the proper course would be legislative amendment.
- The Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practice.
- For these reasons, we do not want to interfere with the judgments of the High Court in these four appeals. Hence, the appeal is dismissed
Case laws relied upon
1. Guljag Industries Limited vs. State of Rajasthan & Another reported in (2003) 129 STC 3 (Raj.)
2. Dass Gupta and Brothers vs. Commissioner of Sales Tax, Delhi Administration (1980) 45 STC 52 (Delhi)
3. CTO vs. Bhagwandas & Sons (1996 Tax World 107)
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