This is a compilation of some important judgments taken from 45 VST to 62 VST with a single judgement from 66 VST. It is hoped that judgements would be useful for all.

Prepared byThe office of OSD (VP)Department of Sales Tax,Government of Maharashtra, Mumbai.

Disclaimer: This is only a compilation and does not express any views of the author of the document. The compilation refers to the gist. Readers may please refer to the original judgement. Although due care has been taken in preparing the gist and compiling the same, the compiler shall not be responsible to any

person for any action taken or not taken on the basis of this publication , whether directly or indirectly, on account of any inadvertent error or omission.

Sr.No.

Citation Case Name Issue DecisionClassification

1 45 VST 111 Swadeshi Udyog Assessing authority has passed original assessment The Court allowed the petition. Each Assessment

1

(All) V. Trade Tax Officer, Kanpur and another

order for 1996-97. On the ground that in the assessment year 1997-98 it was found that certain purchases were not verifiable and, therefore, inference has been drawn that the purchases of mustard oil for the year under consideration were also not verifiable and accordingly the notice for reassessment was issued. On writ petition,

year is an independent year for the purpose of assessment. Only because purchases in some other year were not verifiable, it cannot be used as a basis for initiating proceedings in another year.

2 45 VST 255 (Karn)

Dishnet Wireless Limited V. Asstt. Commr. Of Commercial Taxes, Bangalore and others

.

The petitioner, an internet service operator, extends services of broadband, web hosting, etc, and in order to access the services, a CD-ROM is provided to its customers from whom service charges are recovered. The assessment order was passed. On remand reassessment order was passed. The assessing authority rejected the contention of the petitioner that the internet services did not involve sale of CD-ROM and services were subjected to service tax and passed the orders of assessments. On writ petitions,

The Court allowed the petition. The Court observed that the orders impugned are not speaking orders. The Court observed that an examination of orders showed animate non-application of mind, as the assessing officer without adverting to the contentions advanced by the petitioner in the objections and recording findings over the same, held the objections untenable by placing reliance upon the reported opinion of this court in Bharti Airtel Limited v. State of Karnataka [2009] 22 VST 465, which had been set aside by Hon. Supreme Court.

Assessment

3 45 VST 361 (Guj)

Larsen And Toubro Ltd. And Another V. Union of India and Others.

The petitioner had manufacturing unit at Hazira in Gujarat. He entered into four contracts with ONGC for indivisible turnkey projects consisting both of supply of goods and rendition of service including labour. To execute such turnkey contracts, the petitioners had arranged for supply of certain goods from its Hazira plant at Surat to ONGC at Bombay High, which is situated around 180 kms off the baseline of coast of

Held, allowing the petition, when the sale of goods took place at Bombay High, for which the goods moved from Hazira to Bombay High, such movement does not get covered within the expression "movement of goods from one State to another" contained in clause (a) of section 3 of

High seas sales

2

India and forms part of "exclusive economic zone". It was thus the case of ONGC that title of goods supplied by the petitioner to ONGC, during the course of and in furtherance of execution of the turnkey project, passed at Bombay High and not at Hazira. The assessing authority held the opinion that such sales would be covered under the CST Act as interstate sale.

the CST Act. It is clear that the goods had not been moved from one State to another since Bombay High does not form part of any State of Union of India.

4 45 VST 407 (Bom)

Vithal Sugar Manufacturing Ltd. V. State of Maharashtra and Others.

The petitioner submitted an application on 29.7.2010 for exemption from the payment of purchase tax under section 12B of the Maharashtra Purchase Tax on Sugarcane Act, 1962. It was rejected. The petitioner called into question an order passed by the State Government in the Finance Department, rejecting the application made by the petitioner for exemption under section 12B of the Maharashtra Purchase Tax on Sugarcane Act, 1962.

Section 12B is an enabling power. The State Government is empowered to remit the whole or any part of the tax payable under the Act. The State Government is empowered to do so in order to encourage the establishment of new factories or units or for the purpose of overcoming any difficulties in respect of any factories or units in the initial period of manufacture or production of sugar. While remitting the tax, the State Government may do so for such period or periods and subject to such conditions as may be specified. The levy of tax is a sovereign function. The power to remit the payment of tax is an incidence of the sovereign power of the State. No assessee has a vested right to claim a remission from the payment of tax. An assessee may in a given situation, be aggrieved if a remission has been granted to one but not to any other assessee similarly situated. However, in this

Remission

3

case a challenge on the ground of discrimination has not been set up with any particularity. In the application for remission that was submitted by the petitioner on July 28, 2010, it was only stated that the unit is a new unit and facing financial difficulties. No details whatsoever were furnished to the State Government. The State Government was in those circumstances justified in rejecting the request for remission. The exercise of the power by State Government cannot hence be faulted.

5 45 VST 544 (Ker)

Bharat Petroleum Corporation Ltd. V. State of Kerala.

The assessing authority found that the C form filed by petitioner to be defective and unacceptable and disallowed the claim of concessional rate of tax. The first appeal authority confirmed the disallowance. The Tribunal confirmed the order. The grievance of the petitioner is that the erasures, substitutions are not sufficient to invalidate the form. He had filed confirmation letters from the buyers showing sale which he felt was sufficient.

The Court dismissed the petition. It observed that checking of few C forms showed that advance blank C form is issued by the buyer which is filled up by the seller which is a procedure impermissible under the provisions of the CST Act because buyer should certify correctness of the entries in the C form. Supplementing and substituting entries in C forms produced by the dealer by producing confirmation letters from the buyers were not permissible and therefore authorities including the Tribunal rightly rejected the petitioner' claim.

Declarations

6 46 VST 1 (Bom)

Addl. CST, VAT III, Mumbai. V. Ankit International.

The respondent filed an audit report under section 61 in the prescribed form 704 beyond the period prescribed. DC levied the penalty. The Tribunal in

Held, discretion to impose penalty extends also to quantum of penalty to be imposed.

Penalty

4

second appeal reduced the penalty by holding that the delay on the part of the respondent was not deliberate. On a appeal contending that the under section 61(2) the Commissioner has a discretion whether or not to impose a penalty in the first place but once he comes to conclusion that a penalty is liable to be imposed, he has no further discretion in regard to the extent of the penalty.

7 46 VST 35 (Karn)

Sky Gourmet Catering Pvt. Ltd. V. Asstt. Commr. Of Commercial Taxes, Bangalore and Others.

The applicant was engaged in the business of catering services which included preparation of food. The assesse entered into agreement with airlines for preparation of food and supply of meals. Under the agreement the - assessee agreed to render supply services, like loading and unloading services, transportation services, high lifting services and allied services under separate heads. The consideration paid for towards cost of the food and other services like handling, loading, etc., are separately charged and the bills are also raised separately as agreed to between the parties. The assessee is paying service tax on the gross amounts received by it towards handling charges, transportation, lifting, loading and unloading, etc. The assessment order levied VAT on turnover including all the above charges, The appellant contended the above.

Held, allowing the appeals, (i) that a contract for outdoor catering is a contract for service. By virtue of sub clause (f) of clause (29A) of article 366 it is to be treated as a composite contract and the State Legislature is competent to levy sales tax on the sale aspect. But that does not empower them to levy tax on the entire amount mentioned in the bill.

Sale price

8 46 VST 79 (MP)

Cadila Health Care Ltd. V. Additional Commr. of Commercial Taxes and Others.

Whether GRD powder and GRD bix would fall within the expression "non-alcoholic drink and beverage"

1)In Lazarus Alosius v. State of Kerala [2006] 144 STC 210 (Ker), the Full Bench of the Kerala High Court held that in a generic sense any potable liquid except water is a "beverage". From perusal of the language employed by the Legislature in entry 20(ii) of Part IV of the 1994 Act, the

Schedule entry

5

intention of the Legislature is clear that an item in order to fall under the aforesaid entry has to be in the liquid form which is manifest from the words "beverages including syrups, cordials, distilled juice, ark and essences when sold in sealed or capsuled or cork bottles or jars".2) the expression "beverage" as is commonly understood means any liquid other than water, which may be consumed neat or after dilution. Thus, the products in question, namely, GRD powder and GRD bix which are admittedly not in liquid form cannot be said to fall within the relevant entries, namely, entry 20(ii) of Part IV of Schedule II of the 1994 Act and entry 14 of Schedule II of the Entry Tax Act.

9 46 VST 179 (AP)

Bharat Electronics Limited. V. Dy. Commr. (CT), no. II Div, Vijaywada and Another

The petitioner, has several units spread all over the country. He manufactures night vision devices at Machilipatnam. The goods manufactured are transferred to the other units of the petitioner outside the State. It is the contention of the petitioner that these are not sold by Machilipatnam unit but are to be incorporated in the equipment manufactured at the other units, and are eventually sold there from to the end customers; The Dy. Commr. rejected stock transfer claim and levied tax as interstate sales.

It is only if the goods, which move from one State to another, are sold as they are and are not incorporated in, or do not form part of, other goods would the question of such transfer of goods attracting levy of tax under the CST Act, as an inter-State sale, arise. It is not in dispute that the goods supplied by the Machilipatnam unit, to other units of BEL located outside the State, are merely components of, and are incorporated in, the goods manufactured by other units of the

Branch transfer allowed

6

petitioner - company locate outside the State of A.P., and the goods transferred by the Machilipatnam unit are not sold to the Armed Forces as they are. The transfer of goods by the Machilipatnam unit, to other units of the petitioner - company located outside the State, fall within the ambit of section 6A(1) of the CST Act, and are not inter-State sales exigible to tax under section 6 of the Act. The order of the first respondent, holding that the transfer of such components by the Machilipatnam unit to other units of the petitioner company situated outside the State constitutes inter-State sales under the CST Act, must therefore be quashed.

10 46 VST 289 (Karn)

Desai Brothers Ltd. V. Additional Commr. of Commercial Taxes Zone I, Bangalore.

The assessee is a dealer in garlic and ginger paste and paying tax at four per cent under entry dealing with "fruits and vegetables". Assessing authority passed orders levying the tax at 12.5 per cent on the ground that garlic paste and ginger paste are masala.

The Court allowed the petition.1) The paste that is referred to in this entry is to be read in conjunction with the other items including pickles, even though, the said entry does not deal with ginger or garlic paste, etc. Item No. 27 of the First Schedule deals with ginger and garlic. However, the paste is not included. The honourable Supreme Court in the case of State of West Bengal v. Washi Ahmed reported in [1977] 39 STC 378 (SC) has held that ginger is to be construed as a vegetable. Further the honourable Supreme Court affirmed

Schedule entry

7

the finding of the Division Bench of the High Court which held that green ginger would fall within the meaning of the words "sabji, tarkari or sak". Accordingly they held that green ginger is a vegetable. Ginger or garlic paste in view of its non-mentioning in any of the schedules, would have to be construed into one of the closest proximate entry No. 3 of the Third Schedule which includes the words fruits and vegetables, 2) The reasoning of the revisional authority that since garlic paste and ginger paste is close to masala paste and therefore the same should be read as masala product and consequently the tax at 12.5 per cent is applicable, cannot be accepted. The closest reference cannot be made with reference to masala paste but with the reference to vegetable.

11 46 VST 359 (Mad)

Silver Spring Spinner (India) V. State of Tamil Nadu and Another.

For the year 99-2000 dealer was assessed on 12.11.04. On 22.4.2005 he was sent notice for reassessment. The contention of the petitioner is that the reassessment notice therefore, was barred by limitation, having been issued on April 22, 2005, whereas the period of five years for assessment year 1999-2000 expired on March 31, 2005. The section was amended wef 1.7.2002 providing limitation for assessment of five years from date of assessment as against five years from end of year to which assessment related, which is not

Held, amendment made before end of the expiry of unamended provision applies.

Limitation

8

retrospective.

12 46 VST 453 (Mad)

Venkateswara Industries. V. State of Tamil Nadu.

The petitioner is engaged in the manufacture of spares and accessories and tools for tractors, in particular as per the specifications given by the major tractor manufacturers namely TAFE. Of the various spares and tools supplied by the petitioner, "Grease gun" is one such item was specifically designed by M/s. TAFE (customer) and which as per petitioner is an important accessory., He contended that the "grease gun" manufactured and supplied to M/s. TAFE, cannot be used by any other manufacturer of tractors. The petitioner claimed that the sale of "grease gun" to M/s. TAFE, would attract the levy of four per cent tax as the said item falls under tools/accessories. According to the assessing officer, “grease gun" were not exclusive spare parts for tractors and can be used for other tractors also, it will fall under the residuary clause.

The Court allowed the petition. By virtue of the nature of its usage "grease gun" can be used as a device for application of grease into the bearings and other parts of the vehicle, namely, the tractor manufactured by M/s. TAFE. The further fact that the manufacture of such "grease gun" by the petitioner is according to the specifications of M/s. TAFE, and that it cannot be freely used by the other brand of tractors is one other relevant factor to support the stand of the petitioner that it is a part of an implement of the tractor manufactured by M/s. TAFE.

Schedule entry

13 46 VST 470(Mad)

State of Tamil Nadu V. Garware Wall Ropes

Whether custom duty drawback on export of goods form part of sale price.

1) Where the receipt is from any third party who has nothing to do with the sale and the payment has no relevance or reference to the sale, the same could not form part of the sale transaction; hence, there is no question of including the same under the head of "turnover".

2) When the duty drawback was as per the scheme given under the Excise and Customs Rules and that there was no agreement between the purchaser and the seller on the aspect of duty drawback and it never

Sale price

9

received any consideration and rightly so in the sale effected, the question of roping in those receipts from the Government of India long after the sale does not arise, to be included in the turnover for the purpose of assessment.

14 46 VST 512 (Mad)

Tools Machinery And Products V. State of Tamil Nadu.

The petitioner is a dealer in motor bus accessories. He purchased the motor bus accessories such as glass and resold the goods inside the State at eight per cent under entry for auto parts and accessories. The assessing officer has levied tax at 12 per cent as glassware.

The Court allowed the petition. The schedule entry for glassware covered glass products other than those specified elsewhere, So it is clear that when goods are specified elsewhere the same would not fall under entry for glass. The dealer purchased glass and sold only to bus operators. Therefore the goods would be covered by entry for motor parts.

Schedule entry

15 46 VST 549 (P&H)

State of Punjab V. Anapurna Impex Pvt. Ltd.

For the assessment year 2003-04 the assessment in respect of the assessee was passed on 15.4.2008. Though extension of time for framing the assessment was granted by the Commr in exercise of power u/s 11(10) of the Act,, it was after the expiry of the statutory period prescribed u/s 11, i.e. three years from the last date for filing the return. On appeal the Tribunal set aside the assessment as time-barred. On appeal :

Held, dismissing the appeal, the power of Commissioner to extend time for completing assessment to be exercised before assessment becomes time barred. The high Court followed the previous High Court judgment in Shreyans Industries Limited (18 VST 493). It was held that, deferment of assessment has the effect of enlarging the period of limitation which did not expire by the time the deferment order is contemplated to be passed. When once the period of limitation expires, the immunity against being subject to assessment sets in and the

Limitation

10

right to make assessment gets extinguished. There is no question of deferring assessment which had already become time-barred. Therefore the order extending time for completing the assessment for the year 2000-01. passed on 17.8.2007, i.e. beyond three years from the last date prescribed for furnishing the last return in respect of that period as prescribed under section 11(3) of the Act was liable to be set aside.

16 47 VST 1 (CSTAA)

Hindustan Zinc Limited V. State of Andhra Pradesh and Others.

In the concerned assessment year 1985-86, the appellant had not disclosed the nature of the transactions now involved. The transactions involved are the supply of zinc to M/s. Indian Iron & Steel Company Limited (IISCO) and to M/s. Tata Iron and Steel Company Limited (TISCO). The supplies to these companies were made by the Calcutta stock point. The modus operandi adopted was for IISCO and TISCO to respond to offers made by the Calcutta office of the appellant and offering to purchase the quantities required by them at the prevailing rates and placing orders for purchase of their monthly requirements, on accepting the conditions imposed by the appellant. On information gathered in respect of these transactions from IISCO and TISCO, the assessing officer issued a notice to the appellant to show cause why the two transactions involved here, could not be assessed to tax under the Act. The show-cause notice indicated that it was found that it was pursuant to orders placed on the branch office of the appellant that the goods were sent to the respective buyers for supply through its branch

The Court dismissed the petition. it is indicated that the circumstances have to be appreciated and that to become an inter-State sale, it was not even necessary that the goods be ascertainable before dispatch. In the case on hand, it is seen that specific offers were made by the branch office of the appellant to IISCO and TISCO for sale of their products on the conditions mentioned therein. The conditions were accepted by IISCO and TISCO and they placed orders on the appellant for supply of specified quantities of zinc of specified purity in specified monthly quantities. The authorities below and the Tribunal cannot be faulted for coming to the conclusion that in the circumstances the orders placed by IISCO and TISCO were firm orders for specific

Branch Transfer not allowed

11

office and thus the movement of goods was occasioned by the orders for purchase placed by IISCO and TISCO on the branch. The appellant pleaded branch transfer.

quantities of the products. The attempt of the appellant to distance itself from the offers and acceptance secured by the branch office at Kolkata, can only be considered as a desperate attempt to get over the effect of that part of the transaction in assessing the nature of the sale involved herein. On an appreciation of the facts indicated by the orders under appeal, It is true that even though the orders placed by IISCO and TISCO indicated the specified quantities to be supplied every month and the supplies did not always conform to it, may not tilt the scale in favour of the appellant. Similarly, the fact that in some months, more quantities were delivered to the companies or that the goods sent from Visakhapatnam were not earmarked, may not also tilt the scale.

17 47 VST 66 (All)

Indian Oil Corporation Ltd. V. CCT, U.P., Lucknow.

The petitioner had its refinery unit at Mathura wherein it manufactures petroleum products. The assessing authority added the amount of excise duty paid by the purchaser outside the State of UP in the turnover. He found that the applicant had not included the excise duty in the sale price of the petroleum products which have been transferred from its bonded warehouse to other marketing companies outside UP.

Held, no goods shall be removed from any warehouse except as on payment of duty or, where so permitted by the Central Government by notification in this behalf for removal to another warehouse or for export. The aforesaid provision clearly contemplates that the excise duty is the leviable on the manufactured product and the duty is payable at the point of removal. No goods can be

Sale price-deferred excise duty also a part of it.

12

removed from the factory or the warehouse without the payment of duty. Therefore, the initial liability to pay the Central excise duty was on the applicant while removing the goods from its factory or its warehouse. However, in case if the permission has been granted to remove the goods from the factory or warehouse to the warehouse licensed under section 140 belonging to some other person, without payment of duty, the duty is payable on the clearance of goods from such warehouse. In such circumstances the payment of excise duty has only been deferred or extended from the stage of removal of goods from the factory or the warehouse of the applicant to the warehouse of the purchaser, but the liability to pay the excise duty, which is chargeable and payable under the Act, by the manufacturer does not cease. The incidence of excise duty is directly relatable to manufacture but its collection can be deferred to later stage as a measure of convenience or expediency.

18 47 VST 207 (Karn)

O.P. Developers. V. State of Karnataka and Others.

The assessee is engaged in the execution of civil works contract and also undertakes construction of apartments. The authority has passed ex parte assessment orders for both the years resorting to best

The Court dismissed the petition; No revisional jurisdiction is to be exercised in respect of the matter which is the subject-matter of appeal.

Revision- scope

13

judgment assessment, as the assessee failed to produce books of account before them. Aggrieved by these ex parte orders and penalty order, the assessee preferred two appeals before the Joint Commissioner of Commercial Taxes (Appeals).

During the pendency of the said appeal, the Additional Commissioner of Commercial Taxes I, Bangalore in exercise of his revisional power under section 22A(1) of the Act reviewed that portion of the order of the appellate authority which had granted the benefit to the assessee. It is that order which is challenged by the assessee in this appeal.

However, there is no prohibition in law for the revisional authority to exercise the revisional jurisdiction in respect of the matter which is not the subject-matter of appeal. Merely because appeal is pending his power is not denuded.

19 47 VST 343 (Delhi)

Giesccke & Debrient I.P. Ltd. V. Commissioner of Sales Tax (Delhi).

The appellant imported bank note processing system BPS. under bill of entry which described it as an importer and M/s. Zion Express Cargo Private Ltd., as the cargo agent. On the basis that this import was back to back import in view of the order placed by Canara Bank, that after this order was placed on the dealer, it placed the order on German company, the dealer claimed that the import and transfer is covered by section 5(2) of the CST Act". The Tribunal decided the question against the dealer. On appeal :

The Court dismissed the appeal, The appellant was the importer. The appellant no doubt had entered into an earlier contract with Canara Bank, Bangalore, but for the purpose of the said contract the appellant was not the agent of the supplier in Germany. The contract between the Canara Bank, Bangalore, was on principal to principal basis. The obligation to comply with the purchase order was that of the appellant alone. Similarly, when the appellant entered into contract with the German company it was a contract on principal to principal basis. Canara Bank, Bangalore, did not have privity of contract whatsoever with the German company. Any default of the contract in the first contract with Canara Bank,

Sale in the course of import disallowed

14

Bangalore, would be liability and obligation of the appellant and not that of the German company. Thus, they were two independent transactions. The imported goods could have been diverted to another third person, without violation/default of the contract between the appellant and the Canara Bank, Bangalore.

20 47 VST 358 (Mad)

Kongoor Textile Process. V. Jt. Commissioner (CT), Chepauk, Chennai and Another.

The petitioner is a dyeing contractor who had effected inter-State purchases of dyes and chemicals. Originally the assessee was under the impression that chemicals purchased and used in the execution of the dyeing contract were exempted from tax. It was pointed out to assessee that in the case of dyes, there was 50 per cent of transfer of property and in the case of chemicals, there was no transfer of property at all. Based on the resolution, the assessee paid the taxes on 50 per cent of the dyes used in the dying contract. Having regard to the admission, the assessee paid the tax thereon under the revised return. However, penalty was levied by assessing authority.

The Court dismissed the petition. When once the revised return or original return is filed, admitting the liability, the payment is treated as to a liability date backs to the date when the payment of tax ought to have been made. When once there is default in the payment of tax in accordance with the provisions of the Act, the assessee becomes defaulter, thus attracting penal consequences. Wherever the assessee defaults in meeting the admitted tax liability within the statutory period, interest is leviable and is an automatic one. Consistently, the view as regards levy of interest is that it is an automatic levy and there is no question of discretion reserved in the matter of levy of penalty.

Interest

21 47 VST 363 (Ker)

Jainulavudheen. V. State of Kerala.

In the course of business the petitioner purchased old vehicles from various persons, dismantled the same and sold the items as scrap by weight taxable at four per

The Court dismissed the petition. It is common knowledge that the spares and components recovered on

Schedule entry – scrap or not?

15

cent. During the inspection the intelligence officer noticed that scrap portion of the dismantled vehicle is sold in the breaking yard itself and usable automobile spare parts are recovered by the petitioner from the dismantled vehicles and the same are brought to shop and sold as automobile spares. The intelligence officer found on inspection that the items sold are spare parts of automobiles usable as such and so much so tax payable is at the rate shown under the specific entry in the Act and the petitioner's effort by showing sale as by weight is only to avoid payment of actual rate of tax.

dismantling an old automobile would not have suffered uniform erosion. Scrap is purchased only for melting and for re-rolling the primary metal. However, when old spare parts are sold as such, those are for use as spare parts in automobiles and so much so tax is leviable at the rate applicable for the commodity. The findings of the intelligence officer that the rate of tax applicable for sale of old automobile spare parts is the rate applicable to automobile spare parts is perfectly correct.

22 47 VST 487 (Ker)

Supreme Food Industries. V. State of Kerala.

The petitioner engaged in manufacture and sale of ice cream made bulk purchases of deep freezers and delivered the same to distributors against security deposits almost equal to the value of deep freezers, it was also provided that deposit to be adjusted in 4 equal instalments for wear and tear. He claimed that supply of deep freezers against collection of security from them does not amount to sale. He made an alternate claim for input tax credit, which is the tax paid on the purchase thereof. The Tribunal rejected both the claims supply of deep freezers is sale of capital goods.

Held, the transaction is a pure sale but on credit basis payable in four instalments. The lower authorities including the Tribunal rightly found that the agreement does not reflect the nature of transaction which is nothing but outright sale camouflaging the consideration as deposit, which will be adjusted in four equal instalments in the course of four years.

Sale price

16

23 48 VST 231 (AP)

Ramky Infrastructure Ltd. V. State of Andhra Pradesh.

The petitioner is an incorporated entity engaged in execution of the works contract. a dealer, who obtains certificate in form L1 exercising option for composition of tax payable under sec Act cannot withdraw the option during the currency of L1 certificate. A show-cause notice was issued and the petitioner filed objections.

The Court dismissed the petition. Option once exercised and permission granted for entire year, dealer not entitled to resile and seek assessment under regular provision.

Composition

24 48 VST 443 (SC)

Hotel Ashoka (Indian Tour. Dev. Cor. Ltd.). V. Asst. Commissioner of Commercial Taxes and Another.

The appellant having its duty free shops at all major International Airports in India. At the said duty free shops, the appellant sells several articles including liquor to foreigners and also to Indians, who are going abroad or coming to India by air. The appellant claimed sale in the course of import. The AC rejected the contention of the dealer that the sale made by it in the duty-free shops was a sale in the course of import u/s 5(2) of the CST Act. # as the goods were sold directly to the passengers and even the delivery of goods at the duty free shops was made before importing the goods or before the goods had crossed the customs frontiers of India. levied the tax on the goods sold by the dealer in the duty-free shop.

The Supreme Court allowed the petition and held that sale of goods at duty-free shop in airport is sale in the course of import. After purchase of the goods at the duty free shops, passengers enter the country by crossing the customs frontiers. The goods were actually delivered to the customers and sales were not effected by transfer of documents of title to the goods and, therefore, it cannot be said that no tax could have been levied on the sales effected at the duty free shops. According to the AC, crossing of customs frontiers had no significance because once the goods are brought into our country and especially in the State of Karnataka, all sales effected in the State of Karnataka would be subject to tax as per the provisions of the Act. The duty free shops situated at Bengaluru International Airport are situated in the State of Karnataka and, therefore, sales effected at the said shops would be taxable under the provisions of the

Sale in the course of import

17

Act.

25 48 VST 496 (Bom)

Whirlpool of India Ltd. V. State of Maharashtra and Others.

The petitioner was entitled to the benefits of packages scheme of incentives 1993 whereunder he was entitled to claim refund tax paid on purchases. He submitted bank guarantee for facilitating grant of refund. The Dept. contended that the Commissioner was duty bound to verify as to whether and to what extent a refund was due.

The Court allowed the petition. The Commissioner is not precluded from carrying out a due verification. Refunds relate to the public revenues. The Commissioner as the custodian of the public revenue is duty bound to ensure that the provisions of Section 51 are not being misused and that a refund is due. Such an exercise is not prohibited by the statute. However, refund applications cannot be kept pending indefinitely. The basic purpose of Section 51 is to streamline the grant of refunds to registered dealers and particularly in the case of those falling in the special category carved out in sub-section (3). Having regard to these provisions, the court observed that there would be no justification for the sales tax department to keep the application of the Petitioner pending for the grant of a refund inordinately without explanation.

Refund

26 48 VST 550 (MP)

Paras Pharmaceuticals Ltd. V. State of Madhya Pradesh and Others.

According to the assesse Borosoft Natural and Borosoft Cream are items which can be used to treat specific medical conditions and can also be used otherwise by persons who are not suffering from any such medical problems, for enhancement of beauty, and therefore these items would be taxable under entry 41 of Part III of Schedule II. Dermicool powder which is described as

The assessee accepted that Borosoft Natural and Borosoft Cream are not medicines. Prickly heat powder is normally used for relieving prickly heat problem. Dermicool powder which is described as a prickly heat powder is also commonly understood

Schedule entry

18

a prickly heat powder is a medicine. to be of use in treating prickly problem and not as an ordinary talcum powder. Therefore item Dermicool powder must be held to be a medicine.

27 49 VST 1 (SC)

IFB Industries Ltd. V. State of Kerala.

It has a scheme of trade discount for its dealers under which the dealer, on achieving a pre-set sale target gets certain discount on the price for which it purchased the articles from the manufacturer.

Hon. Supreme court overruled the high court judgment, and allowed the appeal. It held that the assessing authority shall not reject the claim for deduction of the amounts of trade discount solely on the grounds that discount amounts were not shown in the sale invoices.

Sale price (discounts)

28 49 VST14 (Bom)

Commissioner of Sales Tax, Maharashtra State. V. Pure Helium (India) Ltd.

The assessee had effected sales of Helium gas to ONGC which is situated about 150 km from the coast line of Maharashtra. The area falls within the exclusive economic zone on the continental shelf. The assessee claimed that the sales which were effected were sales in the course of export under Sec 5(1) of the CST Act for the reason that Mumbai High falls beyond the territorial waters of India.

The court held that both before and after 15.1.1987, the sale which was occasioned by the movement of the goods from the State of Maharashtra to Mumbai High was not sale in the course of export. The court also held that the State has not sought to levy sales tax in the on the basis that there was a local sale. The assessment sought to be effected on the basis that there was a sale in the course of interstate trade and commerce. Having held that the state was not justified in brining the sale to tax as a sale in the course of inter-state trade and commerce, the court cannot be called upon to decide any other hypothetical issue.

Sale to Bombay High

19

29 49 VST 98 (AP)

State of Andhra Pradesh. V. Bharat Sanchar Nigam Limited.

It is contended on behalf of the petitioners - service providers that the use/utility of the SIM card remains the same in both prepaid and postpaid connections; in the case of a pre-paid SIM card, service charge is collected mainly for activating the connection; service tax is paid on this consideration as "telecommunication service"; a SIM card is incidental to the rendering of telecommunication service; SIM cards are not sold by the service provider to the subscribers, and are not chargeable to tax under the Act; even if it is held that SIM cards are "goods" and it is sold, the price charged for the starter kit does not constitute the sale consideration; sales tax is sought to be imposed even on the activation charges component of the value of a starter kit though it does not amount to "sale"; Post-paid SIM card charges, which represent the call charges collected by the petitioners from their subscribers, cannot be subjected to tax as there is no sale/deemed sale of goods; and, in any event, the purchase price of the SIM card in the hands of the petitioner, and a reasonable profit thereon, can alone be brought to tax under the Act. Revenue contended that, while the SIM card enables access to the cellular network, it can also store data of phone calls, contact numbers, games, music, etc.; it is capable of being bought and sold; it has utility; it is capable of being transferred, delivered and stored; SIM cards have all the attributes of "goods", and can be subjected to "sale"; pre-paid SIM cards are sold to customers, through distributors, for a price; the charges collected from the subscriber are for the SIM card; they are not collected for the service of activating the SIM card; SIM cards are not activated at the time of their sale to the distributors; and the amounts collected

Held: 1. SIM cards, recharge coupon vouchers, mobile telephone rentals on post-paid connections, value added services such as ring tones, music down loads, wall papers, etc., and proceeds received on sharing of infrastructure cannot be subjected to tax.2. Telephone instruments, mobile handsets, modems and Caller ID instruments are "goods" 3. In case these goods are sold or supplied to the subscribers by the service providers such "sale" or the "transfer of the right to use these goods" would be liable to tax.4. However, if, these goods are procured by the subscribers from suppliers, the monthly charges, paid to service provider, would fall within "telecommunication service" and cannot be made liable to tax under the Act. 5. If non-refundable deposits are collected, by the service providers from their distributors, for supply of SIM cards, recharge voucher coupons and the like, cannot be brought to tax under the provisions of the Act. 6. If the non-refundable deposit is received against supply of telephone instruments, batteries, accumulators, etc., these deposits would form part

Schedule entry

20

for issue of prepaid SIM cards, and rentals for postpaidSIM cards, represent the consideration for "sale" and "deemed sale", respectively.

of the sale consideration 7. Likewise, if refundable deposits are collected from post-paid subscribers as security for payment of dues towards STD or ISD facilities provided by the service provider, then such deposits, not being "goods", cannot be brought to tax under the Act. 8. If, however, the refundable deposits are for supply of telephone instrument, handset, etc., which are "goods” these refundable deposits may also form part of the sale consideration under section 2(29)(b) of the Act, and would be chargeable to tax under section 4 thereof.

30 49 VST 134 (Ker)

Cadbury India Limited. V. State of Kerala.

The petitioner purchased raw cocoa beans through agents who purchased from farmers as well as from small traders and delivered them at the godowns of the company. There is written agreement between the company and the agents providing for reimbursement of price paid to farmers/dealers, all the cost incurred by the agents and also commission payable to them at the agreed rate. The assessing officer after examining the terms of the agreement and the accounts came to the conclusion that the agency agreement is only a device to avoid payment of tax on the taxable turnover which is the cost incurred by the company until goods reach their stockyard where delivery is given by the agents. The assessing officer added 15 per cent of other reimbursements to purchase price reimbursed by the

Held, dismissing the petition, the agency arrangement appears to be only a scheme for splitting up of price between purchase cost, transport cost, commission, etc., to avoid tax on part of the turnover.

Agency

21

petitioners to the agent for the payment to farmers and dealers and passed assessment orders.

31 49 VST 200 (Mad)

State of Tamil Nadu . V. Mahaveer Chemicals Industries

The assessee herein is a dealer in chemicals, acids and solvents. The investigation wing inspected the premises of the assessee. The assessee claimed interstate sale after taking constructive delivery of the goods The assessee contended that after the purchase, even before taking delivery, they effected further inter-State sales to their end-users within and outside the State of Tamil Nadu. Thus, by filing EI and EII and form C declaration, the assessee made claim under section 6(2) of the Central Sales Tax Act, 1956. The said claim was rejected by the assessing authority by taking a view that the assessee had effected sale after arrival of the goods at Coimbatore after taking the constructive delivery of goods at Coimbatore. Thus, the assessing authority viewed that the assessee was not entitled to exemption under section 6(2) of the Central Sales Tax Act. The assessing officer pointed out that verification of the records showed that M/s. Mahaveer Chemicals were appointed as registered dealers to deal with the chemicals, viz., liquid/gaseous chemicals manufactured by M/s. Cochin Refineries Limited, Ernakulam, Kerala. Admittedly the said Mahaveer Chemicals and the assessee, viz. Mahaveer Chemicals Industries are located in the same premises, at No. 16/56, Mill Road, Coimbatore. On the purchase effected by M/s. Mahaveer Chemicals from M/s. Cochin Refineries Limited, the liquid/gaseous chemicals were transported in tanker lorries. The transport, delivery and use of such chemicals were covered by Central excise provisions. As per this, there was no necessity to maintain a godown for storing before distributing to the ultimate buyers.

Held, allowing the petition, the documents accompanying the movement of the goods show that the journey started from Cochin to Coimbatore. The Appellate Assistant Commissioner rightly pointed out that there was no obligation on the part of the carrier to transport the goods further to any place beyond Coimbatore. Thus the subsequent arrangement that the assessee had with the same transporter to carry the goods to another place for a different person however did not make the movement a continuation of the original inter-State sale. Further movement done as per the fresh invoices prepared and trip sheets and way-bill clearly pointed out to fresh movement from Coimbatore to other State and to the local purchaser from the assessee.

Sale under section 6(2) of the CST Act disallowed

22

The Revenue pointed out that verification of the purchase invoices, transport documents and other statements, revealed that after purchase, M/s. Mahaveer Chemicals transported them to Coimbatore. The transport documents revealed that the movement of goods started from Cochin in tanker lorries to Coimbatore and had the end destination at Coimbatore, it being the delivery place. After the receipt of the goods in Coimbatore, Mahaveer Chemicals effected EI sale to the assessee herein which was situated in the same premises. Since the sale was effected by transfer of documents of title to goods, while in transit, the sale was treated as one falling under section 3(b) of the Central Sales Tax Act. However, as regards EII sales, said to have been effected by the respondent/assessee, it was pointed out that the inspection of the business premises of the assessee on September 9, 1995 revealed that after taking delivery, the assessee had used form XX delivery notes to transport chemicals in tankers to the end-users within and outside the State of Tamil Nadu. Thus, the authorities came to the conclusion that on the basis of the available materials, after the endorsement in favour of the assessee herein, the movement of the goods had terminated at Coimbatore itself. There afterwards, on the assessee had taken constructive delivery at Coimbatore itself, the assessee effected fresh sale. The authorities held that the claim of the assessee for second inter-State sales could not be sustained.

32 49 VST 252 (All)

Raj Kumar Gaba. V. State of U.P. and Others.

The sales tax dues of the assessment year 2002-03 (State) vide assessment order dated March 18, 2006, are sought to be recovered from the petitioner, the Chairman of the society in the relevant period,

The Court dismissed the petition. That the dues relate to the assessment year 2003-04 when the petitioner was the President of the

Recovery

23

registered under the Societies Registration Act as "Maa Vaishno Gramodyog Sansthan". Learned counsel for the petitioner states that the petitioner had resigned in the year 2004, after which a new committee of management was elected. Shri. Madan Lal Arora, respondent No. 5, was elected as the Manager of the society. He had stopped the business of the society and sold away its entire assets in 2006.

The petitioner submits that earlier the recovery was withdrawn on the ground that the petitioner had resigned from the society in the year 2004. Subsequently Trade Tax Department in pursuance to the provisions of section 8(3) of the U.P. Trade Tax Act, 1948 has initiated recovery against the petitioner, as the Chairman of the society in the relevant assessment year, giving rise to this writ petition.

society and is still a member of the society and dues could be recovered from him under the bye laws from the petitioner. Under the bye laws it is provided that in case of debt all members of the society will be equally responsible.

33 49 VST 256 (Karn)

Habib Agro Industries. V. Commissioner of commercial Taxes, Bangalore.

The assessee has a manufacturing unit in Mandya District, and a branch office at Coimbatore. He claimed an exemption in respect of stock transfer of de-oiled rice bran to its branch in Coimbatore. They were duly supported by form F issued by the said branch office. At an inspection of the business premises eight freight letter pads maintained by the assessee for despatch of de-oiled rice bran directly to the outside consignees were seized containing name and address of the purchaser, quantity sent, vehicle number in which goods were moved from Boothana Hosur. The assessing authority on the ground that the F forms disclosed that bills were raised in favour of dealers in Tamil Nadu and the goods were dispatched from Mandya directly to them, levied CST and penalty u/s 9(2).

The real transaction noted in the freight letter is a sale. This is not disclosed. The entire stock transfer claimed is similar inter-State sales disguised as stock transfer. The assessee has disguised inter-State sales as stock transfer, though the goods have moved as a result of sale directly to the ultimate purchaser. The evidence gathered showed that the good were directly sold to the ultimate purchaser with documents of the sale bill raised at the factory in the name of the branch. The material and particularly, the documents laid on clearly shows the intention on the

Branch transfer not allowed

24

part of the assessee to avoid the payment of Central sales tax and misleading the authorities. The contents of form F are also not true. It also discloses the guilty mind. Under these circumstances, the authorities were justified in disallowing the exemption and were justified in imposing penalty.

34 49 VST 339 (Bom)

Taurus Auto Dealers Pvt. Ltd. V. D.P. Amberaoand Another.

Whether imposing or charging of interest at flat rate 25% u/s 30(4) of MVAT Act retrospectively, which came into force wef 1.4.2009 in respect of late payment of tax for the years 2005-06, 2006-07 and 2007-08 is valid in law

The court dismissed the petition, The only issue for consideration before this court is whether imposing/charging of interest under Section 30(4) of the Act in respect of the late payment of tax for the years 2005-06, 2006-07 and 2007-08 is valid in law. It is an undisputed position that sub-section (4) of Section 30 of the Act came into force with effect from 1 July 2009 providing for imposition of interest at a flat rate at 25 per cent of the additional tax payable as per the revised returns. In the present case, the audit of the petitioner's accounts under the Act for the years 2005-06, 2006-07 and 2007-08 took place on 8 July 2009. Intimation of short payment of tax under Section 63(7) of the Act was made on 16 July 2009 by the Respondents. Consequent to the above Intimation, on 20 August 2009

Interest

25

the Petitioner filed revised returns for the years 2005-06, 2006-07 and 2007-08 and also paid the differential tax demanded consequent to the audit, aggregating to Rs. 41,38,416/- along with interest thereon under Section 30(3) of the Act. Sub-section (4) of Section 30 of the Act provides for interest at a flat rate of a sum equal to 25 per cent of the additional tax payable as per the revised returns. It does not provide for charging of interest keeping in view the delay in paying the taxes but provides for a flat rate depending upon the quantum of additional tax payable consequent to filing of the revised return. The demand for interest is not for the period prior to 1 July 2009 as the interest is being charged not with regard to a delay (period/time wise) in making the payment of tax to the State but is charged at a flat rate of 25 per cent of the additional tax payable as per the revised returns. In the circumstances, in the present case, no interest is being charged for the period prior to 1 July 2009. Consequently, Section 30(4) of the Act is not being applied retrospectively. This is particularly so as all the acts leading to the demand of interest such as the audit,

26

intimation letter under Section 63(7) of the Act, filing of revised returns and the payment of differential tax all took place after 1 July 2009. Merely because a part of the requisites for an action is drawn from a time prior to its passing, that would not make the action retrospective.

35 49 VST 371 (All)

Diamond Cement. V. State of U.P. and Others.

The petitioner separately charged freight and claimed exemption on it. The assessing authority rejected the claim on the ground that petitioner had not disclosed the challan/delivery challan. However Tribunal held that no tax could be imposed on freight. Addl CST granted the permission for reassessment on the ground that charging of freight separately was not verified., On writ,

The petition was dismissed. The petitioner has apart from making arguments, had not relied on any such material to show that the petitioner had disclosed the manner and method of charging freight, before any of the authorities from the stage of assessment to the order authorising reassessment. The petitioner had not disclosed the challan/delivery challan/invoices. The petitioner did not produce the details as to how the goods were transported and the freight was charged. The proof of charging freight separately was not produced nor could be verified from the audit report, profit and loss account, balance sheet or trial balance. The Tribunal erred in observing that the assessing authority had accepted the declared turnover, and the account books, and that the account books and bill books produced before the assessing

Sale price

27

authority shows that the freight was charged separately. The assessing authority had clearly observed and recorded finding that the petitioner did not produce the material relating to freight and did not produce, in spite of demand, the challan, delivery challan, invoices and thus rejected the plea of exemption. The material discovered by the Department from the returns filed by the petitioner in Central Excise Department for levy of service tax, the railway receipts, and the non-production of the document, bill books and challans, before the assessing authority, clearly establishes that the petitioner company did not produce the relevant material to claim that the entire freight was charged separately.

36 49 VST 418 (Gauhati)

State of Arunachal Pradesh and Others. V. BuishiYadaMotors.

The dealer is an authorised dealer of Maruti Udyog Limited , in Arunachal Pradesh. The tax on local sales of motor vehicles is 12%. The State Government, reduced the tax rate to 2% on inter-state sale by issuing notification dt. 2.5.2001 u/s 8(5) of CST Act. However it was noticed that, in order to avoid payment of local tax, sold motor vehicles by showing addresses of persons, who claimed to be the resident of State of Assam. But after the sale of the vehicle, the same vehicle was brought back and registered in Arunachal Pradesh. This gave enough indication that the respondent was evading payment of sales tax in terms of intra-State

The Court dismissed the petition of the State. It observed that the mere fact that the vehicles have been subsequently registered in the State of Arunachal Pradesh will not make the first sale intra-State sale in the absence of any material to show that notwithstanding the terms of the contract of sale between the petitioner and the buyers thereof, vehicles, in question, had not moved at all out of the State of Arunachal

 Inter-State Sale

28

sales tax leviable. Subsequently, in pursuance of letter issued by Commr, Addl DC directed vide letter dated February 7, 2002 , to stop selling motor vehicles to the customers outside the State of Arunachal Pradesh with immediate effect. The dealer challenged the legality of the letter dt 7.2.2002, notice dt 27.5.2002. A single judge allowed the writ and the State filed an appeal.

Pradesh. It was held that the movements of the vehicles to other States was necessitated by the contracts themselves and the movements of the vehicles were inextricably interlinked with the sale and therefore the sale is an inter-state sale.

37 50 VST 103 (Uttra)

B.T.C. Industries. V.Commissioner, Trade Tax/Commercial Tax, Dehradun.

Trucks loaded with coal were intercepted. At the time when such interception took place, though it was held out that the intercepted coals are meant for petitioner, there was no document suggesting that those were tax-paid. As a result, after obtaining security, the goods were permitted to be released. Subsequently, on notice to the petitioner , penalty proceedings were initiated. The petitioner contended that coal is used as fuel in its industry and, accordingly, it has tax exemption. The petitioner disclosed that it has issued C form to its supplier and the intercepted coal was being supplied under the said C form. It was contended that since the coal was being imported through a route, which is not normally adopted, it cannot be held that there was any clandestine intention in using the said route, inasmuch as tax on coal for the petitioner is exempted.

The Court dismissed the petition. Fact remains that in the C form, that was issued by the petitioner in favour of its supplier, was all blank at the time when the same was handed over to the supplier of the petitioner. The petitioner did not indicate the particulars of the order placed upon its supplier, which is a requirement, as would be evident from the form C. Form C was purported to be utilized by showing that the intercepted coals were being supplied to the petitioner. This form C was not with the goods intercepted. This part of the form C was inserted therefore subsequent to interception of the goods in question. By not filling up the form C in the manner the same was required to be filled up, i.e., by not mentioning the order number in the form C, petitioner gave a blank cheque to its supplier, on the basis whereof the supplier could supply coal to the

Declarations

29

petitioner and in addition to such coal, if it wanted to, could deal with coal otherwise in the State of Uttarakhand. What was the real intention in relation to the intercepted coal is anybody's guess, since one truck, it is not disputed, did not carry any paper. That being the situation, by reason of failure on the part of the petitioner in protecting itself while issuing the form C, it failed to ensure that the goods to be supplied thereunder would only be supplied to the petitioner for being used as fuel, for which there is a tax exemption.

38 50 VST 122 (Mad)

State of Tamil Nadu V. Jayesh Brothers.

"Whether, the Tribunal is right in holding the masala powder is not food items taxable under entry 63, Part D of the First Schedule when there is a specific entry in item 1(ix) of Part E of the First Schedule ?"

Held-Masala powder not by itself food item and will not be covered by the entry for food.

Schedule entry

39 50 VST 147 (Mad)

Sundaram Industries Ltd. V. State of Tamil Nadu.

The assessee a company engaged in retreading of tyres on a works contract basis. In respect of the works undertaken, the assessee quoted a consolidated amount, which they claimed as inclusive of tax. In the return made, since the assessee had not separately maintained accounts as regards the amount referable towards transfer of property in goods and labour charges, the assessee apportioned 70 per cent of the amount as per the statute, as taxable turnover. The

The Court dismissed the petition. In the instant case, the dealer had charged a consolidated amount for the execution of the works contract. The indivisible contract showed no bifurcation as regards labour and materials. Even in the accounts, the assessee did not have the details on the cost of the materials used to have

Sale price (works contract)

30

officer viewed that since the assessee had charged a lump sum amount and no separate amount was noted in the bills towards collection of sales tax and that the tax was only notionally stated so in the accounts, the entire turnover at 70 per cent was to be assessed to tax. The assessing officer rejected the contention of the assessee that there was a clear mention in the invoice to the effect that the sale price is inclusive of sales tax. The assessing officer, however, pointed out that since the transactions involved in the execution of the works contract are deemed sales, provisions relating to sales are equally applicable to deemed sales and when the tax on the sales are not separately shown as not included in the sale price, the petitioners were liable to pay tax. As per Explanation (1A) to section 2(r) of the Tamil Nadu General Sales Tax Act, 1959, any amount charged by a dealer by way of tax separately without including the same in the price of goods bought or sold shall be excluded from the turnover. Since the assessee had not collected the tax separately from the purchasers, the mere fact that they had been shown separately in the accounts could not be a justifiable ground for granting exclusion.

a deduction of the labour charges from the consolidated price charged. The consolidated amount charged is stated to include the tax element. Even for claiming deduction on the labour charges, the assessee adopted the statutory percentage only. In the above circumstances, on a consolidated sum thus charged, the claim of the assessee that the adjustment entries given in the accounts have to be taken as tax charged separately was not acceptable. When the parties to the contract have agreed on a consolidated price inclusive of tax, it is clear that irrespective of how they make up the bill or the accounts, the entire consideration will be the turnover.

40 50 VST 302 (Mad)

Mangai Agencies. V. Appellate Dy. Commissioner (CT), Virudhunagar

The appellant filed appeal against assessment order, however he failed to appear on near 38 occasions. Then appellate authority dismissed appeal. On writ filed after delay more than one year and four months, contending that there had been a violation of principle of natural

The Court dismissed the petition. The dealer not utilising opportunity to put forth its cases in appeal cannot complain of violation of natural justice.

Appeal

31

and Another. justice and order without jurisdiction,

41 50 VST 527 (Ker)

Maggy Sunny. V. State of Kerala.

One of the departmental officers pretending to be a consumer made a sample purchase of a gold ornament from the petitioner's shop for which payment was also made by the officer based on slip prepared and issued by the petitioner without raising any invoice and accounting transaction. A search was conducted which departmental authorities recovered slip covering suppressed sales, based on which tax evasion was determined and penalty was levied.

The Court dismissed the petition. Trade practice of sales through slip once established by dept. Burden on assessee to prove such sales entered in regular books.

Investigation

42 51 VST 168 Maharashtra Chamber of Housing Industry and Others. V. State of Maharashtra and Others.

The challenge of the petitioners is that by amending the provisions of Section 2(24) the State Legislature has brought within the ambit and purview of the expression "sale", an agreement for the building and construction of immovable property which is not a works contract.

Held:- Inclusion within works contract of agreement for building construction etc. in respect of works contract valid.

Builders

43 51 VST 382 (Bom)

Premium Paper and Board Ind. Ltd. V. Jt. Commissioner of Sales Tax, (INV-A) and Others

The petitioner who claimed Set off on purchases claimed to have been effected from certain vendors against the tax liability on sales. On the ground that an investigation revealed that the records of the certain vendors were found to be engaged in the activity of only issuing tax invoices without actual delivery of goods and passing on tax credit without paying it in the Government Treasury , that there was a mismatch in the ITC claimed by the dealer and the tax deposited into the Treasury by the bogus vendors in respect of purchases claimed to have been made by the dealer from them, that no one was claiming responsibility for the companies from whom the dealers claimed to have purchased the goods, that in the very first year of

Held, dismissing petition, writ petition challenging vires of provision cannot be entertained where entire claim is based of set-off found upon assessment to be bogus.

Input tax credit

32

business the turnover of three dealers high, action of provisional attachment was made. On a writ,

44 51 VST 413 (Uttra)

Shriya Enterprises. V. Commissioner of Commercial Taxes, Uttrakhand

The question, which has to be decided in the present revision is, whether potato chips is a processed vegetable or not, and consequently liable to be taxed at four per cent or at 12.5%.

Potato chips taxable as processed vegetable.

Schedule entry

45 51 VST 439 (Karn)

State of Karnataka. V. Kitchen Appliances India Ltd.

Subsequent to issue of tax invoice the dealer had issued credit notes to the customers on monthly sales performance basis incentives, in which dealer had deducted output tax relating to discount and remitted the balance tax to the Dept. On the ground that rule 3(2)(c) of the Karnataka VAT makes it mandatory on the dealer to claim the discount separately on the tax invoice and the tax collected should be on the sale price less discount and there is no provisions to claim the discounts, which are allowed in future dates as per the trade practices followed, the assessing authority levied tax on the sum representing discount. The JC (Appeal) dismissed the appeal, however Tribunal directed deletion of tax demanded alongwith the interest. The State filed an appeal.

The court upheld the appeal of the State. It observed that the dealer had not shown the discount in the tax invoices but that the discount offered is subsequent to the raising of the tax invoice. Even though the dealers may have a right to revise the sale price of their goods in accordance with contract or otherwise, in terms of the proviso to rule 3(2)(c), the same would have to be shown at the time of raising the tax invoice. Discount on a product cannot be offered after a sale has taken place. A discount is offered at the time of sale. Once a sale takes place, the question of offering a discount thereafter does not arise for consideration. In view of the admitted fact that the tax invoice did not contain the discount, subsequent credit notes could not be treated as discount to claim relief.

Sale price (discount)

46 52 VST 49 ( Ricoh India Ltd. Whether multi-functional printers/machines and their The multi function machines may or Schedule entry

33

Delhi) V. Commissioner. (Delhi)

spare and consumable, during the period 1.4.2005 to 31.3.2007 are computer peripherals taxable under entry Sch-III-41 @4% of the Act or taxable under residual entry at 12.5%?

may not be computer peripheral, depending upon the main purpose or function which the machine was designed and manufactured to perform. The doctrine of dominant purpose of the multi functional machine will determine whether it is an input or output unit of automatic data processing machine. In case multi functional machine is a duplicator or a photocopying machine, which incidentally can be used as a printer or a scanner etc., the said machine would not qualify and cannot be treated and regarded as input or output unit of automatic data processing machine. Said machines would not qualify under Entry 41A and will be covered by the residuary tax rate. In the case the principal or dominant purpose is to act as input or output unit, then it would be covered by entry 41A.

47 52 VST 120 (Chhat)

Kamesh Traders. V. State of Chhattisgarh and Another.

The writ petition involves the question of law as to whether or not the products of cello company, i.e., serving tray, flask, stainless steel tiffin with plastic body, water jug and hotpot (casserole) would fall within the meaning of "utensils" under entry No. 13 of Part II of Schedule II of the Act. The assesse filed the petition.

The Court allowed the petition. The question for consideration before this court is that whether the above-stated articles, i.e., serving tray, flask, stainless steel tiffin with plastic body, water jug and hotpot (casserole) come within the definition of "utensils" and fall within entry 13 of Part II of the Second Schedule of the

Schedule entry

34

Act, 2005. Entry 13 starts with the word "all utensils". Utensils have a very wide connotation. It further states that all the utensils except utensils made of precious metals. There is no dispute that the above-stated articles are not made of precious metals and there is no distinction whether it is made of stainless steel, plastic or any other metal and as such all utensils come within entry 13 of Second Schedule wherein VAT payable at the rate of four per cent.

On reading of the definitions given by the various dictionaries, it is clear that all the articles which are useful for kitchen and domestic purposes, come within the definition of "utensils".

It is trite law that in case of imposition of taxes, the word should be construed in the same way in which it is understood in ordinary parlance in the area in which the law is in force.

48 52 VST 129 (Karn)

ACC Ltd. V. State of Karnataka.

The assessee is engaged in the manufacture and sale of cement including ready mix concrete. The assessee had effected sale of ready mix concrete (RMC) to its customers and claimed exemption on the charges collected by it for pumping ready mix concrete at the

The Court dismissed the petition. Pumping charges collected from customers being part of pre sale expenses includible in turnover.

Sale price

35

customers' site.

49 52 VST 221 (Mad)

State of Tamil Nadu. V. Kawarlal and Co.

The assessee herein is a dealer in pharmaceuticals and chemicals. He claimed exemption on the turnover as representing high sea sales effected. In support of the claim, the assessee filed bill of lading and high seas agreement and pointed out that the goods in question were cleared by the purchaser by paying customs duty through clearing and forwarding agent and that the assessee had nothing to do with the clearance of the said goods.

The petition was allowed. The Court held that the bill of entry not a document of title and admittedly it carried the name of the ultimate buyer and that there was no denial of the fact that the assessee had transferred the goods before it crossed the customs station, The only ground on which the claim was rejected was the difference in the name found in the bill of entry available with the assessee and the one with the customs authorities. With the title to the goods thus endorsed even before it crossed the customs station, the claim of the assessee could not be denied just based on the bill of entry which is admittedly not a document of title. Under section 46 of the Customs Act - Entry of goods on importation - the importer has to file bill of entry before the proper officer, which may be for home consumption or for warehousing. Only on filing the bill of entry for home consumption that the goods are allowed to be cleared after the payment of required customs duty. In the absence of any details as to whether the said entries relate to the one in the bill of entry for home consumption or any bill of entry for

High seas sales

36

warehousing, the dealer's claim could not be denied.

50 52 VST 306 (Karn)

Essar Telecom Infrastructure (P.) Ltd. V.Union of India and Others

The petitioner having entered into contract with various telecom/cellular operators is required to render service in relation to passive telecom network including operating and maintenance. The assessing authority proposed to impose tax on providing of cellular tower on rent to various service providers stating that the transaction fell under the definition of deemed sale.

Providing cellular telephony towers on rent to various telecom companies amounts to transfer of right to use.

Transfer of right to use

51 52 VST 330 (Karn)

State of Karnataka. V. Anantha Refinery Pvt. Ltd.

The assessee sold oiled and de-oiled cakes in course of inter-State trade and produced C forms. By notification CST was reduced to two per cent on de-oiled cakes. The assesse claimed the benefit for oiled cakes. The benefit was denied and in the reassessment order, the sales tax was levied at four per cent.

Held:- Oil cake and de-oiled cakes are different commodity : concessional rate of tax on de-oiled cake cannot be extended to oil-cake.

Schedule entry

52 52 VST 447 ((AP)

Indus Tower Ltd. V. Commercial Tax Officer, Begumpet Circle, Hyderabad and Others.

The petitioner is in the business of providing telecom infrastructure support services to several telecom operators (such as Airtel, Vodafone, Idea, Reliance, Aircel, BSNL, etc.). The dealer builds, operates and maintains passive telecom infrastructure, also owned and controlled by it. He purchased material on form C intended for use in telecommunication network. But he was not having license issued by Dept. of Telecommunication and hence he was not telecom service provider and CTO levied the penalty as the dealer has misused the form.

Held, allowing the petition,. The petitioners/dealers are registered as infrastructure provider Category 1 (IP-1) by the DOT, Government of India, a fact not in dispute. That they are registered under the CST Act; that the certificate of registration describes the petitioners as telecommunication network service providers; that the goods purchased by them against issue of C forms during the course of inter-State transactions are goods specified for purchase for use in telecommunications network

Declarations

37

specified by them in para 16 of form A application submitted for seeking registration under the CST Act, are also facts not in dispute. It is also not in dispute that the goods in respect of which the impugned penalty orders were passed under the provisions of section 10A of the CST Act were goods specified in the list of goods stated by the petitioners while applying for registration under the CST Act and enumerated in the respective certificates of registration, and were used for the erection and maintenance of the passive telecommunication infrastructure (the cell towers).

It was the contention of the Revenue, that the petitioners are not telecom service providers but are only engaged in the construction of towers equipped with generators and other equipment that are provided to actual telecom service providers/operators and that the petitioners wrongly represented themselves as telecommunication network service providers. The Court held the above contention and assumption by the Revenue as wholly erroneous. The certificate of registration describes the petitioner as engaged in the

38

business of telecommunication network service provider. The registration certificate issued by the DOT, constitutes a federal recognition that the erection and maintenance of telecom/cell towers is an activity falling within the legislative field enumerated in entry 31 of List I. On this analyses, the Revenue cannot be heard to contend that the petitioners are not comprehended within the generic area "telecommunications network",

53 52 VST 484 (Karn)

Assistant Commissioner of Commercial Taxes, Bangalore and Others. V. Pink City

The dealer has not filed the return within the time prescribed nor have they paid the tax. Therefore, a penalty has been imposed under section 72(1) of the Act. The dealers have preferred writ petitions challenging the virus of section 72(1) of the Act on the ground that it is arbitrary.

Power to impose penalty within competence of State legislature.

Penalty

54 53 VST 226 (Karn)

Ali Singhania Bulk Carriers. V. State of Karnataka.

The petitioner own fleet of vehicles and was engaged in transporting concrete mixture. The agreement was to provide vehicles for transport the produce of company from its plant to the various customers in the city. The adequate number of vehicles is made available 24 hours on all the seven days of the week. The company also agreed to reimburse the dealer for diesel and lubricants. On this ground that the transaction amounted to transfer of right to use.

The Court dismissed the petition. It amounts to transfer of right to use goods as effective control of vehicles with company.

Transfer of right to use

55 53 VST 271 (Uttara)

Gujarat Co-op Milk Marketing Fed Ltd. V.

The assessing officer held that the product sold by the petitioner 'Amul Masti spiced Buttermilk" was not one of the item mentioned in entry Sch-I-25 of the Act

Held, allowing the petition, 'Amul Masti spiced Buttermilk" is exempt as

Schedule entry

39

Commissioner of Commercial Taxes, (Uttarakhand)

which exempt tax in respect of " fresh milk, pasteurized milk, buttermilk, separated milk, curd and Lussi". Accordingly assessing authority levied tax on the dealer.

buttermilk.

56 53 VST 355 (Gauhati)

State of Tripura and Others. V. Joy Kali Radio Stores.

The petitioner - assessee is a manufacturer of compressors. During inspection it was found that the petitioner/assessee had done works contract of repairing the defective compressor received from their customers at Chennai, and also the assessee had received repair charges. The assessing officer treated the transaction as works contract.

The petitioner contended that the Tribunal is wrong in holding that the transfer of property by way of replacement of defective parts in the compressors while undertaking repair works took place within the State of Tamil Nadu and hence, the transactions are liable to tax. He further submitted that the authorities have failed to appreciate the fact that the petitioner/assessee received defective compressors from their dealers, who had earlier received the same from their respective customers to whom the said compressors were sold by them and later, these defective compressors were despatched to the factory at Hyderabad for repair and reconditioning; that the repaired compressors were taken into the petitioner's/assessee's floating stock in due course on receipt from Hyderabad. But soon after the receipt of defective compressors, the reconditioned compressor was given to the authorised dealer from their floating stock and flat rate was charged as repairing charges, therefore, the assessing officer ought to have appreciated that the transactions partake the character of an exchange not exigible to tax under the

Held, allowing the appeal, declaration of low profit and high closing stock warrants rejection of books of accounts and assessment to the best of judgment in absence of explanation.

Assessment

40

provisions of the Tamil Nadu General Sales Tax Act.

57 53 VST 382 (Mad)

Sriram Refrigeration Ind. Ltd. V.State of Tamil Nadu.

The petitioner its factory at Hyderabad and supplied refrigerators to customers in Tamil Nadu. The defective compressors were brought to the petitioner for repairs at Chennai. When the defective compressor is handed over, the dealer replaced the defective compressor by a reconditioned compressor of the same model. The defective compressor received was subsequently transferred to the factory in Andhra Pradesh for rectification of the defects. The dealer collected repair charges for the defective compressors. On finding that the dealer carried out works contract of repairing the defective compressors received from their customers at Chennai and received repair charges, the assessing authority assessed the replacement of defective compressor as works contract, he gave relief of deduction at 30 per cent towards labour charges and levied tax at 70 per cent of the turnover in respect of the works contract and levied penalty.

The Court dismissed the petition. It is transaction of works contract taxable.

Sale price works contract

58 53 VST 401 (Gauhati)

BrahmputraV ally Construction and Suppliers. V. Oil and Natural Gas Corpn. Ltd. And Others.

The assessee owned cranes and in pursuance of notice inviting tenders issued by the ONGC for hiring cranes, the assessee had entered into the contract. The cranes were placed at the disposal of the contractee- ONGC on day-to-day basis, without transfer of possession and custody thereof. Operating costs including maintenance, repair, insurance, salary of employees were to be borne by the assessee and it is there was no transfer of ownership of the cranes, nor of the right to use. The possession and custody of the cranes remained with the assessee. The assessee contended that there was no lease. The assessee was paying service tax.

Held, hire of manned crane to ONGC amounts to transfer of right to use goods as ONGC alone entitled exclusive use.

Transfer of right to use

41

59 54 VST 271 (Bom)

National Organic Chemical Industries Ltd. V. State of Maharashtra.

The petitioner entered into a transaction with Assam Gas for the performance of the work of laying HDPE pipe for transportation of natural gas. The assessing officer considered the transaction with Assam Gas as a divisible transaction which could be divided into two parts, namely, sale of HDPE pipes and installation of the same as per the contract with Assam Gas. DC(Appeal) as well as Tribunal affirmed order.

The petition of the assessee was allowed. It was held that the agreement between the applicants and the Assam Gas was a works contract and it could not be divided into two parts, namely, contract to supply the pipes and a contract to lay down the pipelines. The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants. In order to comply with the contractual obligation cast on the applicants, the applicants were required to do various acts set out in clause 3 "scope of work" ultimately to see that the HDPE pipes are laid for transportation of natural gas. The acts to be committed by the applicants could not be divided into two parts, namely, supply of pipes and laying down the pipes. The use of this term contract value clearly indicates that the consideration payable to the applicants was to be calculated as a whole and not in parts. The payment terms set out in the said agreement speak in favour of the applicants that the contract was to be read as an inter-State indivisible works contract. Clause 21 specifically mention that the work was awarded to the applicants on a turnkey basis. The

Whether divisible or indivisible

42

invoices raised at the time of taking out pipes out of the factory premises by the dealer for the purposes of compliance of excise duty provisions specifically mentioned that the articles were for home consumption and not to be sold in the market but to be used in performing contract. Looking to the terms of the agreement as a whole, the property in pipes which were to be used for creation of a pipeline would pass on only after the applicants completed acts to be performed by them as per the terms of the agreement. The transaction to supply and laying down the pipe being inseparable, it would constitute works contract and to such a works contract, the liability to pay Central sales tax would arise only after May 11, 2002 and since the transaction in the present case pertains to the period prior to May 11, 2002, the applicant would not be liable for Central sales tax.(ii) that the distinction between a divisible contract and an indivisible contract came to an end after the 46th Amendment to the Constitution of India, however, liability to pay Central sales tax covered by property in goods involved in the works contract could be fastened only after May 11,

43

2002 when the definition of term "sale" was amended on account of Act 20 of 2002.

60 54 VST 442 (Ker)

Trivandrum Club. V. Sales Tax Officer (Luxury Tax) and Another.

Whether luxury tax is payable on Club allowing guest the to stay in cottages and rooms attached to it on rent and other charges under the provisions of the Kerala tax on Luxuries Act. The assessee filed the petition against levy of tax.

The court dismissed the petition. Admittedly the tariff charged by the appellant for the cottages and guest rooms attached to the club are above the limit that attracts luxury tax under the Act, if the collections attract tax applicable to hotel rooms. The Court observed that "hotel" as defined under the Act has a wide meaning because Explanation covers even guest house run by the Government or a company or a corporation. The appellant's contention is that provision for accommodation in cottages and rooms provided by the club is only to the guests of members or for members of affiliated clubs and, therefore, the rent collection is not in the form of business carried on by the club. The Government Pleader opposed the contention by stating that guest houses of Government and companies which are brought within the meaning of "hotel" under the Explanation to the definition clause are not engaged in business and so much so, renting out of rooms by the club need not be as business to attract liability under the Act. The Court

Luxury Act

44

expressed agreement with the contention of the learned Government Pleader because under the charging section 4(1)(i) luxury tax is leviable for the rent collected by clubs for auditorium, kalyanamandapam and hall attached to clubs. Club as a person liable to luxury tax is recognised by the charging sections and in fact, specific provisions stated above are there for charging luxury tax on clubs on membership fee at the rate of Rs. 100 per member per year, and also on rent collected for auditorium, kalyanamandapam, etc., attached to clubs. The Court observed there is no necessity for the Department to prove that the accommodation provided to guests in cottages and rooms attached to clubs for residence is a business activity of the club to levy luxury tax thereon. Further, there is some force in the contention of the Government Pleader that there is no prohibition against club making profit by renting out cottages and rooms to it's members or to members of affiliated clubs, and such profit of the club will ultimately go to the benefit of the members.

61 55 VST 1 ABB Ltd. The questions of law which arise for consideration in Held, allowing the appeals, express Interstate sale

45

V.Commissioner, Delhi Value added Tax.

this case are :"(i) Whether the sale transactions in the present case were in the course of the inter-State trade, so as to attract the provisions of CST Act, 1956 ? (ii) Whether an inter-State trade is deemed to have been taken place in the course of movement of goods into and inside the country? and(iii) Whether the sale made to the Delhi Metro Rail Corporation is in the course of import and consequently exempt from the Delhi VAT Act, 2, especially section 7(c) of the DVAT Act, read with section 5(2) of the CST Act.

stipulation of interstate movement of goods in agreement not necessary to constitute a sale in course interstate sale.

62 55 VST 81 (Ker)

MGF Motors Ltd. V.State of Kerala.

Whether the replacement of parts of automobile during warranty period without collecting any price for the same from the vehicle owner amounts to sale that attracts sales tax.

Held, Free replacement of parts during warranty period amounts to sale

Sale

63 55 VST 89 (Karn)

Sasken Communication Technologies Ltd. V. Jt. Commissioner of commercial Taxes (Appeals)-3, Bangalore and Another.

Whether software development according to specification of customer sales? The assesse had filed the appeal stating that software development is a service and not a sale.

The court allowed the appeal. It was in the agreement that all patentable and unpatentable, inventions, discoveries and ideas which are made or conceived as a direct or indirect result of the programming or other services performed under the agreement shall be considered as works made for hire and shall remain exclusive property of the client and the Assessee shall have no ownership interest therein. Both, the source code of developed software and hardware projects of worldwide Intellectual Property in and each shall be owned by the client. Therefore, even before rendering service, the Assessee has

Whether Sale-Development of Software

46

given up his rights to the software to be developed by the Assessee.

The considerations under the agreement is not for the cost of the project, the consideration is for the service rendered, based on time or man hours. Once the project is developed, all rights in respect of the said project including the Intellectual Property Rights vest with the customer and he is at liberty to deal with it in any manner he likes.

The Software so developed even before it is embedded on the material object or after it is embedded on a material object exclusively belongs to the customer. The title to the project/software to be developed lies with the customer even before the Assessee starts rendering service.

In fact, a careful reading of the agreement shows that, the employees of the Assessee and the employees of the customer have to work hand in hand, consult at every stage, have interactions and understand the need and requirement of the customer and through their employees, the software is to be developed. The end product i.e., the ultimate software, is not necessarily the work of any one

47

such service provider. It is a collective effort.

As clear from the terms of the agreement, on the day they entered into agreement, there was no software in existence. In other words, there was no goods in existence. The agreement is not for transfer of software. The agreement is for development of software. Even before the software comes into existence, the Assessee has given up all the rights and claims of the software to be developed and has expressly agreed that such a software which may come into existence in the end of the contract period is the absolute property of the customer.

64 55 VST 145 (Uttara)

State of Uttrakhand and Others. V. Nestle India Ltd.

Whether tomato sauce is a processed vegetable. Tomato sauce is taxable as a processed and preserved vegetable.

Schedule entry

65 55 VST 208 (Ker)

Sanjos Parish Hospital. V. Commercial Tax Officer, Thrissur and Others.

In these writ petitions, where hospitals being established by public ltd co with profit motive. Therefore, if in hospitals, medicine and other consumables sold to patient and bills are raised then such transactions are taxable?

Held:- Hospitals are liable to get themselves registered and pay tax on sale of medicine and consumables to patients.

Sale of medicines

66 55 VST 278 P.K. Plastics. V. Commissioner of

Petitioner is engaged in the business of purchase and sale of plastic and steel items. Filed an application for

Held:- Entry "all kinds of utensils and enamelled utensils" not restricted to

Schedule entry

48

(MP) Commercial Tax, MP and Others.

determining the rate of tax on the items purchased and sold such as water jug and bottle, lunch box etc. The Commissioner, held that only the water jug is covered within the meaning of utensils taxable @ 5% and that the remaining items are taxable @ 13%.

utensils used in kitchen alone but also extends to items of daily household use.

67 55 VST 420 (Bom)

Commissioner of Sales Tax, Maharashtra State, Mumbai. V. RamdasSobhraj.

Whether ink, lacquer and chemicals used in job-work of plate making with plates supplied by customers are taxable.

The Court followed its decision in Matushree textiles. It held that the lacquer and ink were materials used in plate making and property in them passed on in the execution of the contract of plate making under the Act. There was transfer of property in ink and lacquer.

Works Contract

68 56 VST 163 Gauhati

Bhola Ram Kanoo V. State of Assam and Others.

Whether, "raabgur" is to be exempted from payment of tax under the Assam General Sales Tax Act, 1993 by treating the same as "gur" which is exempted from tax under entry 17 of Schedule I of the Act or by treating the same as a "cattle feed" which is also exempted from tax under entry 50 of the said Schedule.

The Court upheld the contention of the assessee. It held that though Rabgur is a form of gur it is a distinct item and not the same as gur. The stand of the petitioners that the rabgur is not fit for human consumption is not disputed. Though it may other uses the revenue had not disputed the stand of the petitioner that it can also be used as cattle feed. Held, rabgur exempt as cattle feed.

Schedule entry

69 56 VST 441 (Mad)

State of Tamil Nadu V. Steel Authority of India and Another.

The dealer entered into contract with the foreign co for conversion of S.S. strips in to coin blank. The dealer thereafter entered into an agreement with the Government of India for the manufacture and supply of twenty five and fifty paise stainless steel coin blanks. In this agreement, the dealer was described as the

Held, that conjunct reading of both the agreements would make it clear that these two agreements are independent to one another and were in no way connected with one another. The first agreement was

Sale in the course of import ( not allowed)

49

supplier whereas the Indian Government mint was described as the purchaser. The payment to the supplier for the supply of coin blanks was to be made through irrevocable letters of credit to be opened by the purchaser through the SBI in favour of the supplier. The supplier had to ensure that the coin blanks were manufactured strictly as per specifications. The question as to whether the dealer was eligible for the claim of exemption u/s 5(2) of CST Act.

entered by the dealer as a purchaser with the foreign company for conversion of steel strips into coin blanks and the second agreement was entered into by it as a supplier with the Indian Government Mint for supply of steel strips. In the first agreement the dealer acted in the capacity of a supplier for a valid consideration and in the second agreement it acted as the purchaser to the Conversion Agent for a valid consideration. There was no privity of contract between the local purchaser, namely, the Government and the foreign seller. Under the CST Act tax is leviable on sale and not because of the movement of goods. To claim exemption under Section 5(2) of the Act, the sale or purchase of goods should be deemed to take place in the course of the import of the goods into the territory of India. The assesse dealer had not established that there was any term or condition prohibiting the diversion of the goods after the import i.e., the inextricable link between the transaction of the sale and the actual import making sale in the course of import. Moreover, in order to qualify for the exemption, the goods must move from the foreign country to India in pursuance of the

50

conditions in the contract of sale between the foreign seller and the local purchaser, but, in the present case, the goods were imported from the foreign country to India in pursuance of the contract entered into between the foreign seller and the dealer, which was not the local purchaser. The transaction took place between the parties had amply made it clear that the sale contemplated under Section 5(2) had not taken place and, even assuming that there was an import of goods from Italy, such import was not occasioned as a result of sale by a dealer in Italy. Therefore, the dealer was not entitled to the benefit of section 5(2).

70 56 VST 452 (Gauhati)

Reckitt Benckiser India Pvt. Ltd. V. State of Assam and Others.

Whether the product "Harpic", "Lizol" are pesticides and "Dettol". falls under the category of drugs and medicine.

The Court allowed the petition. "Harpic", "Lizol" are pesticides and "Dettol" falls under the category of drugs and medicine and not a toilet article.

Schedule entry

71 57 VST 55 (AP)

Santhosh Builders. V. Dy. Commissioner of Commercial Taxes (CT), Nellore and Others.

The dealer was serviced the order of assessment long after expiry of prescribed time limit for passing order. No proper explanation for delay was given. The assesse file dpetition.

The Court allowed the petition. In view of the circumstances, it must be presumed that the order was not passed on the date it is purported to have been passed but it was passed beyond the period of limitation prescribed. Consequently, the order cannot be sustained being barred by

Assessment

51

limitation and is accordingly quashed.

72 57 VST 179 (AP)

Kumar Metallurgical Corp Ltd. V. Dy. Commercial Tax Officer, Nalgonda and Another.

The petitioner availed loans from banks hypothecating movable assets and immovable properties sought a reference under the SICA to the BIFR in 03-04. The Asset Reconstruction (ARCIL) obtained security interest and initiated action under the SARFAESI Act. While the petitioner was busy agitating against the proceedings under the SARFAESI Act before the DRT, DRAT and this court, the BIFR passed order on July 22, 2005 to the effect that the reference pending before them shall stand abated in terms of the third proviso to section 15(1) of the SICA. A notice of attachment was issued for non payment of sales tax.

The Court dismissed the petition. Section 16C of the APGST Act has non-obstante clause. It creates first charge on the property of the dealer in favour of the Government which can claim priority in recovery of debts. Section 38C of the BST Act also provided first charge in favour of the Government in the recovery of sales tax dues. Section 22 of the SICA does not in any way bar the proceedings for recovery of sales tax arrears. Therefore the notice of attachment issued u/s 27 of the Revenue Recovery Act could not be faulted.

Recovery

73 57 VST 275 (AP)

Jitender Roller Flour Mills. V. Assistant Commissioner (CT) LTU, Charminar Div, Hyderabad.

The petitioner disclosed export turnover and consignment sales claimed to be transfers to its branches and agents in other States and claimed exemption on the above The assessing authority passed an order allowing exemption., Subsequently, on the ground that the F forms submitted by the petitioner covered consignment sales periods in excess of one calendar month, contrary to the stipulation of rule 12(5) of the Rules) and passed the order of revision of the assessment order withdrawing the exemption allowed on specific turnover. On writ petitions:

The court allowed the petitions. Since the petitioner had filed the F forms for periods in excess of one calendar month and these F forms were before the assessing authority when he passed the initial order were accepted, this cannot be revised as it is a case of lack of diligence on the part of the assessing authority, not liable to be corrected.

 F form

74 57 VST 284 (AP)

State of A.P. V. Hindustan Cables Ltd.

Whether even in the absence of a provision under the CST Act for forfeiture of excess tax collected by a registered dealer, forfeiture could be ordered by recourse to the provisions under the local Act.

Held- following SC judgement in Khemka and Co 9 35 STC 571) and India carbon (106 STC 460) a provision for forfeiture of tax is a

Forfeiture

52

fortiori a substantive provision and not a mere procedural prescription. Since the CST Act contained no provision authorizing forfeiture of excess tax collected but not remitted to the Revenue, no forfeiture could be ordered on forfeiture provisions in the local Act,.

75 57 VST 373 (Mad)

West Coast Industries (Exports) Pvt.Ltd. V. State of Tamil Nadu.

The assessee engaged in manufacturing and trading of hosiery goods purchased furnace oil, distribution pipes, copper cable, transformer, electrical goods, demineralising plant, circular trolley and M.S. trolley and water storage tank by issuing declaration in form C which were not mentioned in RC. The first appellate authority levied a minimum penalty in respect of all above goods except aluminium sheets. Considering the fact that these items were not entered in the registration certificate, the issuance of form C was a violation attracting penal action under section 10A of the CST Act, levied penalty at 150 per cent on the differential tax.

The Commissioner had issued instructions that wherever a dealer had purchased goods on the basis of C form without, including them in the certificate under the CST Act either inadvertently or out of ignorance, no penalty need be levied under section 10(b) of the CST Act. Therefore the first appellate authority confirmed minimum penalty in respect of goods like furnace oil, distribution pipes. Copper cable, transformer and electrical goods which are directly used in manufacturing activity of the assesse and have a bearing on his business. However, aluminium sheets do not have a direct bearing. It is not close to the enumerated items mentioned in the RC and therefore the assessee cannot plead ignorance of law. Therefore levy of penalty on the purchase of aluminium sheets which were used for factory roofing purposes and which could not in any

Declarations

53

manner, be brought anywhere near the enumerated entries confirmed.

76 57 VST 415 (Gauhati)

A.R.N.V. Chemicals Pvt. Ltd. V. State of Assam.

They make bulk purchase of loose detergent powder. The purchased powder is then packed by the petitioner in unit containers and is offered for second sale to the customers. The assesse challenged in a writ petition the order of the revisional authority holding that packing of the detergent powder amounts to "manufacture".

Held, allowing the petition, the process of packing/re-packing of detergent powder does not convert the original product into anything other than detergent powder.

Manufacture

77 57 VST 484 (Orissa)

Tata Steel Ltd and Others. V. State of Odisha and Others.

The questions in writ petitions."(i) Whether the entry tax can be levied and/or imposed on the value of the goods imported by the petitioners from outside the country ? (ii) Whether such entry tax under the aforesaid Act can be levied and/or imposed on import of plant and machinery for establishing a plant in the State of Odisha ? (iii) Whether the entry tax can be levied on certain raw materials and goods imported from outside the country and purchased from outside the State when such materials have not been listed in the schedule appended to the Orissa Entry Tax Act ?and (iv) Whether the Orissa Entry Tax Act,, is violative of entry 83 of List I of the Seventh Schedule and article 246 of the Constitution of India ?"

i) Restriction under article 286 of the Constitution could not be applied in entry 5 of List II of the Seventh Schedule to the Constitution. Thus the levy of entry tax on goods imported from outside the country was not hit by article 286(1) of the Constitution (ii) The taxable event under the Entry Tax Act is entry of specific goods into a local area. whereas custom duty on import of goods into territory of India. When the former is a subject-matter of legislation by the State, the latter relates to entry 83 of List I of the Seventh Schedule. There is no overlapping in the exercise of legislative power. (iii) The Act is a tax in lieu of octroi incident of which are similar to that of entry tax. When the levy of octroi on imported goods was upheld by different courts there is no reason why entry tax on imported goods cannot be upheld. iv)A plain reading

Entry tax on steel

54

of the charging section under the Orissa Entry Tax makes it clear that the Legislature has no intention that imported goods are intended to be left out from the charging section. "Outside the State" means any place outside the State and includes all places outside the State as well as outside the country. (iv) The plant, which is brought in knock down condition, is a combination of machinery in a systematic manner so as to produce goods and, therefore, it is coming within the definition of machinery and, hence, it is liable for entry tax.

78 58 VST 43 (Ker)

HDFC Bank Ltd. V. Intelligence Officer (IB), Dept. of Commercial Tax, Edapally, Kochi and Another.

The petitioner - banks have conceded turnover on the sale of gold bars during the relevant period and paid tax at one per cent, on the premise that the commodity sold will fall within the relevant entry of gold bullions. But the returns were rejected and the turnover was assessed at four per cent treating the commodity as one falling within entry 4(4) of the Third Schedule to the KVAT Act. In this regard, the Commissioner of Commercial Taxes had issued a clarification in exercise of power vested under section 94 of the KVAT Act . In the said clarification, issued on September 29, 2008, it is held that 10 grams of rectangular gold bars, being semi-manufactured gold would fall within entry 4(4) of the Third Schedule with HSN Code 7108.13.00. The assessing authorities found that the rectangular gold bars dealt with by the petitioner - banks cannot be

The court dismissed the petition. Following the Kerala High Court judgement in HDFC Bank ( 36 VST 338), the gold bar dealt with by the petitioner - banks cannot be treated as gold bullion coming within entry 1(2) of the Second Schedule to the KVAT Act with HSN Code 7108.12.00. But it can only be considered as "semi-manufactured" form of gold falling within entre 4(4) of the Kerala Act coming within HSN Code 7108.13.00.(ii)

Schedule entry

55

regarded as bullion since they are not raw or unwrought gold or gold in mass. The assesse filed a writ.

79 58 VST 262 (Gauhati)

Data Plus Info Chanel. V. V. State of Assam and Others.

The petitioner modernized the industrial unit and limited its manufacturing activities to production of computer stationery. For production of computer stationery the raw materials used are paper rolls and carbon rolls.In order to qualify any product as computer stationery, the said product must be perforated on both sides/edges of the paper and must also be foldable. Such perforation must be of certain specifications so that such paper can be fed into the computer printers and if it is a continuous paper, such paper must be horizontally perforated so that the continuous paper can be folded and torn off. Therefore, unless such paper is subjected to such perforation with certain specifications, the same cannot be used as computer stationery. While ordinary paper may be also used for computer printing, computer stationery having distinct characters as stated above is used only for computer printing. The computer stationery carries a distinct identity in the common trade parlance.

The court allowed the writ petition. The activity of the petitioner, involving certain processes with the aid of machines by integrating plain paper with carbon and which is perforated under certain specifications, and known in the common trade parlance as a computer stationery, would qualify as a manufacturing process. The process applied results into transformation of the two commodities of paper and carbon used as raw materials to an integrated and non-separable product assuming an identity of a different article or commodity known as computer stationery in the common trade parlance.

Schedule entry

80 58 VST 290 (Mad)

Ajey& Sons Oils (Madras) P. Ltd. V. State of Tamil Nadu.

The petitioner herein is a dealer in Vanaspathi and Edible oil. The petitioner had effected sales to Andaman Customers and had shown the turnover as inter-state sales and charged at four percent against the C form. The documents seized at the time of inspection revealed that the goods were delivered to the agent at Madras. Assessments were made assessing the turnover under TNGST Act, rejecting the dealer's contention that the purchasers at Andaman have no office or a branch place of business at Madras. Most of their requirements of

The High Court confirmed the findings of the Tribunal that there was nothing on the record to show that the dealer had a contract with the Andamans dealers and towards that end, effected sales, resulting in movement of goods from Chennai to Andamans. In the absence of any material the turnover was assessable under TNGST Act and the sales were

Inter-state sales

56

grocery, edible oils, vanaspathi are to be ordered at Madras and moved to Andamans from their nearest port., viz., Madras harbour. The assesse claimed inter-state sales.

not inter-state sales.

81 58 VST 341 (Gauhati)

Hindalco Industries Ltd. and Another. V. State of Assam and Others.

The petitioner is engaged in the business of manufacturing and dealing in aluminum and its products. The petitioners paid tax at the rate of four per cent on the sale of aluminum rolled products manufactured by it treating the same to be covered under entry 26 of the Second Schedule to the Act.The petitioner filed a petition under section 105 of the Act before Commissioner, seeking clarification as to why the aluminum ingots, wire rods and rolled products and extrusions should not fall within the ambit of entry 26 of the Second Schedule to the Act. The Commr. clarified that such product would be taxable at 12.5%. The assesse challenged the petition.

The Court allowed the petition, observing that giving of reason is an indispensable sine qua non in quasi-judicial adjudications. The order by Commissioner contains omnibus observations that in a number of cases aluminium rolled products had been held to be different from aluminium and that it also did not come under extrusions which is not proper. The contention of the petitioners that in the context of entries in entry 26 of the Second Schedule, the words "extrusions of those" would mean secondary products of aluminium like sheets, plates, foils, etc. had also not been gone into. Therefore the order passed by Commr. was to be quashed.

Assessment

82 59 VST 237 (P&H)

Prem Enterprises. V. State of Punjab and Another.

The appellant has contended that POP is exempted from tax as it is powdered gypsum falling under entry no A-16 for fertilisers. The Commissioner rejected the contention of the appellant that the gypsum has the same chemistry as that of POP and thus tax-free. It has many uses such as in plaster, cement, paints and ornamental stones. The intention of entry A-16 i.e. gypsum used only in relation to improvement of quality

The court dismissed the appeal, The appellant has brought POP within the State of Punjab. Though the chemical properties may be similar, but the fact remains that the uses of gypsum and POP are different. Entry 16 of Schedule A exempts fertilizers from tax. The definition is inclusive which

Schedule entry

57

of soil. POP is not gypsum and not tax-free. includes gypsum as a fertilizer. Entry 16 exempts fertilizer from tax, whereas POP cannot even remotely be used as a fertilizer. Therefore, POP does not fall within entry 16 of Schedule A. As a matter of fact, the order dated August 27, 2008 of the Excise and Taxation Commissioner holding that POP does not fall within entry 16 has attained finality.

83 60 VST 163 (Karn)

United Agencies. V. Assistant Commissioner of Commercial Taxes, II Circle, Bangalore and Others.

The appellant is a registered dealer of old newspaper and waste paper. The appellant claimed exemption from tax liability on the sale of above items as exempted. But the assessing authority did not grant exemption and assessed tax on the ground that the appellant is liable to pay tax treating the sale of old newspaper as waste paper.

Held, Sale of newspapers for purpose other than reading news not exempted.

Schedule entry

84 60VST 241 (P&H)

Daya Ram And Company. V. State of Harayana.

Penalty notice served on friend of assessee. Held, service of penalty notice on friend of assessee is not valid notice.

Service of Notice

85 60 VST 245 (Mad)

A.V.R. Agencies. V. Assistant Commissioner (CT), Tirupur .

The Asst. Commr. refused to issue forms F and C States, stating that they could be misused.

The Court allowed the petition. That the Department has not been in a position to show that the request of the petitioner for the issuance of forms F and C cane be refused for the reason that such forms could be misused.

Declarations

86 60 VST 270 (P&H)

Rathi Udyog. Ltd. V. State of Haryana and

Initially, the Assessing Authority finalized the assessment. Subsequently, a show-cause notice was served upon the petitioner after it was discovered that

The Court dismissed the appeal of the assessee. After framing of the assessment, the information came to

Assessment

58

Others. the turnover of the assessee has escaped assessment during the year in question as the appellant has made unaccounted sales of iron and steel. In the show-cause notice, it was stated that the appellant has suppressed sales. The appellant filed its reply admitting that the sales worth Rs. 31,41,663 exclusive of tax could not be reflected in the returns due to bona fide omission of their clerk.

It was found that assessee - firm has suppressed considerable turnover during one month only and deserves to be assessed to tax to the best of the judgment

The learned counsel for the appellant has vehemently argued that the best judgment assessment could be resorted to only after the rejection of books of accounts that too during the course of assessment proceedings. The assessing officer while issuing show-cause notice has quantified the daily turnover for addition to the gross turnover without returning a finding that account books produced by the appellant are to be rejected. It is only after recording a finding and that too after giving an opportunity of hearing to the appellant, the account books could be rejected by the Assessing Authority and could proceed to frame best judgment assessment. Since no such procedure was adopted, therefore, the order passed under the Act are not sustainable.

the notice of the Assessing Authority that the appellant has not reflected certain sales in the return submitted by it. The Assessing Authority found that not only the appellant has purchased iron and steel from different dealers, which are not reflected in the accounts, but also the sales were also not reflected. Therefore, the Assessing Authority proceeded to frame the best judgment assessment. Once the sales are proved to be outside the said books of accounts, a fact not disputed by the appellant, the rejection of the books of accounts is necessary consequence.

87 60 VST 289 (Mad)

State of Tamil Nadu. V. V.S.S. and Company.

The assessee, manufacture of groundnut oil and oil-cake. On finding that there had been incorrect maintenance of accounts and there has been a shortage of groundnut kernel, which according to the assessing officer indicates that the dealer crushed kernel without

Held, dismissing the petition of the Revenue, electricity consumption cannot be sustained for the reason that the consumption can be supply of water for agricultural purposes or

Assessment

59

recording in the accounts and sold resultant oil and oil-cake outside the accounts and therefore, the claim of exemption made by the assessee on account of consignment sales, was disallowed. The tax was assessed based on the estimate purely on the electricity consumption made by the assesse. He estimated the turnover on the basis of the electricity consumption applying statistical data for consumption of electricity and the conclusion that there has been suppression and imposed tax and penalty.

any other purposes and hence cannot be relied.

88 60 VST 295 (Raj)

Commercial Tax Officer, Baran V. Ganesh Lal Goya & Sons.

The assessing authority imposed tax on the sale of AC generator sets in residuary entry at 10 per cent. The Tax Board by has held that AC generator set is taxable at four per cent entry "all kinds of generating sets" at four per cent and, therefore,

Held, entry No. 41 "all kinds of generating sets" is wide enough to cover the AC generating sets also during the relevant period.

Schedule entry

89 60 VST 350 (P&H)

Eco Auto Components Ltd. V. State of Haryana and Others.

Where the appeal filed by the petitioner challenging certain orders by the Tribunal was dismissed as withdrawn, with liberty to the appellant to take recourse to the legal remedies availing to it in accordance with law. WP filed seeking quashing of the same orders.

The Court dismissed the petition and held that the petitioner could not be permitted to invoke the writ jurisdiction of this court after the petitioner has withdrawn the appeal filed against the orders now impugned in the writ petition.

Appeal

90 60 VST 491 (Gauhati)

Sunil Chandra Dey & Partner. V. Food Corporation of India and Others.

The petitioner is carrying out contract for transportation of food-grains of the (FCI) in terms of the work order. The FCI made deduction from the bills of the petitioner at four per cent as per mandate of the rules in pursuance of the letter of the Principal Secretary, drawing attention to provisions in Act and Rule providing for tax deduction at source. The petitioner moved this writ petition on the ground, that the provisions for deduction from the bills of the

Held, allowing petition, the perusal of rule 7(1) and 7 (2) of the Rules 2005, would show that the deduction of four per cent from the bills is referable to tax liability and not de hors thereof. Thus, deduction of four per cent from the bills of the petitioner cannot be without considering its tax liability. This being

TDS

60

petitioner, without reference to the tax liability was beyond the legislative competence of the State. It has further been submitted that the provision for deduction of tax at source had to have nexus with the tax due or likely to be due.

the settled legal position, the petitioner may give a declaration as to it taxable turnover out of the payment of the bill.

91 61 VST 5 (Cal)

Crompton Greaves Ltd. V. Assistant Commissioner of Commercial Taxes, Corporate Div and Others.

The petitioner collected sales tax on the basis of invoice from purchasers of goods and issued credit notes later on as trade discount and /or incentive giving them credit of tax charged on such incentives, filed returns on the basis of actual collection of tax after the tax was deposited. The Dept rejected the claim of trade discount on the ground that factually trade discount was not made known to the purchaser at the time of sale. The full price has been realised with tax at the time of issuance of bill.

Held, dismissing the appeal, that the petitioner herein had realized the full price with the sales tax and surcharge without any mention of discount being allowed in any manner whatsoever. It was not a discount, which was known and understood at the time of removal of the goods. There was no whisper in the invoices as to discount being allowed. No recurring credit scheme was also introduced to allow the purchasers to get the discount through the credit notes. It was not turnover discount through issuance of credit notes to encourage turnover of sales.

Sale price -discount

92 61 VST 23 (Bom)

Commissioner of Sales Tax, Maharashtra State, Mumbai. V. Kolsite Indistries.

The department referred the following question :

1) Whether, insurance charges will not form part of sale price, as it was borne by the buyer independently and separately and also the parties did not intend, as contained in clause (h) of section 2 of the CST Act, 1956, ? (2)Whether, the Tribunal was entitled to take different view from its earlier view, pertaining to same issue, in respect of the different assessment years in view of the

The appeal was dismissed. The Court observed that the terms in the documents like the agreement, the quotation, marine cover notes, specimen sale invoice clearly revealed that the delivery of goods was to be effected by the assessee is ex-works and assesse had not taken any risk upon themselves qua the goods upon delivery. The respondent, in no

Whether insurance is a part of sale price

61

evidence submitted by the respondent before it : uncertain terms, clarified in the agreement that unless otherwise agreed, the quoted price is exclusive of the charges payable of packing, carriage, freight and insurance. There is no material to show that there was any agreement to the effect that the quoted price is inclusive of insurance. It is also categorically agreed that the delivery of the equipment/machinery is to be taken at the works of the company. However, if the equipment/machinery is desired to be delivered at a particular site, the same can be arranged at the discretion of the respondent at the buyers cost and risk, irrespective of which the delivery shall be construed as complete at the works of the company. These clauses clearly establish that the transactions was/were entered into by and between the respondent and the buyers on a clear understanding that the insurance charges would be charged separately and therefore it cannot be construed to be forming part of the "sale price". Again, the Marine Cover Note further goes to show that the declaration for insurance is to be made immediately after the dispatch of the goods. Since the delivery is ex-works and the

62

amount acknowledged in the Marine Cover Note is only a deposit, the Tribunal was correct in reaching a conclusion that the insurance came into force after the dispatch of the goods. This finding as well as explanation of the respondent that the amount of insurance charges was paid by the buyer subsequently after adjusting the amount of deposit mentioned in the Marine Cover Note is also supported by the addendum to the Cover Note, by which addendum the sum insured was increased by Rs. 10,000 and thereby the insurance company collected extra sum for the additional premium. Therefore the Tribunal was correct in holding that the insurance charges were not part of the sales price u/s 2(h) of the CST Act 1956.

93 61 VST 89 (Cal)

Anatech Instruments Pvt.Ltd. V. Commercial Tax Officer, Sealdah Charge and Others.

The assesse challenged the order of the tribunal which held that the smoke meter and gas analyzer used to examine whether the engines of the automobiles conform to the norms of pollution and these instruments and/or machines are pressed into operation before the automobiles are put on sale or for use on road would be machinery as mentioned in item No. 54B, Schedule C of the VAT Act. The assessee was of the opinion that it is covered by entry for ‘Tools’.

The Court partly allowed the petition. It held that these two machines having measuring functionality cannot be treated as plant and machinery merely because the manufacturers used the same. They are not required for manufacturing automobile in any sense. The word "tools" is of wide import, and the Legislature has made it clear that measuring tools of various

Schedule entry

63

descriptions that can be operated manually and power operated or otherwise are includible there under.

94 61 VST 272 (Ker)

Kochi Refineries Ltd. V. State of Kerala.

The assessment involved is CST assessment. On account of non-production of C forms, its turnover of inter-State sales to the extent not covered by C forms was assessed at the higher rate. Since it was unable to get the C forms and, therefore, assessment at higher rate got confirmed. However, when the Tribunal heard the appeal the petitioner could produce C forms for Rs. 2.46 crores. The Tribunal took a very lenient view and allowed the petitioner's claim by directing the assessing officer to grant concessional rate in respect of C forms obtained later. The assesse filed revision petition seeking more time to produce the forms.

The petition was dismissed. That the C forms should have been produced at the assessment stage itself and even for accepting belated C forms, the assessee has to furnish explanation. Tribunal took a lenient view in petitioner's case and accepted all the C forms produced before them. This in fact amounts to condonation of delay by the Tribunal in the production of C forms without which the same could not have been ordered to be accepted. In any case the Tribunal has no powers to grant further time for the petitioner to try for C forms for the balance turnover. So much so, the Tribunal did not grant time requested for by the petitioner.

Declarations

95 61 VST 324 (Bom)

Timex Art Décor Pvt. Ltd. V. State of Maharashtra and Others.

The petitioner filed VAT returns for 2008-09 and 2009-10 and claimed input-tax credit/set-off on the purchases claimed to have been effected from certain vendors against its tax liability of sales. Information was received by the Department from the Economic Intelligence Unit to the effect that certain vendors/suppliers of the petitioner were fictitious and bogus tax invoices had been issued to the petitioner without the actual delivery of goods and for passing off tax credit without payment or deposit in the treasury.

The Court dismissed the petition. (i) under Sub-section (1) of Section 73, the State Government is empowered to publish or disclose the names of any dealers or other persons if it is of the opinion that it is necessary or expedient in the public interest to do so. The State is also empowered to publish any other particulars relating to any proceedings under the Act in

Input tax credit

64

The Assistant Commissioner of Sales Tax, Investigation Branch, conducted a search on the premises of the dealer. The director was confronted with 13 purchase invoices in response to which he stated that these bills were given to him by agents in the market and were accounted by the petitioner in the purchase register for the claim of input-tax credit. The director stated that he did not know the whereabouts of the dealers; that no supporting documents for the movement of goods were available with him; that he had no details of the transporters and was unable to explain the disposal of the goods purchased from those parties. The statement of one vendor, K. V. Shah, was also recorded and he stated that he had never actually sold or purchased any goods; that he did not possess sale or purchase registers and that the entire operation was being supervised by a hawala operator by the name of Pradip Vyas. The affidavit stated that no sale has been effected to the petitioner and that in his proprietary business, he issued bogus tax invoices to different dealers. On the website of the Sales Tax Department, a list was put up on July 12, 2012 of beneficiary dealers against whom police complaints were lodged after April 1, 2011. The claim of the petitioner appears as a beneficiary in that list. On writ petition contending that a first information report was first filed on October 22, 2012. that the name of the petitioner was uploaded on the website on July 12, 2012 even prior to the filing of the F. I. R. that there was no basis to initiate proceedings under section 73 of the Act, by publication on the website, when the assessment was pending. And that it was the duty of the Department to pursue the hawala dealers who have

respect of such dealers and persons. The publication by the State on the website falls within the enabling provisions of Section 73(1). (ii) That whether and what stage the State should carry out the assessment of hawala dealers was not a matter for determination in these proceedings. The petitioner could not possibly assert that its assessment in accordance with law must be deferred until an assessment is carried out in the first instance against hawala dealers. The Department was justified in taking necessary steps to complete the assessment of the petitioner in accordance with law. A web of complex transactions has been put into place to defraud the revenue and we do not in the course of this judgment intend to circumscribe in any manner whatsoever the full range of powers vested in the State Government through its Sales Tax Department for ensuring that due steps are taken to curb or as the case may be deal with hawala transactions which posed a serious threat to the revenue of the State.

65

collected tax.

96 61 VST 445 (Cal)

Cipla Ltd. V. Dy. Commissioner, Commercial Tax, Corporate Div. and Others.

The petition was filed by the assessee challenging the disallowance of assessee's claim of stock transfer under section 6A of the Central Sales Tax Act, 1956 against the F forms covering transaction of stock transfer for more than one month in violation of rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957.

The petition was allowed. The Court observed that the proviso to rule 12(5) provides that a single declaration might cover transfer of goods, by a dealer to any other place of business, or agent or principal, effected during a period of one calendar month. There is nothing in the rules which can be construed to vitiate a declaration form only on the ground that it covers transactions exceeding a period of over one month.

Declarations

97 61 VST 455 (Bom)

President Trade and Exim Corp and Another. V. State of Maharashtra and Others.

The Tribunal has directed the petitioner to pay an amount of Rs. 50,000 for the assessment year 2005-06, Rs. 4 lacs for the assessment year 2006-07 and Rs. 4.50 lacs for the assessment year 2007-08 on a writ, contending that for the assessment year 2007-08 the petitioner was entitled to a refund of approximately Rs. 27.74 lakhs and therefore, no order of deposit warranted :

Petition of the assessee dismissed. The Tribunal had duly taken the note of the fact that for the assessment year 2007+08 there was a refund to extent of Rs. 27.74 lakhs but having regard to the total tax liability for the assessment year 2005-06 , 2006-07 and 2007-08 which was about Rs.1.43 crores, the direction for deposit of an amount of Rs. 9 lakhs for the remaining two years could not be regarded as arbitrary or contrary to law. The merits of the submission that the petitioner is entitled to a set-off and that the provisions contained in section 48(2) read with section 48(5)of the MVAT Act would not be attracted could be considered by the Dy. Commr (Appeals) when the

Input Tax credit

66

appeal was taken up.

98 61 VST 465 (All)

Skyline Engineering Contracts (India) Pvt. Ltd. V. Commissioner, Commercial Tax, Lucknow.

The petitioner had been awarded a works contract for the construction of new lecture hall complex, Samtel Centre, Boy's hostel. In order to arrive at the value of the contract, the value of the electrical works have been separately shown in the contract. However, the case of the applicant is that the contract was one composite indivisible contract for the execution of the aforesaid contract. The applicant applied for compounding under the compounding scheme. The compounding in respect of the civil work has been accepted excluding the value determined for electrical works. However, the compounding in respect of the civil work was accepted excluding the value determined for electrical works. The assessee filed the petition.

The petition was allowed. A perusal of the contracts reveals that in each contract the scope of the work are mentioned. A composite and consolidated price of the entire work is also mentioned. Only for the purposes of the convenience and for determination of the value of the entire contracts, the price of the electrical work has been separately shown though the electrical work was also a part of the main contracts. Merely because the value of the electrical works was shown separately in the contracts. The same cannot be excluded from the composite value fixed for the entire contracts. The contracts are admittedly civil in nature which also includes the electrical works.

Works contracts

99 61 VST 478 (Karn)

State of Karnataka. V. Modayil Properties (P) Ltd.

The petitions filed by the revenue challenging tribunal order which set aside the order of the assessing authority and held that the assessee is not liable to pay any sales tax on the transportation charges mentioned in the invoice .

The petition allowed. In the invoice raised, the assesse has shown the amount payable towards transportation charges separately and value of goods is shown separately. The amount was payable within 60 days from the date of invoice. Apart from these, no documents were produced to show at what point the title passed. Therefore it is clear title passed to the consignee

Sale price

67

at time of delivery. All amounts received prior to the delivery constitute the value of the goods which may include the transportation charges. There is nothing in the document to show that the transportation charges are directly paid to the transporters. Moreover, the transportation charges is fixed to a particular unit. Under these circumstances, it cannot be said that the transportation charges collected form part of the post-sale expenditure and cannot be included in the total turnover.

100 62 VST 197 (MP)

AAR KAY Agro Spring Industries. V. State of Madhya Pradesh and Others.

The petitioner had filed C forms, which were found defective. In the C form, the purchase order was not mentioned. It is submitted that the petitioner be permitted to file afresh correct C forms duly issued by the competent authority. It is submitted that to rectify the error in C form, the petitioner be allowed an opportunity to file fresh C form.

The Court followed the judgement of the supreme Court in Ambuja cement ( 142 STC 1). Under rule 12(7) of the CST Act, the declaration form could be filed at a subsequent point of time and not necessarily along with returns. That means that the provisions requiring filing of declaration forms along with the return is a directory provision and not a mandatory provision. The object of the rule is to ensure that the assessee is not denied a benefit which is available to it under law on a technical plea.

Declarations

101 62 VST 216 (Mad)

Aspick Engineering (P.)

The assessee effected sale to M/s. VijayashreeColata ,Warora and claimed the sale as an

The petition was allowed. It was not denied by the assesse that the

Inter-state sales

68

Ltd. V. State of Tamil Nadu.

inter-State sale. The assessing officer, viewed the sale as a local sale, on the ground that the purchaser had taken delivery inside the State. The Appellate authority held that the assessment was rightly made. Further Tribunal rejected the assessee's case, on the ground that the price was ex-godown; that the purchaser had taken delivery and moved the goods inter-State at its own cost. Thus, the sale was only a local sale. The Tribunal further pointed out that the goods were insured by the buyers themselves and the sellers were relieved of the liability after the delivery. On a revision petition,

transactions were not governed by a written agreement. The terms of the agreement between the parties are evident only by the despatch details, indicative of the understanding between the parties. It was clear that sale and movement were intimately connected, that the movement of goods was consequences of sale. The HC held it as an inter-state sale.

102 62 VST 241 (AP)

Mahabaleswarappa& Sons. V. Assistant Commissioner (LTU), Anantapur and Others.

The petitioner is engaged in the business of mining .Theysupplied iron ore to an exporter and claimed exemption as "sales for export" u/s 5(3) of the CST Act. He produced H form, as required under section 5(4) of the Act for the entire year, was accepted and assessment was completed granting exemption. The revisional authority issued notice proposing to withdraw the exemption under section 5(3), on the ground that H forms for quarterly periods were not submitted.

Under -rule 12(10)(a) a dealer is required to file a declaration signed by the exporter in form H to the prescribed authority up to the time of assessment by the assessing authority. A plain reading of rule 12(10)(a) does not, in any manner, support the view that they are required to be filed for quarterly periods, and not for entire year. Even a machinery provision has to be read in a manner that is workable.

Declarations

103 62 VST 388 (Delhi)

Varun Beverages Ltd. V. Commissioner of Value Added Tax (Delhi).

The petition was regarding the classification of ‘Slice’ which was classified by the tribunal as a food article. It was contended that the content is water-based. The product "Slice" had a composition of 69.52% water, 1.08 Alfonso Mango, 15.56% Totapuri Mango, 13.05% Sugar, and .79% preservatives. The question therefore was whether fruit based pulp based drink was classifiable as "food article".

The predominant contents of the mango pulp drink, in this case , is water ( 70%). The mango pulp content is 17%. The Court observed that the product does not claim to be a fruit juice and therefore it cannot be urged to have minimum modicum of nutritive properties. If the product had been milk based it might have

Schedule entry

69

been different. The mango pulp is at best an energy giver and in all cases a thirst quencher and cannot be called a food article.

104 65VST 260 (Mad)

Jayam& Co. V. Assistant Commissioner (CT) Main Amindakarai Assessment Circle, Chennai and Another.

The section 19(20) of the Tamil Nadu VAT Act was challenged as arbitrary. The section said that 'notwithstanding anything contained in this section, where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him. the amount of the input tax credit over and above the output tax of those goods shall be reversed.

The selling dealer gave discount after issuance of the tax invoice and charging VAT on the selling price, extending discount to the petitioner which were in the form of credit notes. On receipt of the credit notes the purchasing dealer calculated the purchase price taking into account the discount and fixed the same as the purchase price. By value addition the purchasing dealer sold the goods to the consumer and VAT was calculated on the sale price fixed by the purchasing dealer by considering the discount Thus he took excess tax credit as the VAT paid by him was less that the VAT paid by him to the first selling dealer 9 before discount) .High Court upheld the validity of the amendment as the above method caused a dent in State revenue.

 Sale price- ITC on discount

70

71