Gujarat High Court
State Of Gujarat vs Ahmedabad Jilla Sahkari Doodh Utpadak ... on 11 July, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/951/2013 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 951 of 2013
TO
TAX APPEAL NO. 953 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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STATE OF GUJARAT....Appellant(s)
Versus
AHMEDABAD JILLA SAHKARI DOODH UTPADAK SANGH
LTD....Opponent(s)
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Appearance:
MR. PRANAV TRIVEDI, ASSISTANT GOVERNMENT PLEADER for the
Appellant(s) No. 1
MR B S PATEL WITH MR CHIRAG B PATEL, ADVOCATE for the Opponent(s)
No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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O/TAXAP/951/2013 CAV JUDGMENT
Date : 11 /07/2017
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE BIREN VAISHNAV) 1 All these appeals filed under Section 78 of the Gujarat Value Added Tax Act, 2003, ("Value Added Tax"
for short) are against the common judgement and order dated 21.03.2013 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad. By the aforesaid order, the Tribunal rejected the rectification applications filed by the appellants, State of Gujarat holding that the view taken by the Tribunal, in the judgment and order dated 02.04.2011 needed no rectification / clarification. The Tribunal further held that if the applicants / appellants were aggrieved by the finding of the Tribunal that the transactions of the concerned assessee were inter state transactions and not local sales, it was open for the applicants to challenge the same before the Gujarat High Court. Having disposed of the clarification applications with the aforesaid observations, the State of Gujarat has come in appeal against the common judgment and order passed in Second Appeal Nos 622 to 624 of 2002 rendered by the Tribunal on 02.04.2011.Page 2 of 38
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2 By an order dated 29.11.2013, the appeals were admitted to consider the following substantial question of law:
" Whether on the facts and circumstances of the case, the tribunal has rightly held that the transaction in question are consignments or interstate transactions and thereby the opponent is entitled to exemption under Section 6A of the Central Sales Tax Act?"
3 Before the question is answered it would be necessary to appreciate the facts involved in the present appeals.
3.1 'Ahmedabad Zilla Sahakari Doodh Utpadak Sangh', the respondent in this appeal (also known as 'Uttam Dairy') was carrying on dairy business. It sold milk, Ghee and Butter. The sale was on a consignment basis through various commission agents / consignees. Through these consignment agents, Ghee and Butter was transported and sold at Silvassa and / or Daman. It was the case of the assessee that such consignee agents, swould lift the goods from the factory premises of the principal (the dairy) for the purposes of sale to Silvassa / Page 3 of 38 HC-NIC Page 3 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT Daman. These consignee agents would on lifting such goods would deposit an advance popularly known as "Ghee deposit or butter deposit" in the principal's favour. On the receipt of sale notes from the consignee agent, who would sell such goods by transporting them to Silvassa and Daman, the sales account of such consignee would be credited by adjustment entries in the deposit accounts.
3.2 The consignee agents would transport these goods through various modes of transportation to their sellers in Silvassa / Daman, outside the State of Gujarat obtain " F Forms" which in turn would be submitted to the asseesse and the assessee would produce such forms before the prescribed authority to support its claim that the goods moved from one State to another by the reason of transfer of such goods through the agent. Since the goods were sold outside the State at Daman and Silvassa which had a holiday period declared by the Central Government, tax exemption would then be sought by the assessee.
Page 4 of 38 HC-NIC Page 4 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT 4 The Assessing Authority i.e. the Assistant Commissioner of Sales Tax was of the opinion that such sales through consignee agents were in fact not inter State transactions but were local sales and therefore not eligible for exemption under Section 6A of the Central Sales Tax Act. For assessment years 1996 to 1997, to 19981999 (part that is from 01.04.1998 to 30.09.1998), the Assessing Authority by an order dated 01.11.1999, found that the mode of the assessee of sale through its consignee agents was in fact a local sale and not inter State transaction to Silvassa / Daman. The Assessing Authority, therefore, assessed that the respondent / assessee was liable to pay Rs.56,14,890/ as Sales Tax plus penalty of Rs.19,38,229/ and Rs.9,69,115/ under Section 45 and 49(2)(C) respectively of the Gujarat Value Added Tax. The Assessing Authority held that the assessee was liable to pay Rs.1,10,66,672 as tax since the assessee had already paid Rs.23,85,149/ the liability was assessed at Rs.86,81,523/ The Assessing Authority in coming to the conclusion that the assessee was in fact not engaged in inter State sales but local sales, based its opinion on certain factors namely: Page 5 of 38
HC-NIC Page 5 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT (A) that a Ghee Deposit Account was opened by the assessee in its books. The assessee would take the entire amount of sale proceeds in advance from the consignee agent and only after receipt of sale notes from the consignee agent his sale account would be credited by obtaining necessary adjustment entry in the Ghee deposit account. This foundation of the Assessing Authority was based on clause 4 of the Consignment Agreement, which the assessee entered into with its consignee. Clause 4 of such agreement provided that the consignee shall remit the sale proceeds to the union immediately after effecting the sales along with account sales. The consignee can sell the goods on cash or credit basis at his own risk.
(B) Based on (A) above the Assessing Authority was of the opinion that since the consignment agent lifted the goods from the dairy itself, the "sale" in fact took place at the outlet itself as the delivery was taken by the consignee at his own risk. Therefore the transaction of sale was complete at the dairy and therefore it was in the opinion of the Assessing Authority a local sale and not inter State sale.
(C) It was the case of the Assessing Authority Page 6 of 38 HC-NIC Page 6 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT also that the transportation of goods like dairy products i.e. Butter and Ghee by such consignee agents through the four commission agents in question revealed that in fact such goods were never transported to the ultimate seller at Silvassa or Daman. This opinion of the authority was based on the Assesing Authority's visit to one of the commission agents namely Bandish Trading Company. A statement was recorded on 25.09.1998 of one Narsinhbhai Lallubhai Damania, the owner of the Company. In such statement, the owner of the trading company stated that the godown of the agency was never used for transportation of goods as a consignee agent for transportation of the assessee's products to Daman and that the agency had never operated as a consignee agent for transportation of goods such as ghee and butter to Daman. The Assessing Authority, therefore, based on such statement came to the conclusion that since in fact such consignee agents were not transporting goods to Silvassa / Daman, the assessee was in fact engaged in a transaction which was local sales and sales to such consignment agents were in fact branch transfers and therefore not tax exempt and should have been Page 7 of 38 HC-NIC Page 7 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT therefore assessed for sales as local branch sales under the Act.
5 Aggrieved by the order passed by the Assessing Authority on 01.11.1999, assessing tax as noted above, the assessee filed a first appeal before the Deputy Commissioner of Sales Tax under Section 65 of the Gujarat Sales Tax Act, 1969. Before the Appellate Authority, the assessee assailed the decision of the Assessing Authority and contended that the findings of the Assessing Authority that it was not an inter State transfer but local sale was wrong. It was contended by the assessee that the goods in fact were transported to Silvassa and Daman and forms 'F' were produced before the prescribed authority in support of its contention that there was movement of goods from one State to another through the consignee agent. Such movement of goods to the consignee agents was not by branch transfers but for effecting actual sale at Silvassa or Daman in the nature of inter State sales since Silvassa and Daman were tax havens. Exemption was rightly claimed from the assessment of tax. The Appellate Authority was not satisfied with the Page 8 of 38 HC-NIC Page 8 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT evidence produced by the assessee, namely, lorry receipts showing actual transportation of Ghee and Butter to Silvassa to substantiate inter State movement, production of sale notes to show that the ghee deposit account would not tantamount to acceptance of full sale price of goods by the dairy merely because of such full payment. Further evidence in the form of proforma invoices 'F' forms and details of vehicles through which such goods were in fact inter State transactions were produced. The Appellate Authority also did not agree to the assessee's transactions based on the consignment agreement which provided that the consignee shall remit the sale proceeds in advance. The Appellate Authority also held that the sale in fact took place at the dairy. It was therefore a local sale. Details of the lorry receipts in proof of the fact of actual movement of goods to Silvassa and form 'F' to substantiate inter State movement as envisaged under Section 6A of the Central Sales Tax Act, did not convince the Appellate Authority and the appeal was dismissed by its order dated 24.06.2002.
Page 9 of 38 HC-NIC Page 9 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT 6 Aggrieved by this order of the Authorities below, the assessee dairy approached the Gujarat Value Added Tax Tribunal by filing Second Appeals, the judgments of which, are under challenge in these Tax Appeals. The Tribunal in the impugned judgment accepted the contention of the assessee holding that the dairy through its consignee agents sold goods to sellers in Silvassa / Daman. The goods in question namely butter and Ghee were transported to the sellers in Daman and Silvassa and hence there was movement of goods inter State. Consignments by virtue of agreement between the inter se principal and the agent through consignment agreements, which provided remission of sales proceed by the consignee immediately after assigning sales, would not lead to a conclusion that the relationship between the assessee and the agent was that of vendor and vendee. The transaction would not merely become local sales transaction by virtue of this clause in the agreement.
6.1 Merely because the deposit account known as Ghee deposit account or butter deposit account was opened in the books of the assessee, such device of accepting advance deposit would not Page 10 of 38 HC-NIC Page 10 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT tantamount to accepting full sale price of goods. Such deposit, according to the tribunal was in the nature of an advance deposit and therefore the findings of the First Appellate Authority and the Assessing authority that merely because such consignee agents paid the full price to the principal prior to dispatch of goods and such goods were accepted by such consignee agents at their own risk, would not render such a sale local sale.
6.2 The Tribunal further on the appreciation of facts on record held that, the assessee had in compliance of Section 6A of the Central Sales Tax Act, 1956, discharged the burden by producing form "F" which was obtained in accordance with clause 7 of the agreement which required the consignee to furnish such form. Based on such forms together with details of the lorry receipts and invoices of various vehicle owners which transported the goods, the Tribunal upheld the contention of the assessee. While allowing the appeal, the Tribunal observed and accepted the submissions of the Page 11 of 38 HC-NIC Page 11 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT assessee that sales through the consignee agents and consequential transportation of goods through such agents for sale to Silvassa and Daman was transfer of such goods and its movement from one State to another through its agent and therefore exempt from tax.
7 In order to appreciate the correctness of the findings of the Tribunal, which is based on the facts of the case, it would be in the fitness of things, to briefly refer to the contentions raised by the revenue in the appeal before the Tribunal and reiterated by the learned Assistant Government Appeal Shri Pranav Trivedi in these appeals. The contentions of the appellant/ revenue are as under:
A) By virtue of the consignment agreement's clause 4 which required the consignee to remit the sale proceeds to the union immediately after affecting the sales and that the consignee can sell the goods on cash or credit basis at his own risk, the sale in fact occurred at the dairy and was therefore a local sale, and assessable to tax and not exempt as contended by the assessee.Page 12 of 38
HC-NIC Page 12 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT B) The fact that the entire payment of the sale proceed was made in advance by the principal was a circumstance against the assessee to contend that the sale was in the nature of inter State transaction.
C) Further it was contended that in absence of any accounts produced to substantiate the nature of sale by the consignee agents it should be presumed that the sale took place at a local level and not inter State. There was nothing on record to show at the hands of the consignee agent through their accounts to say that the incident of sale occurred at Silvassa or Daman.
D) The vehicles which transported the goods had no insurance nor did the consignee agents show any over head expenses to suggest that such sales were in the nature of inter State movement.
E) Through the discussion in the judgment of the Tribunal, Mr Pranav Trivedi, learned AGP invited the attention to the details, which were produced at pages (831 to 841 of the paper book before the original authority). In the body of the judgment of the Tribunal statements have been reproduced relating to five vehicles belonging to one of the commission Page 13 of 38 HC-NIC Page 13 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT agents namely Bandish Trading Company. Attention is invited of this Court of such statement made by the owners of such transport vehicles recorded during the period of assessment. These vehicle owners have through their statements have either denied that their vehicles have travelled outside the State or have brought out a fact that in comparison to the capacity load of their vehicles, which were light goods vehicles the weight of the goods, namely butter and Ghee were far in excess of capacity of these vehicles, and therefore, that the goods in fact were transported outside Gujarat itself can not be believed.
F) Section 6A of the Central Sales Tax Act stipulates that where any dealer claims that he is not liable to pay tax under this Act in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by a reason of transfer of such goods by him to any other place or to his agent or principal, the burden of proving that such movement of goods did occur is on that dealer. A declaration in the nature of form 'F' has to be produced by the dealer to substantiate his transaction of inter State movement. In the submission of learned Page 14 of 38 HC-NIC Page 14 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT AGP Shri Trivedi, the assessee did not discharge this burden as required under Section 6A of the Central Sales Tax Act, 1956, and therefore, the sale in question was obviously in the nature of local sale and not inter State and therefore chargeable to tax under the Act as local sale.
8 On the other hand Mr B S Patel appearing for respondents / original assessee contended that A) Merely because the agreement provided for remission of sales proceeds in advance and lifting of the goods by the consignee at the dairy and subsequent exposure to such goods at his own risk would not render such a sale in one as a local sale.
B) Merely because the accounts of the dairy showed an advance payment as Ghee deposits / butter deposit such advance receipt would not tantamount to payment of consideration in advance. Sale notes were produced by the consigne based on which the Ghee deposit account would be debited against such advance deposit. Such a deposit and the adjustment entries in the deposit account was only in the nature of an advance deposit and cannot tantamout to payment of Page 15 of 38 HC-NIC Page 15 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT sale price to attract the provisions of the local sale transaction.
C) Proforma invoices were produced sales notes were produced so as to substantiate the fact that the consignment agents had in fact lifted such goods on behalf of the principal, for sale at Silvassa / Daman.
D) The fact that no insurance was taken for such goods was not relevant for the purposes of coming to the conclusion that the sale was not inter State sale.
E) Substantial evidence has been produced by way of lorry receipts to show that the assessee transported goods from Ahmedabad to Silvassa through the consignment agents which were carried through the vehicles. Detail of the vehicles which carried such goods according to Shri Patel has been produced extensively in the paper book and has been reproduced by the Tribunal. According to Mr Patel, the statements which are sought to be relied upon, five in number of the vehicle owners have been sought to be produced by the Government for the first time before the Tribunal, though such statements were recorded at the assessment stage. No opportunity to cross examine the transporters whose statements are so recorded has been Page 16 of 38 HC-NIC Page 16 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT given. Merely because such five statements are on record, the fact that there was no inter State movements of goods cannot be held against the assessee.
F) The assessee has by producing form 'F' sufficiently discharged the burden of proof and in accordance with Section 6A of the Central Sales Tax Act have proved that the sales were in fact inter State and not local sales. It was not open for the assessing authority to contend now that such forms were defective and therefore cannot be taken into account for discounting the assesses's version that the sales were in fact inter State.
9 It is in light of the submissions made that the correctness of findings of the Tribunal need to be examined in the facts of the case on hand. The facts which are undisputed are that:
1) The assessee entered into consignment agreements with selling / consignee agents, four in number, one of which was Bandish Trading Company.
2) Through the consignment agreements ghee and/or butter was lifted by such agents from the dairy Page 17 of 38 HC-NIC Page 17 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT premises itself on remission of sale proceeds to the union (Dairy) at their own risk.
3) A Ghee / Butter Deposit Account was opened in the account books of the union. From the credit amount so deposited adjustments were made. According to the assessee, once sales notes were furnished adjustments were made. Their books of account would reflect stock transfer.
What the revenue found objectionable and therefore leading it to conclude that the sales were local sales and not intraState have been discussed in the respective stands of the parties. Primarily, two issues were before the Tribunal, which it answered.
(A) Whether the device of sale through such consignment agreements entered into by agents and the clause 4 would thereof render the sale as local sale.
(B) Even otherwise did the goods actually move to Silvassa / Daman and whether even when form F was produced by the Union to prove such movement, on facts and on the face of some transporters denying such movement was such movement genuine? And, therefore the case of the Revenue to tax them as local sale was Page 18 of 38 HC-NIC Page 18 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT correct.
The Tribunal recorded the following findings:
"46 In this case, admittedly, the goods were dispatched in other State through regular transport carriers, the L/R shows the name of the appellant as the 'consignor of the goods'. The commission agent is shown as consignee and when the transporters deliver the goods to them, the commission agent put their signatures on the transport receipts for having received the goods. Therefore, it is incorrect to say that the goods have been delivered to the consignee as agent at the appellant's factory. In the Tribunal's view, details of the transport company receipts through which goods were consigned were already furnished to the Assistant Commissioner along with the name of the consignee agents appointed by the appellant. The said material and relevant evidence have been ignored by both the authorities below.
47 In the books of account of the commission agent, the stock transfers are only shown as the good received on consignment and when the goods are sold by them the sales are shown in their returns submitted to the sales tax office of Silvasa or Daman. They have sold the goods on their own account and their books as well as income tax returns only disclosed the earning of commission as the selling commission agents of the appellant.
48 Based on such sale notes, the net realization shown therein has been credited by the appellant to the Ghee sale account . Butter sale account. Thus, all these expenses are reflected in sale account. They are borne by the appellant. Whatever expenses including telephone and postage, incurred by the agent are shown deducted in their sales notes. The appellant has already furnished form F obtained from the said commission agents as prescribed under Section 6A.
49 In the Tribunal's view, the authority has Page 19 of 38 HC-NIC Page 19 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT also come to an incorrect conclusion that the four parties have not acted as commission agents though they have sent their sale notes and credited the realization only after deducting the expenses incurred by them for the sale of the goods. The authority has erroneously came to the conclusion that as the appellant's books do not show the expenses, the sales on consignment basis cannot be accepted. The lower authorities have failed and neglected to appreciate that the amount taken to the sales account is the amount of net realization and not gross realization. Therefore, the question of debiting expenses does not arise. The lower authorities have erroneously taken the advance received as sales without taking into consideration the fact that such advance received is first taken to the deposit account and not to the sales account.
50 It is equally true that no insurance has been taken for goods in transit. The transport freight has been paid by the commission agent and he has deducted the same as expenses while furnishing the sale note to the appellant. The commission agent has its own godown where the goods are unloaded by him. The commission agent also kept regular stock register regarding the incoming and outgoing goods. It is understood from the commission agent M/s. Bandish Trading Company of Silvasa that the enforcement branch of Ahmedabad had already visited their place and their godown in Silvasa.
50.1 The Tribunal has also considered following admitted facts which have been stated by the appellant. The Tribunal has also accepted the said facts as correct because they are based on documentary evidence produced by the appellant on the record of the case. The appellant has also produced proof by way of affidavits of the parties who had issued such transport receipts as well as copies of agreements with the selling commissionagents with their reply dated 20.09.1999 (page 119 of the paper book). The deponent had even in response to the summons issued by the Assistant Commissioner personally Page 20 of 38 HC-NIC Page 20 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT accepted the fact that the goods have been transported to the destination outside the State and signatures have been obtained when the goods were so delivered to the said commission agents. Even the sale notes issued by the commission agents as well as the extracts from the books of accounts of the said commission agents were produced to show that they had sold the goods as selling commission agents. It is also admitted that the said parties are registered outside the State in the Union Territory and they are also assessed in respect of those transactions in their respective territory. Even visits were paid and it was found that the parties do have their places of business at the respective places. Therefore, on facts, the conclusion that those parties at Daman and Silvasa have not acted as selling commission agents of the appellant is unjustified and unwarranted. Therefore, the entire assessment made under theGST Act(i.e. Local Act) in respect of such consignment sales (outside sales) is not tenable in the eye of law. In this behalf, Tribunal has gone through the reply filed by the appellant on 20.2.1999 before the department (page 119 to 133 of the paper book) and annexures produced therewith and also ledger account of the appellant for the year 199697 which gives details of transportation charges and others expenses in that behalf.
51 The Tribunal is of the view that the lower authorities have also incorrectly equated the amount advance payment as the sale price of the goods. The lower authorities have also been wrongly impressed by the fact about insurance having not been taken. The authorities have further wrongly observed that the goods were delivered to the buyer in his own vehicle. This conclusion arrived at by the lower authorities in the Tribunal's view, is totally against the weight of documentary evidence in the form of transport receipts as well as other evidence produced at the time of hearing which are duly supported by the oral evidence of the parties concerned. The signature taken by the transporter on the reverse of the transport receipts while Page 21 of 38 HC-NIC Page 21 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT effecting delivery in the other State is ample proof to show that the goods have in fact been delivered in the other State by the transporters.
52 The Tribunal is of the view that the lower authorities' conclusion that (1) the said parties have not acted as selling commission agents and (2) the goods have not gone outside the State, are totally contrary to and inconsistent with the evidence on record. Theauthorities have failed and neglected to appreciate that admittedly at the time of visit, the parties did not have their place of business, though they were closed at the time of visit. Not only that, but the said conclusion suffers from the vice of nonapplication of mind on the part of the authorities to the relevant documents produced by the appellant and also the evidence of third parties such as selling commission agents, agreements with them, their sale notes, their books of accounts, the evidence of the transport receipts supported by the affidavit of the said parties through whom the goods were transported and also the evidence of the Government authorities of the other State in the form of registration certificates, forms, assessment order etc by those authorities.
53 In the Tribunal's view, the conclusion of the authorities below are vitiated and arrived at without properly appreciating the evidence produced by the appellant and, therefore, the conclusions reached on facts as well as on law to the effect that M/s. Bandish Trading Company has not acted as selling commission agent and that he had taken delivery of the goods locally and the goods have bot been dispatched to the other State are wholly erroneous. There is no specific denial about the transaction of consignment sales effected through the other commission agents M/s. Patel Enterprises, M/s. Gujarat Coop Milk Produce and Investment Pvt Ltd. The entire branch transfer claims have been disallowed by applying the analogy of the discussion relating to M/s. Bandish Trading Company and the same has been wrongly subjected to local tax through the sales through other Page 22 of 38 HC-NIC Page 22 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT commission agents are also made in Unions Territories.
58 The appellant had produced copies of the bills of consignment agent who sold the goods in Daman / Silvasa as per Rules 3(C), 7 and 8 of CST (Gujarat) Rules, 1970 along with form F which were obtained from prescribed authority of that State. Not only that, but it is proved that all the four consignment agents were assessed in Daman /Silvasa by the sales tax authority. In that view of the matter, the conclusion and reasoning to treat local sales by agent are against the evidence.
58.1 In this connection, the revenue has produced statement of owner of five vehicles to prove that goods did not move from Ahmedabad to Silvasa and, therefore, all the consignment sales made in all the three years' assessment are required to be considered as local sales. In Tribunal's view, the assessing authority had made some inquiries behind the back of the appellant and without disclosing any information or giving copies of the statement of such parties or opportunity of being heard in respect of the details of such enquiries and without providing opportunity of cross examination to the appellant and used the said information against the appellant, and therefore, the reasoning for considering consignment sales as local sales is unjustified. In Tribunal's view, the statement of the owner of vehicles was recorded at assessment stage, but copy thereof was not given to the appellant and for the first time copy of statement and information obtained recently from the RTO are given to the appellant at second appeal stage, and therefore, without affording any opportunity of cross examination to the appellant, the sales tax department cannot rely upon the same. The appellant is engaging the transport carriers and the transporter is managing for the vehicles and the appellant is not knowing the owner of the transport vehicle. The Page 23 of 38 HC-NIC Page 23 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT appellant had also produced affidavits of two transporters which disclose that the goods were transported from Ahmedabad to Silvasa. In the Tribunal's view, after lapse of about 15 years, it may not be possible for the appellant to produce further evidence to show that goods were transported from Ahmedabad to Silvasa.
60 In view of the above facts, the Tribunal is of the view that if the department had made cross check with vehicle owners, the department must have recorded statement of all the vehicle owners. However, the State Government agent has produced only five statements of owners of vehicles.
62 In Tribunal's view, after production of forms in 1999 by the appellant at assessment stage, for the first time after the lapse of about 15 years, it is sought to be contended on behalf of the revenue in the Second Appeal in 2010 (Before Tribunal stage for the first time) that the said forms were defective and, therefore, consignment transactions should not be allowed. Both the authorities below had not disallowed the claim of consignment on the ground of forms being defective and, therefore, such contention raised for the first time cannot be entertained at such a belated stage. It may be observed that it is now settled principle laid down in the case of E.V.Mathai and sons (129 STC 503, paper book page 125) that if forms are defective, then, opportunity of correction has to be provided to the dealer. In the Tribunal's view, it is now not possible to cure the defect in the forms after about 15 years as the business of consignment agent is closed down since long. The claim of consignment sales cannot be disallowed as production of Form F was not mandatory during the years 199697, 199798 and part of year 199899 i.e. from 1.4.1998 to 30.9.1998. The production of form F is now mandatory as per amendment in section 6A w.e.f 11.5.2002. In that view of the matter, the contention of the revenue is not accepted regarding production of form F and it is held Page 24 of 38 HC-NIC Page 24 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT that the transaction carried out by the appellant during 199697, 199798, and from 1.4.1998 to 30.9.1998 were consignment transaction.
63 In the premises aforesaid, it is held that consignment sales made by the appellant through four consignment agents are not local sales but same are covered by section 6A of the CST Act and, therefore, not liable to tax under Local Act in the facts and circumstances of the case. They are interState sales u/s. 3(a) of CST Act and as such, are not liable to tax under the Local Act in the facts and circumstances of the case.
10 Analysis of the evidence on record, in the facts of the case had led the Tribunal to arrive at a conclusion that it did. The findings and the conclusions arrived at need to be assessed in light of the question of law framed, while admitting the appeals i.e. whether on facts and circumstances of the case, the Tribunal has rightly held that the transactions in question are consignments or inter State transactions and thereby the opponent is entitled to exemption under Section 6A of the Central Sales Tax Act?
11 Section 6A of the Central Sales Tax Act reads as under:
"6A (1) Where any dealer claims that he is not Page 25 of 38 HC-NIC Page 25 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods [and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale.] (2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under sub section (1) [are true and that no interState sale has been effected, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall, subject to the provisions of subsection (3),] be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale.
[(3) Nothing contained in subsection (2) shall preclude reassessment by the assessing authority on the ground of discovery of new facts or revision by a higher authority on the ground that the findings of the assessing authority are contrary to law, and such reassessment or revision may be done in accordance with the Page 26 of 38 HC-NIC Page 26 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT provisions of general sales tax law of the State.]"
11.1 Consignment Agreement's clause 4 was pressed into service to contend that since the entire sales proceeds were paid immediately and the risk in goods was entirely that of the agent sale was a local sale. Moreover, the Ghee / Butter deposit advance when seen in light of this and deduction and set off of expenses showed / suggested local sale.
The Tribunal, on facts found that, in the book of commission agents stock transfers are shown and when sold at Silvasa sales are shown in the returns submitted to the Sales Tax Office at Silvasa / Daman. Further, on receipt of a sale note from such consignment agent necessary adjustments are made. Advance receipts, according to the Tribunal, in such consignment transactions are permissible. In arriving at such a finding, the Tribunal relied upon a judgement of this Court in the case of The Commissioner of Sales Tax, Gujarat vs. M/s.Page 27 of 38
HC-NIC Page 27 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT Mohanlal Gokaldas and CO. reported in197/GSTB/HC Vol.227(292), wherein the following question of law was preferred by the Tribunal for its opinion:
"Whether on the facts and in the circumstances of the case the transactions in dispute for both the periods, between the opponent firm and the parties at Delhi, who according to the opponent firm are its commission agents, were transactions of consignments of goods to these commission agents for sale on commission basis or were transactions of sales effected by the opponent firm to the said commission agents, that is, sales by principal to to principal."
Further it was held that:
"28 It was next contended that the Hundis which were drawn by the assessee on its different constituents with a view to realise the price of the goods despatched with the amounts of sale price for which the goods were sold to the ultimate buyer at Delhi. The argument was that this approximation to points to out right sales and not to an agency as contended by the assessee. Here also we do not find any substance in the argument for the simple reason that in case of out right sales the Hundis would have been drawn exactly for the amount for which the sales were effected but the very fact that the amounts of Hundis approximated with the sale price of the goods despatched, again goes to emphasis the type of relationship which generally obtains between a principal and its agents. If ultimately the Delhi constituents of the assessee were to render a true and full account of the transactions it would not matter if the assessee received only an approximated amount towards these transactions.
29 From this discussion it follows that there is nothing to show that the property in the goods despatched by the assessee to its Delhi constituents passed to these constituents. On Page 28 of 38 HC-NIC Page 28 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT the contrary those facts show that the Delhi constituents had rendered themselves liable to the assessee to show that the goods were sold by them in the market at the best available market price and to account for the receipt and expenditure relating to despatched goods. This therefore brings us to the other aspect of the matter, namely accountability of the Delhi constituents of the assessee. As already noted above if the Delhi constituents of the assessee had become the owners of the goods despatched to them they would have surely not considered themselves liable to account for any of the expenditure incurred by them after taking delivery of the goods in question. It is however found that these Delhi constituents have made the following expenditures after taking the delivery of the goods and have debited this expenditure to the account of the assessee and have also sent the account relating thereto to the assessee in different statements of accounts. This expenditure is found to be of the following categories:
(a) All expenses from station to godown.
(b) Brokerage paid to the brokers at Delhi at the time of effecting the sales in favour of the ultimate buyers and
(c) Expenditure incurred by these Delhi constituents of the assessee in paying the bunding charges for the empty tins. S That this expenditure is incurred by the Delhi constituents after taking the delivery of the consigned goods is apparent from the various statements of accounts sent by these constituents to the assessee at different times.
One of such statements is found at the page 177 of the paper book. Apart from showing that these Delhi constituents of the assessee had not become the owners of the goods despatched to them these items of the expenditure further reveal the fact that that these Delhi constituents were considering themselves liable to render the account of this expenditure to the assessee. The assessee would at all Page 29 of 38 HC-NIC Page 29 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT times be entitled to challenge the quantum of expenditure which is incurred by these Delhi constituents and if such a challenge is made by the assessee within the period of limitation, the Delhi constituents would under law, be answerable to explain each and every naiya paisa which they have spent with regard to the goods delivered to them. It is thus found that the Delhi constituents to whom he assessee has sent the goods were also accountable to the assessee after taking the delivery of the goods and upto the state, these accounts were approved by the assessee, either expressly or impliedly. 30 The above discussion thus reveals two important aspects of the matter namely (1) the property in the goods despatched by the assessee to Delhi did not pass to the Delhi constituents and (2) the Delhi constituents remained accountable to the assessee for all the receipts and the expenditure made by them with reference to the goods delivered to them. These two important aspects of the matter are totally inconsistent with the theory of sale advanced by the department and are fully constituent with the theory of agency prepounded by the assessee".
Considering the agreement and covenant 4 thereof the Tribunal relied on the judgment in the case of Union of India and Another vs. M/s. K G Khosla & Co. Ltd., and others reported in (1979) 2 SCC 242 to support its stand that merely provision in the contract would not determine the sale, when in fact there was movement of goods. In the case before it the Supreme Court, held that in order to hold a sale to be inter Page 30 of 38 HC-NIC Page 30 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT State sale, the contract may not provide for such movement but if such movement is incidental then such sale would be interState sale. The Supreme Court in the case of Union of India and Another vs. M/s. K G Khosla & Co. Ltd., and others (Supra) held as under:
"15 It is true that in the instant case the contracts of sales did not require or provide that goods should be moved from Faridabad to Delhi. But it is not true to say that for the purposes of Section 3(a) of the Act it is necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. The true position in law is as stated in Tata Iron and Steel Co.Ltd., Bomabay vs. S R Sarkar, wherein Shah, J. speaking for the majority observed that clauses(a) and (b) of Section 3 of the Act are mutually exclusive and that Section 3(a) covers sales in which the movement of goods from one State to another "is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State" (page 391). Sarkar,J. Speaking for himself and on behalf of Das Gupta, J. agreed with the majority that clauses (a) and
(b) of Section 3 are mutually exclusive but differed from it and held that " a sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods would be moved; in other words; a sale occasions a movement of goods when the contract of sale so provides" (page 407). The view of the majority was approved by this Court in the Cement Marketing Co. of India vs. State of Mysore; State Trading Corporation of India v. State of Mysore and Singareni Collieries Co. vs.State of Andhra Pradesh.
In K G Khosla & Co. vs. Deputy Commissioner of Taxes, counsel for the Revenue invited the court to Page 31 of 38 HC-NIC Page 31 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT reconsider thequestion but the Court declined to do so. In a recent decision of this Court in Oil India Ltd., v. The Superintendent of Taxes, it was observed by Mathew, J., who spoke for the Court, that: (1) a sale which occasions movement of goods from one State to another is a sale in the course of interState trade, no matter in which state the property in the goods passes; (2) it is not necessary that the sale must precede the interState movement in order that the sale may be deemed to have occasioned such movement; and (3) it is also not necessary for a sale to be deemed to have taken place in the course of interState movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale (page 801, SCC p.737 para
9). The learned Judge added that it was held in a number of cases by the Supreme Court that if the movement of goods from one State to another is the result of a covenant or an incident ofs the contract of sale, then the sale is an inter State sale.
Even considering the judgement in the case of State of Gujarat vs. Bombay Metal Alloys reported in (54 STC 45) the Tribunal held that merely because the contract of sale does not provide for occasion of movement, would not itself go against the assessee. The relevant paragraph of which is as here under:
"18 Taking an overall view of the material facts and circumstances of the case in their proper perspective, the conclusion is inevitable that the movement of goods in the instant case was occasioned as a result of or in pursuance of the contract of sale. It is true that the contract of sale itself is not shown to have provided for the movement of goods and that the movement of goods is not shown to have been occasioned in accordance with the specific terms of such contract. For the purposes of section Page 32 of 38 HC-NIC Page 32 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT 3(a) of the Central Act, however, that is not essential. It is sufficient if the movement was an incident of such contract. The facts cumulatively indicate that the movement of goods herein satisfies the said test. The buyer, who carried on business in another State and for whom the instant transaction was a sole business venture within the territory of this State, had instructed the vendor after the conclusion of the contract of sale, but before the title to the goods passed, to despatch the goods to Bombay. Pursuant to such instructions, the goods were separated by the vendors as consignors. The buyer, who was the consignee, had to pay merely the transport charges. These facts cumulatively indicate that there was a conceivable link between the contract of sale and the movement of goods and the nexus is not otherwise explained. For the purpose of Section 3(a), it is immaterial where the property in the goods passed. Against the aforesaid background, the only conclusion possible is that the purchase of goods in the instant case was in the course of interState trade and that it is not exigible to purchase tax under Section 15 of the Act."
11.2 The other question that the Tribunal addressed is on the question whether the actual movement of goods did take place?
It is the case of the assessee that movement of goods from one State to another State did take place. Such transfer was occasioned through his consignee agents. In order to substantiate the facts of movement of goods and to show that the goods were in fact dispatched through regular Page 33 of 38 HC-NIC Page 33 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT transport carriers, Lorry receipts were produced to show movement of goods. Copies of the bills of consignment who sold the goods at Daman / Silvassa along with form F together with the fact that the sales tax authority at Daman / Silvassa assessed such goods was on record. The Tribunal, as a matter of fact, on appreciation of evidence, found evidence produced by the assessee to show that the four consignment agents had transported the goods, the table of which is as here under:
1996-97 Vehicles Transaction
P.B.page
GCMMF Ltd 4 437
Madhumark 7 11 441
Bandish Trading Co. 11 18 447
Patel Enterprise 22 24 455
Bandish Trading Co. 28 34 463
Patel Enterprise 6 8 469
Bandish Trading Co. 35 41 477
Total 113 140
The revenue for the first time in the course of hearing before the Tribunal, produced statement of five transporters who had either, denied transporting the consignment or the vehicles had for less load bearing capacity then the weight of the goods Page 34 of 38 HC-NIC Page 34 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT consigned. All these statements of such transporters were recorded during the disputed assessment period. The contention of the Revenue, that these five sample cases, was eloquent of the fact that the goods did not move outside the state. The Tribunal rightly, on facts, rejected the contention of the revenue, to rely on these statements. These statements, as is evident from the record, were available when the exercise of assessment or even when the case was considered before the First Appellate Authority. It was for the first time, after 15 years, that such statements were produced during the course of hearing before the Tribunal. As rightly observed by the Tribunal, not only were these cases produced for the first time and copies thereof were not given to the assessee. Such statements, as the Tribunal had rightly held, could not have been relied upon at the stage of Second Appeal without affording any opportunity of cross examination. Moreover, except these five sample statements the State did not produce any other statements and the Tribunal was therefore right in holding that in probability if other statements were produced it could have disclosed the true nature of Page 35 of 38 HC-NIC Page 35 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT transactions of consignment. Since the inquiries vis avis these transporters was held behind the back of the assessee, such facts cannot be relied upon by the Revenue. Moreover all such statements related only to one transporter / consignee Bandish Trading Co. 12 The consequential question that the Tribunal answered in favour of the assessee was regarding submission of form 'F' to substantiate the fact that the goods were in fact sold at Silvassa / Daman. Did the assessee discharge the burden of proof by producing such form 'F'. In accordance with Rule 12(5) of the Central Sales Tax Rules, 1957, the declaration by a dealer, that the goods did move from one State to another, has to be given in the prescribed form 'F'. The assessing authority disregarded the claim of such movement of the dealer, though such form 'F' were produced, on the ground that they were not complete. The assessee, according to the Revenue's stand, had not discharged the burden of proof to show that the transfer of goods was in course of interState sale. From the facts on record, that forms 'F' for the assessment periods in question were produced, is not Page 36 of 38 HC-NIC Page 36 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT disputed. The claim was not disallowed by the assessing authority on the ground that such 'F' forms were not produced. The contention that the forms were defective was also taken at the stage of the Second Appeal. The Tribunal, in such circumstances recorded a finding of fact that, 15 years after the transactions having taken place, the plea of production of defective 'F' forms cannot be entertained. 13 Taking an overall view of the case on hand and on the basis of the facts on record, the Tribunal held that all three essential ingredients of interState namely that (1) there was an implied stipulation in the contract regarding interState movement of goods
(ii) the goods did actually move from one State to another, (iii) and the sale concluded in another State, were satisfied.
14 Having held thus, based on the facts so present before the Tribunal, no fault can be found in the findings recorded by the Tribunal. The Tax Appeals are accordingly dismissed. The question is answered in favour of the assessee.
Page 37 of 38 HC-NIC Page 37 of 38 Created On Fri Aug 18 07:47:28 IST 2017 O/TAXAP/951/2013 CAV JUDGMENT (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) Bimal Page 38 of 38 HC-NIC Page 38 of 38 Created On Fri Aug 18 07:47:28 IST 2017