Allahabad High Court
Commissioner Of Sales Tax vs Swadeshi Metal Works on 30 July, 1986
Equivalent citations: [1987]66STC64(ALL)
JUDGMENT Anshuman Singh, J.
1. These four revisions under Section 11(1) of the U.P. Sales Tax Act (hereinafter referred to as the Act) have been preferred by the Commissioner of Sales Tax against the order dated 31st August, 1985 passed by the Sales Tax Tribunal,Ghaziabad Bench-II, relating to the assessment years 1978-79, 1979-80, 1980-81 and 1981-82 all under the Central Sales Tax Act (hereinafter referred to as the Central Act).
2. Briefly stated the facts relevant for the decision of these cases are that the respondent assessee is a dealer of iron and steel having its head office at Mandi Shiam Nagar, Bulandshahar and branch office at Delhi. For the assessment years 1978-79, 1979-80 and 1980-81 no inter-State sales were admitted by the respondent-assessee but for the assessment year 1981-82 it disclosed its inter-State sales at Rs. 19,930.50. A survey of the business premises of the assessee was conducted on 31st March, 1982, when some account books and certain other papers were seized. From these documents the assessing authority inferred that the branch transfers shown by the assessee were not actually branch transfers to Delhi office but were inter-State sales exigible to Central sales tax. He, therefore, issued notice under Section 21 of the Act to the assessee-respondent in respect of the first three assessment years in question and after considering the materials the assessing authority rejected the account books under the Central head and enhanced the Central sales in respect of all the four assessment years. In the first appeals filed by the respondent-assessee the Assistant Commissioner (Judicial) allowed the appeals in part and reduced the net turnover. The Commissioner of Sales Tax, U.P., as well as the assessee both feeling aggrieved against the aforesaid order preferred second appeals before the Tribunal which by the impugned order allowed the appeals of the respondent-assessee but dismissed those of the Revenue.
3. I have heard Sri P.K. Jain, learned counsel appearing for the Commissioner of Sales Tax and Sri Bharatji Agarwal, learned counsel appearing for the respondent-assessee. Mr. Jain urged that the transactions, which have been shown as branch transfers by the respondent-assessee are actually not branch transfers but are inter-State sales exigible to Central sales tax and the Tribunal committed an error in accepting the said transactions as branch transfers. He further urged that in view of the decision of the Supreme Court in Sakney Steel and Press Works Ltd. v. Commercial Tax Officer [1986] 60 STC 301 which has been pronounced after the impugned order was passed and which is squarely applicable to the facts of the present cases this Court instead of deciding the cases itself should direct the Tribunal to apply its mind and decide the appeals afresh in the light of the aforesaid decision. Mr. Bharatji Agarwal, learned counsel for the respondent-assessee, on the contrary has vehemently resisted the contention raised on behalf of the Commissioner of Sales Tax and submitted that the facts of the aforesaid Supreme Court case are entirely different from the facts of the present cases and the principle laid down in the aforesaid decision cannot be applied and as such it is not necessary to send the matter back to the Tribunal.
4. Before entering into the various contentions raised on either side I think it necessary to refer to the aforesaid Supreme Court decision. The facts of the Supreme Court case are that Sahney Steel and Press Works Limited, a public limited company engaged in the manufacture and sale of stampings and laminations made out of steel sheets which were utilised as raw material for making electric motors, transformers, etc., had its registered office and its factory in Hyderabad. Its branches at Bombay, Calcutta and Coimbatore were mainly engaged in effecting orders from customers within and outside their respective States for the supply of goods conforming to definite specifications and drawings and advised the registered office at Hyderabad. The company manufactures (a) standard goods according to the company's own designs and specifications and (b) non-standard goods according to the designs and specifications supplied by customers. The dispute was with regard to the non-standard goods which the company manufactured according to the designs and specifications supplied by customers at its factory at Hyderabad and despatched them to the respective branches by way of transfer of stock. Such goods were booked to "self" and sent by lorries. The goods received by the branches were entered in the stock accounts of the branches and kept in stock for ultimate delivery to the customers. On the goods reaching the branches, they were inspected by the customers and accepted by them where the customers were local parties. Where the customers were outside the State the branch despatched the goods to them. The branches raised the bills and received the sale price. The company was assessed to State sales tax in Maharashtra, West Bengal and Tamil Nadu in respect of those goods. It claimed that there was only a transfer of stock from Hyderabad to the branches outside the State of Andhra Pradesh and that the sales effected to the customers by the branches were local sales in the respective States. The Commercial Tax Officer, Hyderabad, held the sales to be sales in the course of inter-State trade and made an assessment accordingly for the years in question. Before the Supreme Court the petitioner-company contended that when the registered office of the company at Hyderabad despatched the manufactured goods to its branch office it was merely a transfer of stock from the registered office to the branch office and thereafter the movement of the goods started from the branch office to the buyer. It was urged that the registered office and the branch office were separately registered as dealers under the sales tax law and transactions effected by the branch office could not be identified with transactions effected by the registered office. The movement of the goods from Hyderabad to the branch office, it was said, was only for the purpose of enabling the sale by the branch office and was not in the course of fulfilment of the contract of sale. The Supreme Court negatived the aforesaid contention and held :
Even if, as in the present case, the buyer places an order with the branch office and the branch office communicates the terms and specifications of the orders to the registered office and the branch office itself is concerned with the sales despatching, billing and receiving of the sale price, the conclusion must be that the order placed by the buyer is an order placed with the company and for the purpose of fulfilling that order the manufactured goods commence their journey from the registered office within the State of Andhra Pradesh to the branch office outside the State for delivery of the goods to the buyer. We must not forget that both the registered office and the branch office are offices of the same company and what in effect does take place is that the company from its registered office in Hyderabad takes the goods to its branch office outside the State and arranges to deliver them to the buyer. The registered office and the branch office do not possess separate juridical personalities. The question really is whether the movement of the goods from the registered office at Hyderabad is occasioned by the order placed by the buyer or is an incident of the contract. If it is so, as it appears no doubt to us, its movement from the very beginning from Hyderabad all the way until delivery is received by the buyer is an inter-State movement.
5. In the cases in hand the modus operandi of the assessee's firm is that "saria and patti" are manufactured from blooms and ingots which are either sold in U.P. or taken to Delhi for sale. The goods move out of the factory on an excise gate pass in which the consignee is M/s. Swadeshi Metal Works. The name of the erstwhile purchaser is not mentioned. The assessee has a branch office at Delhi. Earlier the branch office was at 2-A, Jhandewalan Extension, for which it paid Rs. 900 per annum, till 31st January, 1982. Thereafter a premises situated at 260, Narayana Lohamandi, New Delhi, was taken on rent for storing goods transferred from head office to branch office. The storing charges of this premises were not on monthly basis but were on the basis of the quantity taken and stored there. The assessee maintained regular account books, stock books, etc., at the branch office. After the goods reached at the branch office the unloading were resorted to and an entry of the goods was made in the stock register. The octroi receipts bore the name of the branch office and cartage and unloading expenses were debited in the account books and "dharamkanta" parchies are also maintained. After completion of all these formalities the branch office effected sale of the goods on receipt of sale price either through crossed cheques or drafts in favour of the Delhi office. There was not a single case in which goods were directly sent to the purchasers from the head office. No orders were placed by the branch office at Delhi on behalf of any customer of any particular specification or drawing of the goods to the head office.
6. Thus it is amply clear that the facts of the Supreme Court case in Sahney Steel and Press Works Ltd. [1985] 60 STC 301 are entirely different from the facts of the cases in hand and as such the principle laid down in that case cannot be applied to the instant cases. Therefore, it would be futile to send the cases back to the Tribunal for afresh decision.
7. The Tribunal after considering the materials on record in detail held that there existed a branch office of the assessee at Delhi, that it is the branch office at Delhi which sold the goods received from the head office to the buyers, that all the transactions of taking advance and transferring goods to the purchasers took place at Delhi and the payments made either through crossed cheques or drafts were entered in the account books at Delhi and encashed there; and that taking of advance in some cases in the name of branch office at Delhi and thereafter supplying of goods from the Delhi branch office to the purchasers cannot lead to the inference that there was a contract of sale between the head office and the purchasers and the goods moved out of the State in pursuance of the contract of sale between the head office and the purchasers. These are findings of fact which cannot be interfered with by this Court in revisional jurisdiction and the learned counsel for the Revenue has not been able to place any material which may indicate that the findings recorded by the Tribunal are based on no evidence or based on irrelevant consideration and as such the order passed by it deserves to be sustained.
8. After hearing the learned counsel for the parties and perusing the order of the Tribunal I am of the opinion that the Tribunal has rightly held that the assessee made no inter-State sales in the years under consideration and the stock transfers declared by it were really in the nature of branch transfers.
9. In the result the revisions fail and are accordingly rejected. However, there will be no order as to costs.