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Tata Oil Mills Ltd. Vs. the State of Andhra Pradesh and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition Nos. 1316, 1558 and 1812 of 1966
Judge
Reported in[1971]28STC619(AP)
AppellantTata Oil Mills Ltd.
RespondentThe State of Andhra Pradesh and ors.
Appellant AdvocateT. Ramachandra Rao, Adv.
Respondent AdvocateS. Ramachandra Reddy, Adv. for ;Principal Government Pleader
DispositionPetition allowed
Excerpt:
.....will deliver and collect the empties free of charge to the buyers without any extra cost to us, within city limits in your port town depots like bombay, madras, calcutta and cochin. ..14. this agreement clearly shows that the petitioner-company was merely entitled to receive commission for the sales of the products manufactured by m/s. assuming that this sale was effected by the petitioner-company itself in favour of the customers in the state of andhra pradesh as the documents relating thereto are endorsed by the petitioner-company in favour of the customers in the state of andhra pradesh and as a consequence thereof, it amounted to a sale in the course of inter-state trade or commerce, even then as the movement of goods commenced from the state of gujarat in the course of..........on seven items covering a turnover of rs. 10,19,566.49 on the ground that they relate to inter-state sales effected in bombay and gujarat states in respect of which no sales tax is leviable under the central sales tax act, 1956, by the state of andhra pradesh.2. the second respondent, however, issued a notice dated 25th february, 1966, calling upon the petitioner-company to show cause why the said turnover should not be taxed at 10 per cent, as no 'c and 'el' forms were filed by the petitioner-company. the petitioner-company filed its objections to the above notice. the items comprised in the said turnover are as follows:(1) rs. 14,818.81 sales of caustic soda(2) 618.75 soda ash(3) 949.39 inter-state sales of r.d. oil(4) 9,12,392.00 inter-state sales of soda ash(5) 2,580.00 do......
Judgment:

Madhava Reddy, J.

1. These three writ petitions are by M/s. Tata Oil Mills Ltd., Hyderabad, represented by the Manager, Sales Office at Hyderabad, questioning the jurisdiction of the State of Andhra Pradesh and its Commercial Tax Officers to assess it to tax under the Central Sales Tax Act (74 of 1956) (hereinafter referred to as the Act) on the turnover relating to sales in respect of the products manufactured by M/s. Tata Chemicals, Mithapur in the State of Gujarat, and also on the turnover relating to sale of goods despatched by its head office at Bombay to the customers in the State of Andhra Pradesh. The turnover representing these sales are hereinafter referred to for sake of convenience as 'agency sales' and 'branch sales' respectively. The turnover falling under the above two categories for the assessment years 1961-62 and 1962-63 was not held liable to tax. But for the assessment year 1964-65, the Additional Commercial Tax Officer (Overflow Assessment), Andhra Pradesh, by his assessment order dated 30th March, 1966, finally assessed the petitioner-company to tax under the Central Sales Tax Act on a turnover of Rs. 10,14,895.81 and held that a tax of Rs. 1,01,489.60 was payable. The petitioner-company invokes the jurisdiction of this Court in W.P. No. 1316 of 1966 to quash the said order as illegal and also as ultra vires of the powers of the Commercial Tax Officer and that of the State of Andhra Pradesh. It is stated that under an agreement dated 13th August, 1962, the petitioner-company was appointed as the sole selling agent for the sale of chemicals and other products manufactured by M/s. Tata Chemicals, Bombay, whose factory is at Mithapur in the State of Gujarat, in the whole of India for a period of three years from 1st July, 1962, to 30th June, 1965. For the subsequent period also the said agreement was continued. The petitioner-company, while submitting its return for the year 1964-65 claimed exemption on seven items covering a turnover of Rs. 10,19,566.49 on the ground that they relate to inter-State sales effected in Bombay and Gujarat States in respect of which no sales tax is leviable under the Central Sales Tax Act, 1956, by the State of Andhra Pradesh.

2. The second respondent, however, issued a notice dated 25th February, 1966, calling upon the petitioner-company to show cause why the said turnover should not be taxed at 10 per cent, as no 'C and 'El' forms were filed by the petitioner-company. The petitioner-company filed its objections to the above notice. The items comprised in the said turnover are as follows:

(1) Rs. 14,818.81 Sales of caustic soda(2) 618.75 Soda ash(3) 949.39 Inter-State sales of R.D. Oil(4) 9,12,392.00 Inter-State sales of soda ash(5) 2,580.00 do. caustic soda(6) 2,325.94 do. zinc chloride(7) 85,881.60 do. sodium bicarbonate------------10,19,566.49------------

3. In effecting the sales covered by items (1) to (3) above, i.e. branch sales, the Bombay sales office adopted the following procedure. It took the railway receipts to 'self' and despatched the goods to the customers' destinations but sent the invoices to the Hyderabad sales office, i.e., the petitioner-company. The petitioner-company in their turn issued the sale bills from Hyderabad and sent the railway receipts to the customers along with the sale bills.

4. It is contended that the petitioner-company is not an independent dealer but only part of the same company as the Bombay sales office and irrespective of whether goods were consigned directly to the customers by the Bombay office or by sending the railway receipts to the petitioner-company at Hyderabad, they in their turn issuing the bills and sending the railway receipts to the customers, the goods had commenced to move from Bombay and, therefore, the State of Andhra Pradesh had no jurisdiction to levy the sales tax under the Central Sales Tax Act.

5. The second respondent in respect of a part of the turnover of item (1) above, amounting to Rs. 4,670.68 held that as the railway receipts were despatched direct to the customers by the Bombay office, the petitioner-company was entitled to exemption as the inter-State sales were effected at Bombay. As regards the rest of the turnover pertaining to the above three items, the second respondent, however, held that it was liable to tax as according to him the element of inter-State trade started only when the petitioner-company despatched the railway receipts and the invoices to the customers in the State of Andhra Pradesh and therefore the 'appropriate State' under the Central Sales Tax Act to bring the above turnover to tax is the State of Andhra Pradesh. In that view, he held that the turnover of Rs. 11,716.07 was liable to tax.

6. The turnover relating to items (4) to (7) pertains to the sales of goods manufactured by M/s. Tata Chemicals, Mithapur, Gujarat State, through the petitioner-company to various customers in the State of Andhra Pradesh. In respect of these transactions, the petitioner-company on receiving orders from the customers, either directly or through its distributors forwarded indents for the goods to the factory of M/s. Tata Chemicals Ltd. at Mithapur. Thereupon M/s. Tata Chemicals Ltd. used to directly despatch the goods to the destinations indicated by the customers and forward the railway receipts made out in favour of the petitioner-company to the petitioner-company along with pro forma invoices to indicate the amounts to be charged to the customers. On receipt of these documents, the petitioner-company prepared regular invoices and sent them to the customers with the railway receipts endorsed in their favour. It is claimed by the petitioner-company that it was appointed as the sole selling agent for the products manufactured by M/s. Tata Chemicals Ltd. In view of the agreement entered into between the petitioner-company and M/s. Tata Chemicals Ltd. evidenced by a letter dated 13th August, 1962, the petitioner-company claims that it was merely a sole selling agent in respect of these sales and that, therefore, it was not liable to pay any tax under the Central Sales Tax Act. It is further contended that there was only a single sale by M/s. Tata Chemicals Ltd. to the various customers in the State of Andhra Pradesh and the petitioner-company being merely an agent, it was not liable to tax. There was only one sale by the manufacturer in favour of the customer and not two sales one by the manufacturer in favour of the petitioner-company and another by the petitioner-company to the customer in the State of Andhra Pradesh. Alternatively, it is contended that even if it be held that there were two sales, so far as the first sale was concerned, it is the State of Gujarat that was entitled to levy and collect sales tax under the Central Sales Tax Act and even in respect of the second sale', the so-called sale by the petitioner-company in favour of the customer in the State of Andhra Pradesh, the movement of goods pursuant to this sale commenced from the State of Gujarat and therefore under Section 9(1) of the Act, it is the State of Gujarat and not the State of Andhra Pradesh that had jurisdiction to assess, levy and collect tax. The Commercial Tax Officer, however, under the impugned order held that the petitioner-company was not a commission agent but a commercial agent of M/s. Tata Chemicals Ltd., and that the goods despatched by M/s. Tata Chemicals Ltd. to the destinations of the customers through the petitioner-company amounted to a sale in favour of the petitioner-company and that the petitioner-company in turn sold the goods to the customers in Andhra Pradesh State by endorsing the railway receipts and that constituted a second sale and as the petitioner-company had not produced 'C forms and 'E1' forms, these were two inter-State sales and the petitioner-company was not entitled to any exemption in respect of these inter-State sales. The second respondent also held that in view of the fact that the petitioner-company had its place of business in Andhra Pradesh at Hyderabad, the Andhra Pradesh State was the 'appropriate State' having jurisdiction to assess the petitioner-company to tax under the Central Sales Tax Act.

7. The petitioner-company preferred an appeal against the assessment order to the Assistant Commissioner of Commercial Taxes and applied for stay but the stay petition was dismissed without recording any reasons. A revision petition filed against the said order before the Deputy Commissioner for Commercial Taxes was also dismissed without assigning any reasons. Subsequent to the above, the Deputy Commissioner, Commercial Taxes, Hyderabad Division, issued two notices under Section 9(3) of the Central Sales Tax Act read with Section 14(4)(c) and Section 20 of the Andhra Pradesh General Sales Tax Act and the Rules made thereunder for the assessment years 1961-62 and 1962-63. By notice No. TAC. 1/1810 of 1966--Asst. No. 1464/61-62 dated 30th September, 1966, the Deputy Commissioner, Commercial Taxes, Hyderabad Division, proposed to revise the assessment orders relating to assessment year 1961-62 by including a turnover of Rs. 15,80,476.92, and assessing the said turnover to tax at 7 per cent. By another notice No. TAC. 1/34321/66--Asst. No. 1464 of 62-63 dated 8th August, 1966, the Deputy Commercial Tax Officer proposed to revise the assessment order for the assessment year 1962-63 and include a turnover of Rs. 16,91,013.94. In respect of these two notices the petitioner in the other two writ petitions prays for a writ of prohibition restraining the respondents from taking further proceedings pursuant to the said notices on the same grounds as he seeks the assessment order relating to the assessment year 1964-65 quashed.

8. Of the several items of turnover referred to above in respect of which exemption was claimed by the petitioner-company, the first three items, i.e., the 'branch sales' as already noted, relate to the goods despatched by the Bombay office to the destinations of the customers in the State, but the railway receipts were sent to the petitioner-company at Hyderabad who in their turn issued the sale bills from Hyderabad and sent the railway receipts to the customers along with the sale bills. The Commercial Tax Officer held that the element of inter-State trade started only when the petitioner-company at Hyderabad despatched the railway receipts and the invoices to the customers in the State and in that view held that the Andhra Pradesh was the appropriate State for purpose of assessing the said turnover to tax under the Central Sales Tax Act. Inasmuch as the petitioner-company did not file 'C and 'E1' forms the Commercial Tax Officer held that the turnover was taxable at 10 per cent. It is the case of the petitioner-company that there was no sale by it to the customers and that it was effected by the Bombay office and only the railway receipts endorsed were despatched through the petitioner-company. In the alternative it is contended that even if the sale is held to be by the petitioner-company to the customers in the course of inter-State trade, still inasmuch as the movement of goods has commenced from Bombay it is the State of Maharashtra that has jurisdiction in the matter and not the State of Andhra Pradesh. The levy and collection of tax and penalties under the Central Sales Tax Act have to be in accordance with Section 9, which as it stood on the relevant date, reads as follows :

9. (1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within Clause (a) or Clause (b) of Section 3, shall be levied and collected by the Government of India in the manner provided in Sub-section (3) in the State from which the movement of the goods commenced:

Provided that, in the case of a sale of goods during their movement from one State to another being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within Sub-section (2) of Section 6, be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained the form prescribed for the purposes of Clause (a) of Sub-section (4) of Section 8 in connection with the purchase of such goods.

9. A sale or purchase of goods as per Section 3 shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

10. The learned Government Pleader relying upon a decision of the Supreme Court in Tata Iron and Steel Co., Ltd. v. S. R. Sarkar [1960] 11 S.T.C. 655 (S.C.) contends that for sales in the course of inter-State trade or commerce which fall under Clause (b) of Section 3 of the Act, the 'appropriate State' having jurisdiction under the Central Sales Tax Act to assess and levy tax is the State of Andhra Pradesh. But that decision is not of much -assistance as it was rendered having regard to Section 9(1) as it then stood. Section 9(1) then read as follows :

9. Levy and collection of tax.--(1) The tax payable by any dealer under this Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in Sub-section (2).

11. After the amendment it is clear that whether a particular transaction is a sale in the course of inter-State trade or commerce falling under Clause (a) or Clause (b) of Section 3 of the Act, the tax shall be levied and collected by the Government of India in the State from which the movement of goods commenced. It is admitted that the turnover with which we are now concerned, is not covered by the proviso to Section 9(1) of the Act. Admittedly the movement of goods has commenced from Bombay which is beyond the State of Andhra Pradesh. In view of Section 9(1) as is applicable to the assessment years 1964-65, 1961-62 and 1962-63, irrespective of whether these sales fall under Clause (a) or Clause (b) of Section 3, the movement of goods having commenced from Bombay, the State of Andhra Pradesh has no jurisdiction. The assessment order in so far as it includes the turnover referable to these sales is concerned, is wholly without jurisdiction. For the same reason, the Deputy Commissioner of Commercial Taxes who has issued the impugned notice proposing to revise the assessment by including such turnover for the assessment years 1961-62 and 1962-63 must be held to have acted wholly without jurisdiction and must be restrained by the issue of an appropriate writ.

12. The other turnover in respect of which exemption was refused and is covered by items 4 to 7 above and referred to as 'agency sale' is one relating to sales of goods manufactured by Tata Chemicals Ltd., Mithapur in Gujarat State. The petitioner-company claims that it has merely acted as an agent in booking the orders and endorsing the railway receipts in favour of the customers to whom the goods were directly despatched by the manufacturers while the railway receipts thereof along with the pro forma invoices were sent to the petitioner-company. It is not in dispute that the movement of these goods started from Gujarat and reached directly the destinations of the customers in the State of Andhra Pradesh.

13. The first question that falls for consideration in regard to this turnover is whether the petitioner-company acted as a commission agent as contended by it or as a commercial agent as held by the Deputy Commercial Tax Officer. That turns upon the terms and conditions subject to which the petitioner-company was appointed by the manufacturers as its sole selling agent for the Union of India and also upon the method adopted in effecting the sales to the customers. The terms of the appointment of the petitioner-company as the sole selling agent of the manufacturer is evidenced by a letter dated 13th August, 1962. The more important terms of the said agreement are as follows:

We have pleasure in renewing your appointment for a further period of three years from 1st July, 1962, to 30th June, 1965, as the sole selling agents for the Union of India for our principal products comprising alkalies, heavy chemicals, marine products and vacuum salt on the following terms and conditions:--

(1) You will sell under our direction the entire output of these products....

(2) * * * .(3) You will continue to sell our products through your sales depots at important centres in India, and for this purpose you will engage the necessary personnel, trained and experienced in the sale of these products.

(4) You will -assume all del credere risks, except on sales to Tata concerns or direct sales made by us.

(5) * * * *(6) In the distribution of some of our products...you will deliver and collect the empties free of charge to the buyers without any extra cost to us, within city limits in your port town depots like Bombay, Madras, Calcutta and Cochin. For outside city limits you may recover a reasonable delivery charge from the buyers. As for the inland depots you may arrange for the delivery and return of the empties also at a reasonable delivery charge, which may be recovered from the buyers.

(7) We shall fix the prices from time to time at which our products should be sold as also make our own arrangements for their publicity. However, in such matter you will be consulted whenever required.

(8) Agency commission.--You will be paid commission on sale of our products on per tonne basis at the following rates.

Rate of ommission per tonneRs. P.Soda ash.Sodium bicarbonate.(9) We shall bear all expenses incurred by you in respect of the following:--

(i) Rebates, if any;

(ii) Insurance charges on our products stored either by you or your sales depots in their respective warehouses for sale on consignment account; (iii) Leakage, wastage etc.;

(iv) Freight and forwarding charges;

(v) Customs and clearing charges.

The payment of rebate, if any, to dealers shall always be subject to our previous approval.

Wherever octroi is levied, it should be recovered from the buyers in case of direct sales. However, in case of sales on consignment basis, it may be paid on our account credited accordingly.

(10) * * *(11) You will submit to us every month the market reports from all centres where your depots are situated.

(12) You will render us a progressive sales statement every week showing the sales made in the week, together with a remittance of 75 per cent, of the actual sales and shall settle the final account for a particular month by the 20th day of the following month.

(13) You will forward to us :

(i) A weekly statement showing the quantity sold during the week ; and

(ii) A monthly statement showing the sales effected during the month and the stocks held at the end of each month...

14. This agreement clearly shows that the petitioner-company was merely entitled to receive commission for the sales of the products manufactured by M/s. Tata Chemicals Ltd. Though the description of the petitioner-company as the sole selling agent may not by itself be decisive of the matter the fact that it was under an obligation to sell under the directions of and at the prices fixed by the manufacturer, that it was to assume all 'del credere risks' and that it was to return the empties at a reasonable delivery charges, that the manufacturer himself was liable to bear all expenses in respect of rebates, insurance charges, leakage, wastage, freight and forwarding charges, customs and clearing, that the petitioner-company was to render a progressive sales statement to the manufacturer every week showing the sales made in the week, together with a remittance of 75 per cent, of the actual sales and settle the final account for a particular month by the 20th day of the following month, leaves absolutely no doubt that the petitioner-company was merely a 'commission agent' and not a 'commercial agent'.

15. The learned Government Pleader, however, contended that under Clause (10) of the agreement the manufacturers made it clear to the petitioner-company that 'once goods are despatched directly from their works at Mithapur they would undertake no responsibility for leakage, wastage, damage etc. in transit after a clean despatch document has been obtained....' But this by itself cannot take away the effect of other clauses. That clause is not inconsistent with the status of the petitioner-company as sole selling agent which is abundantly made clear by the other terms of the document. So far as the transactions in question are concerned the petitioner-company on receiving orders from customers either directly or through their distributors, forwarded the indents for the goods to the factory of M/s. Tata Chemicals Ltd. at Mithapur and the manufacturers thereupon despatched the goods to the destinations indicated by the customers and sent the railway receipts made out in favour of the petitioner-company along with the pro forma invoices to indicate the amounts to be charged to the customers. The goods were actually despatched to the destinations of the customers directly by the manufacturers and not to the petitioner-company. The mere fact that railway receipts were sent to the petitioner-company does not make it a sale in favour of the petitioner-company. The railway receipts gave the petitioner-company a control over the goods but that was only subject to the agreement between the manufacturer and the petitioner-company. The petitioner-company could not appropriate the goods for themselves. The property in the goods as such did not pass to them. They were merely to endorse the railway receipts in favour of the customers together with the invoices, prepared on the basis of the pro forma invoices sent by the manufacturers. Merely having custody of the goods as a sole selling agent does not make the sole selling agent a purchaser of the goods from the manufacturers. In these circumstances, it cannot be held that there was any sale in favour of the petitioner-company by the manufacturers. We are also supported in this view of ours, by a decision of the Supreme Court in Hafiz Din Mohammed v. State of Maharashtra [1962] 13 S.T.C. 292 (S.C.).

16. The sale that is effected in favour of the customers thus was by the manufacturers through the agency of the petitioner and, therefore, the petitioner-company was not liable to be assessed to tax under the Central Sales Tax Act. Assuming that this sale was effected by the petitioner-company itself in favour of the customers in the State of Andhra Pradesh as the documents relating thereto are endorsed by the petitioner-company in favour of the customers in the State of Andhra Pradesh and as a consequence thereof, it amounted to a sale in the course of inter-State trade or commerce, even then as the movement of goods commenced from the State of Gujarat in the course of inter-State trade or commerce, in view of Section 9(1) of the the Act as it stood on the relevant dates, it is the State of Gujarat from where the movement of goods commenced that has jurisdiction to assess this turnover to tax and collect the same.

17. For the foregoing reasons, the assessment of the above turnover to tax under the Central Sales Tax Act for 1964-65 by the Additional Commercial Tax Officer (Overflow Assessment), Hyderabad,, and the subsequent orders passed on appeal and revision must be quashed. For the same reasons, the Deputy Commissioner for Commercial Taxes, Hyderabad Division, must be held to have no jurisdiction to revise the assessments for the other assessment years and must be restrained from taking further proceedings in pursuance of the impugned notices.

18. In the result, all the three writ petitions are allowed with costs. Advocate's fee Rs. 100 in each.


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