MiS Tribal Co-operative Marketing Development Federation of lndia Ltd' v. THE HON'BLE SMT JUSTICE P.SREE SUDHA

Judgment

(per the Hon'ble Si Justtce T.Vinorl {unLar) This Special Appeal is directed against the order of the Commissioner of Commercial Taxes, A. p. , Hyderabad, dt.2l.|O2OO2 in Ref.L.III(1)/ 2OSO 199-2 for the assessment year 1995-96 under the provisions of CST Act, 1956 (for short .the Act').

2. Heard learned counsel for the appellant, leerrned Special Standing Counsel appearing on behalf of respondent- State and oerused the record.

3. The appellanl is an apex level cooperative socict5r established under the administrative control of Ministry of 'I'ribal Affairs, Government of India, with its head office at New Delhi, having branch officcs a11 over thc Countn.

4. The appellant undertake s the activities inter alio including upliftment of tribals by purchasing minor forest and agricultural produce, stocking and disposing of by u,ay of sales and exports so as to ensure a reasonable return to the tribai farmers locatcd in diflerent parts of the Country. t I I I I I I I ! I I I I i ? tax for the

5. The appellant was initially assessed to assessment year 1995_96 by the Commercial Tax Officer, Nampaliy Circle on the gross turnover of Rs.2,46,60 ,Og7 /_ and. net turnover of Rs. 1,5g,72, O97 / _, uid.e order dt.2g.03. 1998. 6. The Commercial Tax Officer by issuing revised proceedings, dt.22.7O.2OO2, assessed the appellant to tax by subjecting the turnover of Rs.9,O7,63 ,436 / _ to tax under Section 3(a) of the Act, by noting that the appellant had dispatched raw cashew nuts to the State of Kerala by obtaining railway receipts in i[s own name and delivering the said goods to M/s CAPtrX, Quilon, Kerala and received the consideration for such sales.

7. The Assessing Authority by taking note of the fact that though the appellant had claimed the said sale is pursuant to the contract entered into by it with M/s B.p. Exporters, Hyderabad, however, such contract has resulted in movement of goods from the State of Andhra pradesh to euilon at Kerala, had disallowed the claim of the appellant of such sales not being exigible to tax under the provisions of Section 3(a) of the Act,

8. Aggrieved .by

the aforesaid order of assessing authority, the appellant had filed an appeal uide No.Al69 /9g_99, before the First Appellate Authority, who by its order dt.24.l}.7ggg, \ .ffillF:Fz - --"'!G J ,l -.i-- --- 3 i I had allowed the said appeal by setting aside lhe order of the Assessing Authority in bringing the turnover relating to supply of raw cashew nuts in the name of M/s B.P. Exporters to M/s CAPFIX, Quilon, Kerala.

9. The Commissioner, Commercial Taxes, having found the order of the Appellate Authority to be prejudicial to the interest of Revenue, exercising powers under Section 20(1) of the APGST Act, 1957 r/w Section 9(2) of CST Act, had issued a show-cause notice, dt.29.08.20O1, calling upon the appellant, to show cause as to why the order of the Appeliate Authority should not be set aside and the order of the Assessing Authority be restored, whereby the Assessing Authority had brought the turnover regarding supply of raw casheu, cffected to M/s CAPEX, Quilon, Kerala, to the tune of Rs.9,88,86,419/ to tax based on provisionai assessment order made by the Assistant Commissioner(lnt.), dt.29.O1.1996.

10. On being issued with show-cause notice, the appellant fi1ed objections to the said notice uide it's letters, dt.28.O2.2022 and dt.06,05.2OO2, and claimed that they had purchased totai rarv cashew nuts to the tune of Rs.21,20,93,6121- to an extent ol 6529.07 ri,ri 1i.e., Rs.12,73,10,699 l- tor and on behalf of M/s.MVR Industries, Madras to an extent of 3662.80 MT, and 4 Rs.8,47,82,9121- for and on behalf of M/s B.P.Exporters, Hyderabad, to an exlent of 2866.273 MT); that they had made the entire extent of raw cashew nuts through an agent by name M/s Sri Krishna Traders, Kothur; and that the stock of goods purchased by them through their agenl was kept in the premises of Santhosh Oil Refinery and New Vijayalakshmi Oil Extractions, Kothur, Mahaboobnagar. 1 1. Appellant by it's objections contended that the purchase of 2866.27 MT made by them was on behalf of their resident principal namely M/s B.P.Exporters, pursuant to an agreement dt.28.O4.1995, and as such, the event of tax liability is not in their hands.

12. Appellant further contended that interstate sale of raw cashew nuts was affected pursuanL to the agreement between M/s CAPEX, Quilon, Kerala and M/s B.P.Exporters, and for the said agreement the appeilant is not a parry.

13. Appellant furthe r contended that since, M/s B. P. Exporters have authorized l'll ls CAPEX, Quilon, Kerala to release the entire payment for supply of raw cashew nuts to the appellant, the same would not obviate thc lransaction between the appellant and M/s. B.P. Exporters of a local sale in their hands to one of an interstate sale, which sale in fact had taken \/ --,ffi8r7 '-{s:/ ':,'', / 5 place betrveen M/s B.P. Exporters and M/s CAPEX, Quilon, Kerala, and [hus, the liabiiity to pay CST would be in the hands of M/s B.P. Exporters and not on [he appellant.

14. Ho\4,e ver, the Commissioner by the aforesard submission of the appellant of it raising invoice in the name of M/s B.P. Exporters, Hydcrabad, but in fact delivering ttre goods to M/s CAPtrX, Quilon, Kerala, by the appellant itself b}, obtaining railway receipts in its own name, had held that since, the sale betwecn the appellant and M/s B.P. Exporters, Hyderabad, had occasioned its movement of goods from the appellant at I lydcrabacl to l\erala, the said transaction r,r,ould be exigiblc to tax under Section 3(a) o[ the Act.

15. The Commissioner by holding as abovc had r-cjected [he explanatron submitted by the appellant and ser aside the order of the Appellate Authority and restored the order of the Commercial T:rx Officer, dt.28.03. 1998.

16. Aggrieved by the aforesaid order, the appeliant has come up by way ol'this Special Appeal.

17. Learned counsel for the appellant reiterated the stand taken by it belore the Commissione r, Comme rcial Taxes, and sought to sustain the order of the Appellale Authorit5r, while t I 5 learned Special Standing Counsel appearing for the respondent sought to sustain the order of the Assessing Authority as well as the Commissioner of Commercial Taxes.

18. We have taken note of the respective submissions made.

79. Before us, learned counsel appearing on behalf of the appellant contended that the sale bctween the appellant and M/s B.P. Exports is complete, the moment the appellant had raised the invoice in the name of M/s B.P. Exporters.

20. It is to be noted that though thc appellant had raised invoice in the name of M/s B.P. Exporters, pr.rrsuant to an agreement entered into by it by the said M/s B.P. trxporters, it is the appellant which had undertaken the transportation of goods from Hyderabad to M/s CAPtrX, Quilon, Kcrala, in its own name and delivcred the goods thereat and also received total consideration directly, in tn'o trenches from M / s CAPEX, Quilon, Kerala.

21. Though it is contended on behalf of the appellant that it is only an agenl of a resident principal and thus, is not liable to tax, admittedly the resident principal, M/s B.P. Exporters, who had an agreement with M/s CAPEX, Quilon, Kerala, for procuring and supply of rarv cashew nuts, had entered into an l agrccment with the appellant, pursuant to whictr, the appellant having procured raw cashew nuts by engaging an agent and also undertaking supply, resulting in moveme n[ of said goods lrom the StaLe ol A.P. to the State of Kerala, can only be said as having occasioned movement pursuant to the atoresaid order issued by M/s CAPEX, Quilon, Kerala to M/s B.P. Exporters, who in turn had entered into an agreement with the appellant, and thus, the aloresaid agreement having resulted ilr the movcment of goods lrom the State of Andhra Pradesh to the Srzrtc oi Kerzrla, the said transaction would have to be considered as interstate sale falling under Sec:lion 3(a) of the Ac[. Section 3(a) of the Act reads as under: "3(a) A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commercc if the sale or purchase occasions the mo\.ement o[ goods from one State to another"

22. 'lhough it is contended on behalf of th<: appellant that sincc, it is only.ln agent o[ the resident principal, the suppll, of raw cashe,,r, nurs in the name of M/s B.p.Exporters, Hyderabad rvould not be exigible to tax, even assuming the saicl claim of the appellant is acccpted, lhc fact of the goods having occasioned movement from the Statc of Andhra pradesh to the State of Kerala is nqt in dispute. Thus, even if the sale is betu,een the t 8 appellant and M/s B.P. Exporters, si.nce, the movement of goods had taken place to the State of Kerala, having regard to the provision of Section 3(a) of the Act, such transaction would necessarily be have to be subjected to tax under CST Act only.

23. In similar circumstances the Madras High Court in Duuent Fa,ns Put. Ltd. o. State of Tamil lVadur held as under: "5. Section 3(a) of the Central Salcs Tax Act, 1956 lays emphasis on the movemenl of the goods from the State to anothcr as being an essential ingredicnt of an intcr-Statc sale. The actual Lransfer of propert-v in the goods nccd not necessarily take placc in the Statc in rvhich thc movement commences, nor is it csscntial that it tal(es place in the State in which the movement terminates. 'I'here is no bar to the seller as also the purchaser being within the sarne State. A conLract of sale may be entered into the State wherein the goods are at the time of contract, or such a contract cal bc entered into in a different State. What is material for the purpose of Section 3 is the movement of the goods from one State to another as a result of a sale or purchase, ar-rd it is not esscntial that a direction for the mo\remcnt of the goods be expressly set out in the contract. It cart also be incidental to the transaction of sale.

8. When the broad feaLures of the transaction arc clear, vtz., that the order placcd by the assessee on the supplier was for the delivery by the supplicr to thc assessee's customer outside the Statc and thc goods had in fact moved out of the State and thc lorry receipt showed the name of the supplier as the consignor, the transaction has to be regarded as one which falls within the ambit of Section 3(a) of the Central Sales Tax Act, 1956. Even assuming that the assessee had rendered some assistance to its supplier by way of arrarging cartage from the supplier's premises to the premises of the transporter or in booking the goods on the lorry, such ' (rggs) rt: src a:r ;,,.ri 9 assistance does not render what is otherwise an1 intcr- State sirlc into a local sale."

24. ln lhe instant case also, the appcllant had <lispatched rau' cashew nuts to the State ol Kerala by obtaining railu,ay receipts rn its own nzrme and after delivering the said goods transportcd to M/ s CAPltX, Quilon, Kcrala, had received the consideration [or such sales.

25. Iiurther, a rcacling ol Clause 17 of the agre(imen[ e ntercd inlo bctu,een thc appellant and M/ s t3.P. Exportcrs. I-Ivde rabad, under u,hich the trppcllant is claiming itself to bt: an :rgcnt ol ar rcsident principle, would show the understanding between the parties to be different. For the sake of convenience, Clause (17) ol the said agreement is reproduced as under: " 17. Sales Taxes: ll thc perrLy inti,nds to move out the stock of the commoclitt, outside the statc of procurement, rhe sale of the saLri stocli will be subject ro Central Szr.les'l'ax (CST) as pc'r raLL's Ln lorce against C-l.orm subject to pr.ocluction of ct:rtificiitc Lo tlrr: effect that stocks of the commo<lity terken out of thc statc of procurement. [n case the partl does not submit such ccrtificate, thc sale of the stock shall be treated as local sales uithin the State and shall attract the appropriate local salcs ta-x depending upon thc sales tax registration of the part).. 'lhe party shall also be fully rcsponsible for any liability on account o[ salcs Lar that ma].:ir'rsc at alter stage/ln luturc. and thr: samc shall bc paid bl thc part\. to TR .-ED on first demand.,, ,/ {t 10

26. A reading of thc aforesaid clause would clearly show that if M/s B.P. Exporters intended to move Lhe stocks of rarv cashew nuts outside the State of procurement i.e., from thc State of Andhra I)radcsh, sr..Lt:h sair: r.vill bc subjcctcd to tax under CST against the production of C-Form Declarations oblained from the delivery State, failing which, such sale being considered as local sale and any additional liability on TRIFEI) i.e., the appellant being made good by M/s B-P. [txporters.

27. If only the claim of the appellant of it being an agcnt of a resident principal and thus not berng liable to Lax is to bc acceptcd as correct, such a clausc rvould not cxist jn thc agreement.

28. Thus, the claim of the appeilant of it not being liable t<; CST on the goods sold in the name of M/s B.P. Exporters, Hyderabad and dispatched to M/s CAPEX, Quilon, Kerala, cannot bc accepted, and on the other hand, sale having occasioned movement of goods from one State to another, would have to be considcred only as €rn intcrstate sales liablc to tax under Section 3(a) oi the Act. It is for thc said reason, thc order of the Commrssioner, in the considered vicw of this Court in setting aside the order of the Appetlate Deputy Commissioner 11 and rcstoring the order of the Assessing Authority cannot be said to be either erroneous or illegal.

29. Thus, the Special Appeal is devoid of any merit and is accordingl.i,, dismissed. No order as to costs.

30. Conscquently, miscellaneous petitions pending, if any, shall stancl closed in the light of this final ordcr. //TRUE COPY// SD/- K. SRINIVASA RAO \J OINT REGISTRAR ttsa"r,oN oFFrcER ) To,

1. THE COMMISSIONER OF COMMERCIAL TAXES, HYDERABAD' - 2. One CC to SRI S KRISHNA MURTHY Advocate [OPUC] 3. Two CCs to GP FOR COMMERCIAL TAX, High Court for the State of Telangana. [OUT]

4. Two CD Copies W HIGH COURT DATED:2810512025 JUDGMENT SPLA.No.20 ot 2002 (: :, r.\r t o c) ^ " \\\t I\15 l: " 'ir oi:sr',Ar x. (; )- * DISMISSING THE SPL. APPEAL HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY, THE TWENTY EIGHTH DAY OF MAY TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE T.VINOD KUMAR THE HONOURABLE SMT JUSTICE P.SREE SUDHA SPECIAL APPEAL NO: 20 OF 2002 Between M/S Tribal Co-operative Marketing Developmeq[ Federation of lndia Ltd., (Ministrv of Tribal Affairs, Govt of lndia). 510, 5"' Floor, Babukh-an Estate, Basheerbagh, Hyderabad, Rep by its Regional Manager, Sri M. Bhav Singh. ...APPELLANT AND Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabbad. RESPONDENT Special Appeal filed under Section 23(1) of the A.P.G.S.T Act, against the proceedings of the Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad dt.21.10.2002 in ccT/Ref.L.lll(1)12057199-2, preferred against the order passed by the Deputy Commissioner (cT), secunderabad Division passed in Appeal Nos. tu55/99-2000 and tu56/99-2000, 20.09.1999, preferred against the order passed by the commercial Tax Officer, Nampally circle, Hyderabad dt.31.3.1999 for the assessment year 1995-96 (CST), prefened against the order passed by the Dy. commissioner (cT), secunderabad Division passed in Appeal No.A,/69/98-99, d1.24.10..1998, preferred against the order d1.28.03.1998 passed by the Assistant Commissioner (CT)No.l, Enforcement Wing, Hyderabad for the year 1995-6' This appeal coming on for hearing, upon perusing the Memorandum .of grounds of appeal, the Judgment and Decree of the Lower court and the material iapers in peiition and upon hearing the arguments of and upon hearing the arguments of Sri S. Krishnamurthy, Advocate for Appellant and of _Government pl6ader for Commercial Taxes, High court, Hyderabad for the Respondent. That this Court doth order and decree as follows 1. That this Court while dismissing the appeal confirmed all the finding made in the judgment and decree of the lower court.

2. fhat there shall be no order as costs Dt- K. SRINIVASA RAO \orrur necrsrnan S \ To, ,\, 1. The Commissioner of Commercial Taxes, Hyderabad. 2. fwo CD Copies btt loo otf\cEo- HIGH COURT DATED:2810512025 DECREE SPLA.No.20 ot 2002 DISMISSING THE SPL. APPEAL 7>x .t ).'