The State of Tamil Nadu,rep. by the Deputy Commissioner (CT)Salem Division, Salem v. Tvl.Macwin Explosives & Accessories(P) Ltd., Onnalwadi, Hosur - 635 125, Dharmapuri District

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 20.01.2009Coram :THE HONOURABLE MRS.JUSTICE PRABHA SRIDEVANandTHE HONOURABLE MR.JUSTICE K.K.SASIDHARANT.C.(R) No.1096/1990The State of Tamil Nadu,rep. by the Deputy Commissioner (CT)Salem Division, Salem.: Petitionerv.Tvl.Macwin Explosives & Accessories(P) Ltd., Onnalwadi, Hosur - 635 125, Dharmapuri District.: RespondentPrayer :- Tax Case Revision filed under Section 38 of the TNGST Act1959 to revise the order of the Sales Tax Appellate Tribunal(Additional Bench), Coimbatore dated 20.09.1989 and passed in CTANo.133/1989 and CTMP No.227/1989. Against the order of the AppellateAssistant Commissioner(CT)Salem,dated 1.12.88 and made in Appeal No.and year 45/88/CST against the order of the Deputy Commercial TaxOfficer,Hosur, dated 29.2.88 in Asst.No. and year CST 447097/86-87 For petitioner:Mr.Haja Nazirudeen,Spl. Govt. Pleader (Taxes)For respondent :Mr.R.L.Ramani, Sr. Counselfor Mr.B.RaveendranJ U D G M E N TK.K.SASIDHARAN, J.This tax case has been remanded by the Hon'ble Supreme Court ofIndia to examine the issues involved in the matter afresh in thelight of the decision of the Supreme Court in Ashok Leyland Ltd. v.State of Tamil Nadu and Another, [(2004) 134 STC 473], with libertyto the parties to implead other States if found necessary and with afurther observation that in the event of creation of another forum bya Parliamentary Act, it would be open to the parties to approach thesaid forum. https://hcservices.ecourts.gov.in/hcservices/ Factual matrix :-2.The respondent is an Assessee on the file of the DeputyCommercial Officer, Hosur and having its registered Head Office andfactory at Hosur with branch outside the State like Dhanbad andNagpur. With respect to the assessment year 1986-87, the respondent[hereinafter referred to as 'the assessee'] reported a total andtaxable turnover of Rs.72,16,968/- and Rs.38,81,255/-. The AssessingOfficer determined the total and taxable turnover at Rs.87,13,767/-and levied a penalty of Rs.7,24,777/- on the ground that the turnoverof Rs.48,31,850/- was not correctly brought into account representinginter-State sales. The said Assessment Order was challenged by theassessee before the Appellate Assistant Commissioner.3.Before the Appellate Authority, the assessee contended thatthe sales turnover to the tune of Rs.48,31,850/- only represented'stock transfer' to its branches for open market sale and therefore,the said turnover was not exigible to tax. It was their furthercontention that the sales transaction of inter-State sale to the tuneof Rs.38,81,917/- was required to be assessed at a concessional rateas the assessee had filed the necessary "C" Forms for the saidtransaction. The assessee also challenged the levy of penalty on theground that computation of penalty at 150% of the tax due on thetaxable turnover at Rs.48,31,850/- was not sustainable as they havebrought the turnover into the account and claimed exemption inrespect of the said turnover by treating the same as 'stock transfer'to its branch for open market sale.4.The Appellate Assistant Commissioner disposed of the appeal,whereby he directed the Assessing Officer to verify the "C" Formsinvolving turnover of Rs.38,81,817/- and to grant appropriate reliefto the assessee after such verification. The Appellate AssistantCommissioner also gave a finding that the transaction relating to theturnover of Rs.48,31,850/- were only inter-State sales and not 'stocktransfer' to its branches for open market sales and as such, theAppellate Authority was of the opinion that the Assessing Officer wasjustified in imposing penalty. Accordingly, the appeal was partlyallowed and partly dismissed as per order dated 01.12.1988.5.The order of the Appellate Authority was taken up before theTamil Nadu Sales Tax Appellate Tribunal. The Tribunal set aside theimposition of penalty and gave a factual finding that the transactioninvolved in the matter represented only 'stock transfer' to thebranches of the assessee for open market sale and it was not inter-State sale.6.The order of the Tamil Nadu Sales Tax Appellate Tribunal[Additional Bench, Coimbatore] was challenged by the State of TamilNadu in T.C.No.1096/1990. The primary question raised in the tax casewas as to whether the transaction involved in the matter representedonly stock transfer to the branches of the assessee for open marketsale or an inter-State sale. https://hcservices.ecourts.gov.in/hcservices/

7.The tax case was disposed of by this Court as per Judgmentdated 02.12.1997 by deciding the issue in favour of the Revenue andagainst the assessee. The Division Bench was of the opinion that thegoods were moved from the State of Tamil Nadu to Dhanbad and Nagpurpursuant to an incident of contract of sale and eventually, the salewas completed there and as such, it goes without saying that thetransaction represented only inter-State sales, exigible to tax atthe appropriate rate and not stock transfer to branches for openmarket sale, thereby not exigible to tax. While setting aside thedecision of the Tribunal with regard to nature of sale transaction,the Division Bench was pleased to confirm the order of the Tribunalwith regard to penalty, as the Division Bench was of the opinion thatit was not the case of the department that the assessee failed todisclose the entirety of the transactions in its accounts.8.The Judgment dated 02.12.1997 in T.C.NO.1096/1990 waschallenged by the petitioner before the Hon'ble Supreme Court inCivil Appeal No.943/2001.9.The Hon'ble Supreme Court considered the effect of Sec.6-A(2)of the Central Sales Tax Act with respect to the movement of goods inAshok Leyland Ltd. case [134 STC 473 (SC)] and held that by reason ofSec.6-A(2) of the Central Sales Tax Act, 1956, a legal fiction hasbeen created for the purpose of Central Sales Tax Act to the effectthat where the movement of goods takes place otherwise than as aresult of sale, the transaction would not be an inter-State sale. TheSupreme Court also held that initial burden of proof is always on thedealer to show that the movement of goods was occasioned by reason oftransfer of such goods other than by reason of sale and on adeclaration made by a dealer to the said effect, an enquiry has to bemade by the Assessing Authority for the purpose of passing an orderand for arriving at a satisfaction that the movement of goods wasoccasioned otherwise than as a result of sale. According to theHon'ble Supreme Court, whenever such an order is passed by theAssessing Authority, a legal fiction is created and by means of sucha legal fiction, if it is determined that the transaction in questionis not an inter-State sale, then it amounts to a transfer of stock.It was further observed that once such a legal fiction was drawn, thesame would continue to have its effect not only by making an order ofassessment in terms of the State Law, but also for the purpose ofinvoking the powers of assessment contained in Sec.9(2) of theCentral Sales Tax Act.10.The Civil Appeal No.943/2001 was also taken up with the AshokLeyland Ltd. Case cited supra and without deciding the factualdispute involved in the matter, the Hon'ble Supreme Court remandedthe matter to this court for fresh consideration in the light of thedecision rendered in Ashok Leyland Ltd. case.11.While remanding the matter to this court for freshconsideration, the Hon'ble Supreme Court also observed that in the https://hcservices.ecourts.gov.in/hcservices/ event of creation of a particular Forum to decide the matter betweentwo States by way of a Parliamentary Act, it would be open to theparties to approach the said Forum.12.The decision of the Supreme Court was made on 07.01.2004 andit appears that the Central Sales Tax Appellate Authority wasconstituted in the meantime. Since the petitioner failed to move theStatutory Authority [hereinafter referred as the AppellateAuthority], the assessee preferred an appeal purportedly under Sec.20of the Central Sales Tax Act. The Appellate Authority considered themaintainability of the appeal. The Appellate Authority was of theview that the order of the Taxation Tribunal was in favour of theassessee and it was only the petitioner who moved the High Courtassailing the said order. The Appellate Authority also observed thatthe alleged inaction on the part of the State to move the High courtto re-examine the matter does not confer jurisdiction on theAppellate Authority to assume the role of the High Court.13.Ultimately, the appeal preferred by the assessee was rejectedas not maintainable. 14.The Central Sales Tax Appellate Authority has beenconstituted as a Forum to decide the dispute relating to CentralSales Tax. The said Authority has got jurisdiction throughout Indiaand its order is binding on all the Central Sales Tax Authorities.Admittedly, in the present matter, interest of other States are alsoinvolved and it is the case of the Assessee that they have alreadypaid tax in the State of Bihar and Maharashtra. Therefore, in theevent of this Court taking up the matter, necessarily, other Stateshave also to be impleaded as parties and any direction issued by thisCourt would affect the interest of other States also. It was only inthat context that the Hon'ble Supreme Court while remanding thematter, observed that in the event of creation of another Forum by aParliamentary Act, it would be open to the parties to approach thesaid Forum. Now that the Central Sales Tax Authority has been createdwith jurisdiction throughout India, we are of the opinion that thematter has to be decided only by the said Authority.15.While considering the Appeal preferred by the assessee, theCentral Sales Tax Appellate Authority was of the view that thedirection of the Hon'ble Supreme Court was only to the High Court toconsider the matter afresh in the light of the Judgment in AshokLeyland Ltd. Case and as such, the parties cannot confer jurisdictionon a Tribunal when it does not have the same. However, we are of theview that since the order of this Court dated 02.12.1997 inT.C.No.1096/1990 has already been set aside by the Hon'ble SupremeCourt in Civil Appeal No.943/2001, by directing this Court to decidethe issue afresh, virtually, the order of the Tribunal is restoredand it is only the said order which is to be considered afresh inaccordance with the decision of the Supreme Court in Ashok LeylandLtd. Case. Therefore, when there is a statutory authority now https://hcservices.ecourts.gov.in/hcservices/ functioning with jurisdiction to decide the issue relating to casesunder the Central Sales Tax Act and as the matter involves otherstates also, it is the said Authority who alone has got jurisdictionto decide the issue. Therefore, we are of the considered view thatthe matter has to be decided on merits by the Central Sales TaxAppellate Authority.16.The learned Special Government Pleader appearing on behalf ofthe petitioner also submitted that the Sales Tax Department is takingemergent steps to file an appeal before the Central Sales TaxAppellate Authority. In such circumstances, we are of the view thatinterest of justice would be sub-served by granting liberty to thepetitioner to file statutory appeal before the Central Sales TaxAppellate Authority.17.In the result, the tax case is disposed of by grantingliberty to the petitioner to file an appeal before the Central SalesTax Appellate Authority, New Delhi against the order dated 20.09.1989in Appeal No.133/89 on the file of the Tamil Nadu Sales Tax AppellateTribunal (Additional Bench), Coimbatore Bench and in the event offiling such an appeal within a period of eight weeks from the date ofreceipt of a copy of this order, we request the Tribunal to entertainthe appeal and decide the same on merits as expeditiously aspossible. The Tax Case is disposed of subject to the above direction.No costs.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.tarTo1.Central Sales Tax Appellate Authority,New Delhi.2.The Sales Tax Appellate Tribunal (Addl. Bench),Coimbatore3.The Deputy Commissioner(CT),Salem Division,Salem.4.The Appellate Asst.Commissioner(CT),Salem.5.The Deputy Commercial Tax Officer,Hosur.+ 1 CC to Special Government Pleader,SR.2173T.C.(R) No.1096/1990GV(CO)EM/26.2.