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M/S DEWAN RESINS PRIVATE LTD., versus COMMISSIONER OF TRADE TAX, U.P.LUCKNOW

High Court of Judicature at Allahabad

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M/S Dewan Resins Private Ltd., v. Commissioner Of Trade Tax, U.P.Lucknow - SALES/TRADE TAX REVISION DEFECTIVE No. 1303 of 1998 [2006] RD-AH 17370 (9 October 2006)

 

This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).

HIGH COURT OF JUDICATURE OF ALLAHABAD

RESERVED

TRADE TAX REVISION NO.(1303) OF 1998

M/s Dewan Resins Private Ltd., Meerut.       ....Applicant

Versus

Commissioner of Trade Tax U.P., Lucknow.   .Opp.party

***************

Hon'ble Rajes Kumar, J.

Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 24.03.1998 for the assessment year 1986-87 under Central Sales Tax Act.

Applicant was carrying on the business of manufacture and sale of plasticised surface coating material. Applicant had a depot at Delhi. Applicant claimed to have stock transferred the goods from its factory to its Delhi depot and effected the sale from such depot at Rs.1,68,31,679.75p.  Assessing authority had rejected the claim of stock transfer to Delhi  depot for Rs.20 lacs and treated it as a inter-State sales. Assessing authority had rejected the claim of stock transfer mainly on the ground that on 11.12.1986, applicant had despatched 45 drums to Delhi depot.  The aforesaid goods were checked in transit by Trade Tax Officer (Mobile Squad). The employee of the applicant Shri Bhupendra told that out of 45 drums, 17 drums was to be delivered to M/s Depy's India, Kirti Nagar, Delhi. One of the Director of the company also confirmed the said statement and on this basis stock transfer for Rs.20 lacs was rejected. Applicant filed first appeal before the Assistant Commissioner (Judicial), Trade Tax, Meerut, who vide its order dated 03.01.1992 allowed the appeal in part. First appellate authority had rejected the claim of stock transfer of only 17 drums valuing Rs.78,200/- and the claim of stock transfer for rest of the goods have been accepted. Aggrieved by the said order, applicant as well as Commissioner of Trade Tax filed appeals before the Tribunal. Tribunal by the impugned order rejected both the appeals.

Heard Sri Piyush Agrawal, learned counsel for the applicant and Sri B.K. Pandey, learned Standing Counsel.

In the present case, dispute relates to the rejection of stock transfer of 17 drums, which were claimed to be stock transfer to the Delhi depot but had been treated as inter-State sales.  Learned counsel for the applicant submitted that 17 drums were despatched to the Delhi depot and had been delivered at Delhi depot and thereafter, Delhi depot sold it to M/s Vinyl Products, Kirti Nagar Industrial Area, Delhi and not to M/s Depy's India, Kirti Nagar, Delhi and, therefore, the movement of goods of 17 drums could not be treated as inter-State sales but was stock transfer. Learned Standing Counsel submitted that at the time of inspection on 11.12.1986 when 45 drums were in transit from factory to Delhi depot, Shri Bhupendra, employee of the applicant told that 17 drums were to be delivered to M/s Depy's India, Kirti Nagar, Delhi and this averment was also confirmed by the Director of the Company, therefore, the movement of  17 drums from factory to Delhi depot was in pursuance of the prior contract of sale with M/s Depy's India, Kirti Nagar, Delhi and the subsequent diversion of the goods to M/s Vinyl Products, Kirti Nagar Industrial Area, Delhi would not change the nature of the transactions and has rightly been treated as inter-State sales.

I have perused the order of Tribunal and the authorities below.

I do not find any substance in the argument of learned counsel for the applicant. Admittedly, the goods had moved from Meerut to Delhi depot. In transit, when the goods were checked, the employee of the applicant, Shri Bhupendra told that 17 drums had to go to M/s Depy's India, Kirti Nagar, Delhi and this fact was also confirmed by the Director of the Company. No dispute has been raised with regard to the statements of Shri Bhupendra and Director of the Company. Thus, it is clear that at the time of movement of the goods, it was known that 17 drums had to go to M/s Depy's India, Kirti Nagar, Delhi must be in pursuance of same order. In fact goods were not meant for delivery to the Delhi depot and the movement of the goods were in pursuance of prior contract of sale. Thus, even if, after the  goods were being checked, same were diverted to Delhi depot; and subsequently, sold to different  parties, nature of the transactions would not change. Subsequent sale to different party, M/s Vinyl Products, Kirti Nagar Industrial Area, Delhi was only a device on the part of the applicant.

Section 3 of the Central Sales Tax reads as follows:

"3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce - A sale or purchase of goods 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 gods, from one State to another; or

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

Section 3 (a) of Central Sales Tax Act says that sale or purchase of goods shall be deemed to take place in the course of inter-State sales or commerce, if sale or purchase occasion the movement of goods from one State to another. The word "occasion the movement of goods" came up for consideration before the Apex Court in the several cases namely, K.G.Khosla And Co. (P) Ltd Vs. Deputy  Commissioner of Commercial Taxes, Madras Division, Madras, reported in 167 STC, 473 and Balabhagas Hulaschand And Another Vs. State of Orissa, reported in 37 STC, 207.

As held by Apex Court for being inter-State sales under section 3 (a) of Central Sales Tax Act there should be movement of goods in pursuance of prior contract of sale, i.e. if on the agreement to sale there is movement of goods from one State to another State, the movement is deemed to be in the course of inter-State sales. Subsequent diversion of the goods after the movement of the goods will not change the nature of the transactions, if at point of movement of goods it was inter-State sales, then it will remain as inter-State sales irrespective of the subsequent changes.

In the present case, at the time of movement of goods from Meerut to Delhi, there was a pre-existing contract of sale and thus, it was a inter-State sales. Subsequently, after the goods were being checked, the goods had been diverted to some other party through the sale depot, the movement of goods which was initially the inter-State sales would not cease to be inter-State sale. If this principal of law is not accepted then it would give the opportunity to the dealer to convert the inter-State sale into stock transfer after the goods are being checked. It may be mentioned here that the sale of impugned goods to M/s Vinyl Products, Kirti Nagar Industrial Area, Delhi was only a device. Thus, in any view, Tribunal has rightly treated the movement of 17 drums as inter-State sales.

In the result, revision fails and is accordingly, dismissed.

Dt.09.10.2006

R./


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