M/S Jamshedpur Utility And ... vs The State Of Jharkhand Through The ...
2022 Latest Caselaw 4974 Jhar

                                                         1


                 IN THE HIGH COURT OF JHARKHAND AT RANCHI
                           W.P.(T) No. 3648 of 2016
                M/s Jamshedpur Utility and Services Company Ltd. (JUSCO) having its
                office at Bistupur, P.O. and P.S. Bistupur, Town Jamshedpur, District-East
                Singhbhum through its Deputy General Manager (Corporate Accounts)
                                                                  ...... Petitioner
                                          Versus
                1. The State of Jharkhand through the Principal Secretary-cum-
                    Commissioner, Commercial Taxes Department, having its office at
                    Project Building, Dhurwa, P.O. and P.S. Dhurwa, Ranchi.
                2. Joint Commissioner of Commercial Taxes (Administration), Jamshedpur
                    Division, P.O. and P.S. Sakchi, Town Jamshedpur, District-East
                    Singhbhum.
                3. Deputy Commissioner of Commercial Taxes (Urban Circle), Jamshedpur,
                    P.O. and P.S. Sakchi, Town Jamshedpur, District-East Singhbhum.
                4. Assistant Commissioner of Commercial Taxes (Urban Circle),
                    Jamshedpur, P.O. and P.S. Sakchi, Town Jamshedpur, District-East
                    Singhbhum.                                    ......... Respondents
                                              --------

CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh Hon'ble Mr. Justice Deepak Roshan

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                For the Petitioner            : M/s SumeetGadodia, Adv.
                For the Respondents           : Mr. P.A.S.Pati, A.C. to G.A.-II.
                                              --------
26/08.12.2022            Heard learned counsel for the parties.

2. The instant writ application has been preferred by the petitioner for following reliefs:-

(i) For quashing a portion of the order dated 19 th May, 2016 passed in Revision Case bearing No. JR 167 of 2015 by learned commercial Taxes Tribunal, Jharkhand, Ranchi (Annexure-7) wherein revision application of the petitioner on the issue pertaining to 'Transit Sale' has been rejected;

(ii) To quash/set aside the order dated 19.03.2015 passed by Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur Division in Appeal Case No. JU/CST-A-06/2014-15, communicated to the petitioner vide Memo No. 182 dated 19.03.2015 wherein appeal filed by the petitioner has been dismissed to the extent it relates to the issue of 'Transit Sale';

(iii) To quash/set aside the Assessment Order dated 15.03.2014 passed by Assistant Commissioner of Commercial Taxes Urban Circle, Jamshedpur (Respondent No.4) wherein Assessing Officer, while passing the assessment order pertaining to Financial Year 2010-11

had proceeded to levy tax under the provisions of Central Sales Tax Act, 1956, to the extent tax it had levied in respect of transaction pertaining to 'Transit Sale'.

3. The brief facts of the case as enunciated by the pleadings is that the petitioner company is primarily engaged in providing basic utility services to the citizens of Jamshedpur and it surrounding places as a Contractor of M/s. Tata Steel Limited. The primary service provided by the Petitioner are distribution of electricity, supply of water, maintenance of sanitary and water system, maintenance of parks and garden, maintenance of geological park, educational institution and to provide basic civic amenities and maintenance of city streets of joining area. Petitioner is also executing different works contract awarded to it by various clients.

During relevant financial year (2010-2011), Petitioner was having three separate purchase orders dated 24.12.2009, 02.02.2010 and 18.03.2010 issued in its favour by M/s. Tata Steel Limited for supply and delivery of goods. During the assessment proceeding, Petitioner furnished requisite statutory forms being E-1, E-2 and Form 'C' in terms of Section 6(2) read with Section 8(4) of CST Act in proof of transaction pertaining to transit sales. Apart from the above, Petitioner also furnished following documents before the learned Assessing Officer, namely:-

(i) Copies of purchase orders for purchase of goods issued by M/s. Tata Steel Limited to the Petitioner.

(ii) Copies of Invoices of the venders from whom the Petitioner had purchased the goods in question including copies of Delivery Challans.

     (iii)      Road Permits being JVAT 504G.
     (iv)       Lorry Receipts, and
     (v)        Copies of Invoices raised by the Petitioner to M/s. Tata Steel Limited

However, Assessment Order was passed by Assessing Officer, whereinprimarily following two transactions, tax were levied upon the Petitionerunder the provisions of CST Act:-

(i)Levy of tax on transaction of inter-State sales made by Petitioner in pursuance of execution of works contract for an amount of Rs. 31,23,66,171.21/-.

This issue is not the subject matter of adjudication before this Court as the Revisional Court has allowed the Revision Petition bearing No. JR 167 of 2015 to this extent.

(ii) Rejection of claim of Petitioner of transit sales under Section 3(b) read with Section 6(2) of CST Act and consequential levy of tax thereupon for an amount of Rs. 12,45,85,385.01/-.

4. M/s Sumeet Gadodia, learned counsel for the petitioner submits that from bare perusal of the Assessment Order to the extent of issue No.2, it would transpire that Assessing Officer proceeded to reject the transactions of transit sale of the Petitioner on the following grounds.-

(i) There was a gap of one month to six months from the date of transit sale and the consequent raising of bills by the Petitioner-company to M/s. Tata Steel Limited; and

(ii) The endorsement made in the lorry receipt does not specify the date on which such endorsement has been made.

Being aggrieved, Petitioner preferred an appeal before Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur Division, Jamshedpur, which was registered as Appeal Case No. JU/CST-A- 06/2014-15, however the same was rejected.

5. During the revisional proceeding before the Tribunal, by way of example,statement of transit sales made during the period in dispute and samplecopies of tax invoices raised by Petitioner to Tata Steel Limited for theperiod in dispute, were submitted by the Petitioner to demonstrate thatPetitioner had effected sales by transfer of documents of title of the goodsduring their movement from one State to another, which is an exemptedtransaction under Section 6(2) of the CST Act.

He further submits that before the Tribunal, Assessee also contended that under normal business transactions, bills are not raised immediately after the delivery of goods and as the normal business practice, bills are also generally raised after time gap of one to six months. He contended that Petitioner has raised bills on lot wise delivery of goods and in majority of goods, bills have been raised with gap of 45-60/ days from the date of delivery to M/s. Tata Steel Limited. He further submits that the petitioner also specifically contended before the learned Tribunal that no endorsement is needed if there is a dispatch instruction to the seller to send the goods to the ultimate buyer and the concerned consignee is sufficient proof of subsequent sale.

(6) Mr. P.A.S.Pati, A.C. to G.A.-II. learned counsel for the State submits that the petitioner is engaged in providing basic utility services to

the people of Jamshedpur and surrounding areas as a contractor to Tata Steel Ltd. and also takes independent works contract awarded by its various clients. He further submits that the petitioner also held transaction with Tata Steel Ltd. through different works contract vide works contract dated 24.12.2009, 02.02.2010 and 18.03.2010 and supplied the goods to Tata Steel Ltd. and it is claimed by the petitioner that these goods were supplied to Tata Steel Ltd. in course of movement of goods.

He submits that after regular assessment proceeding the Assessing Officer imposed tax @ 12.5% under JVAT treating them inter-state sales on both kinds of transaction involving inter-state sales and transit sales and the petitioner plea for exemption in the light of Section 3 (a) of CST Act read with Section 6(2) was negated which was also affirmed by the JCCT (Appeal) vide its order dated 19.03.2015 who rejected the appeal filed by the petitioner company. Being aggrieved, the petitioner challenged the order passed by the JCCT appeal before the tribunal and the tribunal partly allowed the appeal filed by the Assessee after relying the Judgment passed in the case of A & G Projects &Technologies Ltd. Versus State of Karnataka reported in (2009) 2 SCC 326.

Learned counsel for the revenue further submits that there is no concept of exempted goods either under CST Act or JVAT Act after goods so purchase is ultimately used in execution of works contract, thus there is no error in the order passed by the learned tribunal, as such no relief can be granted to the petitioner.

7. Having heard learned counsel for the parties and after going through the documents annexed with the respective affidavits and the averments made therein, before analyzing the legality of the impugned judgment it is relevant to mention the relevant paragraphs of the same. For brevity, paragraph 35 to 38 of the impugned judgment is quoted hereinbelow:-

"35. The production of these Forms could provide the required proof for exemption provided in respect of transaction under section 6 (2) CST. Learned counsel for the petitioner has relied upon P.A.George Case (Para-13) on perusal of which we find that Hon'ble Apex Court was pleased to hold that if certificate in Form E-I, E-II or Form 'C' have been furnished then there is no further requirement as per section 12 for sustaining the claim of exemption. The Tax authorities nowhere have disputed about submission of these Forms or certificates rather have doubted their genuineness only on the ground that bills were raised after 4 to 6 months after delivery of goods. We are of the view that there is no

rationale or any logic in giving such a finding without otherwise questioning the authenticity of the Forms or certificates. However, something more is required to be established by the petitioner.

36. In A &G Project the Hon'ble apex Court in para-11 has been pleased to hold that the dividing line between sales and purchases u/s 3

(a) and those falling u/s 3(b) is that in the former case the movement is under the contract where as in the later the contract comes into existence only after the commencement and before termination of inter-state movement of the goods.

37. As per the above decision in A& G Project case if a contract of subsequent sales is already in existence prior to commencement of movement of goods for inter-state sale u/s 3 (a) then the exemption of 6 (2) will not be available. If the case of the petitioner is tested on the touch stone of the above decision of the Hon'ble Apex Court we find that the claim of exemption on transit sale is not available to the petitioner for the following reasons:-

i) The petitioner in para-40 of the revision petition has admitted that there were already three contracts dated 24.12.2009, 2.2.2010 and 18.03.2010 (Annexure-11) in existence with Tata Steel for supply and delivery of goods. There is further admission that in pursuance of these pre-existing contracts petitioner placed orders for purchase of goods beyond the limits of Jharkhand. In para-41 of the petition it is also admitted that the petitioner had issued instruction to the sellers outside Jharkhand for direct delivery at the buyer's destination i.e. Tata Steel. Even name of Tata Steel Ltd. appears on the sale invoices.

38. We fail to understand how inconsistent pleas could be taken by the petitioner when the law is explicit on the point that subsequent sale during transit shall not be preceded by any preexisting contract."

After going through the aforesaid findings, it transpires that the learned tribunal has completely failed to appreciate the ratio of the Judgment of the Hon'ble Apex Court rendered in the case of A& G Projects (supra) and merely on the basis of an observation as contained in para-13 of the said judgment proceeded to reject the claim of 'Transit Sale' of the petitioner.

8. At this stage it is relevant to mention here that the issue involved in this case was considered by this Court in the case of M/s Tata Steel Limited Vs. State of Jharkhand (W.P.(T) No. 4179 of 2018) delivered on 24.10.2018. The revenue have challenged the order passed by this Court in Tata Steel Ltd. before the Hon'ble Apex Court, however the same was dismissed and thus the judgment passed in the Tata Steel Limited still holds ground and in that judgment this Court has interpreted the ratio passed in the case of A & G Projects(supra).

For better appreciation, paragraph 5 sub para (xxvi) to (xxvii) is quoted hereinbelow:

"5........

(xxvi) Looking to paragraph no.11 of the counter affidavit it appears that there is a mis-interpretation and mis-reading of the judgment delivered by Hon'ble the Supreme Court in the case of A & G Projects & Technologies Ltd. Vs. State of Karnataka reported in (2009) 2 SCC 326 especially paragraph no.13 thereof.

For ready reference relevant part of paragraph no.13 reads as under:

"Para13.......................................................

........................................................ The dividing line between sales and the purchase under Section 3(a) and thus falling under Section 3(b) is that in the former case the movement is under the contract whereas in the latter case the contract comes into existence only after the commencement and before the termination of the inter-state movement of the goods........................

.................................................................................... .................................................................................... ..........................................."

(emphasis supplied)

(xxvii) Looking to the counter affidavit, it appears that the aforesaid paragraph of the judgment delivered by Hon'ble the Supreme Court has been wrongly appreciated by the respondent-State that there was pre-determined or pre-decided contract of sale between the petitioner and the dealer of the goods at a point of time prior to the sale of goods between the manufacturer of the goods from other inter-State and the dealer of the goods. It ought to be kept in mind that mere narration of the goods given by this petitioner to the dealer for their purchase from outside the State is nothing, but, an understanding on purchase of the goods or at the highest it can be said to be an agreement to sale between the petitioner and the dealer of the goods or in the worst case, it can be a "present sale of future goods", (which is known as agreement to sale as per Section 6(3) of the Central Sales Tax Act 1956). Sale of goods between this petitioner and the dealer will come into existence, when the dealer puts an endorsement during transit of the goods in favour of this petitioner. This endorsement made by the dealer of the goods converts "agreement to sale" into "sale" or by this endorsement it can be said that "present sale of future goods" is converted into "sale". Present sale of future goods is also "an agreement to sale" (as per Section 6(2) of the Central Sales Tax Act, 1956). Thus, by no stretch of imagination it can be said that there was pre-determined or pre-decided contract of sale between petitioner and the dealer of the goods, prior to the purchase of the goods by the dealer from the manufacturer of the goods (from another State). Sale between petitioner and the dealer comes into existence only upon the endorsement made by this dealer of the goods, during transit of the goods. It appears that the respondent-State authorities has lost sight of the correct meaning of:

(a) Agreement to sale which is in pre-existence between petitioner and the dealer of the goods.

(b) Present sale of future goods is also known as agreement to sale (as per Section 6(3) of the Sale of goods Act).

(c) The incidence of tax is on a sale and not an agreement to sale.

Thus, the aforesaid aspect of the matter has not been properly appreciated and mechanically the reason has been given in paragraph no.11 of the counter affidavit by wrong interpretation of the aforesaid decision rendered by the Hon'ble Supreme Court and hence, the reasons given in paragraph no.11 for denial of grant of Form-C is not tenable at law......"

9. It is further opined that even if, for the sake of argument, it is presumed that movement of the goods has taken place under a pre-

existing contract and as per the judgment of the Hon'ble Supreme Court the said transaction cannot be treated to be a transaction of 'Transit Sale' falling under section 3(b) of the C.S.T. Act, then also no liability of tax can be fastened upon the petitioner in respect of the aforesaid transaction by the State of Jharkhand as admittedly, petitioner had purchased the goods in question from various State situated outside the State of Jharkhand and had duly discharged its liability of payment of central sales tax to the respective State Government. If the aforesaid transaction of 'Transit Sale' is deemed to have been rejected, then the transaction would fall under the purview of Section 3(a) of the C.S.T. Act and since, admittedly, the entire tax in respect of the aforesaid sale falling under Section 3 (a) of the C.S.T. Act has been discharged by the petitioner to the respective State Governments, no further tax liability can be imposed by the State of Jharkhand upon the petitioner.

10. At the cost of repetition, there is misinterpretation and misreading of the judgment delivered by the Hon'ble Apex Court in the case of A & G Projects (Supra). The learned tribunal has committed an error by wrongly appreciating that there was pre-determined or pre decided contract of sale between the petitioner and the dealer of the goods at the point of time prior to the sale of goods between the manufacturer of the goods from other inter-state and the dealer of the goods.

11. Even otherwise, the law is now well settled that the tribunal was not supposed to decide an issue which was not the case of the revenue.As a matter of fact,the learned tribunal has categorically held at paragraph 35 of its order that there is no rationale or any logic in giving such a finding

without otherwise questioning the authenticity of forms or certificates. It has further been held by the tribunal that the tax authorities nowhere have disputed about submissions of these forums or certificates rather; have doubted theirgenuinenessonly on the ground that bills were raised after four to six months after delivery of goods and thus held that there is no rationale or any logic in giving such finding. However, ultimately the tribunal has misdirected itself by misinterpreting the judgment passed in the case of A & G Projects (Supra).

12. Having regard to the facts of the case and the discussions made hereinabove the instant writ application is allowed and the order passed by learned Commercial Taxes Tribunal, Ranchi vide order dated 19.05.2016/ order dated 19.03.2015 passed by learned Joint Commissioner of Commercial Taxes (Appeal), Jamshedpur division and the Assessment Order dated 15.03.2014 passed by Assistant Commissioner of Commercial Taxes Urban Circle, Jamshedpur are, hereby, quashed and set aside, so far as rejection of claim of Petitioner of transit sales under Section 3(b) read with Section 6(2) of CST Act and consequential levy of taxthereupon for an amount of Rs. 12,45,85,385.01/- is concerned.

It has been brought to the notice of this Court that the Assessee has already paid the demand raised by the revenue, as such the revenue will proceed to refund the same in accordance with law.

13. With the aforesaid observation, the instant writ application stands allowed.Pending IA, if any, stands disposed of.

(Aparesh Kumar Singh, J.)

(Deepak Roshan, J.) Amardeep/AFR