PANCHAMAL CASHEW INDUSTRIES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) BOTH these appeals are disposed of by this common judgment. Following questions have been raised by the assessee : 1. Whether, on the facts and in the circumstances of the case, the order of the appellate authority is erroneous and prejudicial to the interest of the Government revenue ? 2. Whether, on the facts and in the circumstances of the case, the judicious discretion of the appellate authority could be subject for consideration under the revisionary powers envisaged under the Section 22-A of the Act ? 3. Whether, on the facts and in the circumstances of the case, the respondent is vested with the jurisdiction to invoke the provisions of Section 22-A of the Karnataka Sales Tax Act, 1957 ? 4. Whether the respondent was right in ignoring the fact that the assessing authority had examined the movement of consignment without examining the effect of the letters as the whole. The appellate authority examining the effect of the letters in its entirety on the movement of cashew kernels. This aspect of the matter was not considered by the respondent ? 5. Whether the first respondent was right in ignoring the fact that in the case of inter-State sale each and every transactions is to be examined by the authority and leave their findings on the same ? 6. Whether the respondent is right in holding that the transactions entered are clear sales in the course of inter-State sales ignoring the fact that there were transfers otherwise than by way of sale ? 7. Whether the respondent is right in observing that the inter-State movement was incidental to the order placed by Mahalsa Enterprises, Mangalore, and there is no evidence to say that said Sri mohan Kamath acted as the representative when there was no orders from the said Mohan kamath ? 8. Whether the first respondent was right in not examining the fact that "f" form can be availed of only by commission agents and not by dealers and when the consignee used the "f" forms, the same is for sales as agent and not as dealers ?

(2.) THE facts of the case are that the assessee is engaged in the manufacture of cashew kernels. Assessment for the year September 1, 1985 to August 31, 1986 was framed on August 29, 1989. The dispute is with regard to the transactions whether they are inter-State sales or transfer to the agent for sale outside the State. Deputy Commissioner, Appeals remanded the matter for framing the fresh assessment. A. C. T. O. , Intelligence, Bangalore, inspected and searched the business premises of the assessee on May 7, 1987 and seized certain books of account and documents. It was found that consignment sales to the tune of Rs. 11,65,140 were shown which were supported by "f" form and sale patties. On the basis of the seized record it was noticed that the goods have moved from the State of Karnataka to the customers outside the State as a result of privity of contract. Transactions of Rs. 9,34,870 were considered as inter-State sale. Letter of the assessee addressed to Vishal Trading Company to the effect that 98 cases of cashew kernels were supplied on the instruction of Sri Mohan Kamath of Mahalsa Enterprises on September 26, 1985 and the pro forma invoice No. 508 for Rs. 1,60,240 was taken into consideration. From the sale patti it was found that the sale price after deducting the expenses was of the value shown in the pro forma invoice and accordingly the transaction under invoice Nos. 508 to 518 were considered as inter-State sale. It was pointed out by the assessee that in the despatch note Nos. 508, 509 and 518 the word "invoice" was struck down and "pro forma invoice" was written. The assessing authority observed that in the light of the correspondence and facts of the case the transaction is an inter-State sale. It is contended that Sri Mohan Kamath has only given despatch instruction to stock transfer and have not placed the order for inter-State sale. The appellate authority beside considering other factors have taken note of the letter dated October 8, 1985 from which it was found that the documents were retired through bank and a request was made only to send "f" form and sale patti. The levy of tax was set aside considering the discounting of pro forma invoice or despatch note as consistent with consignment agent transactions. Decisions given in [1968] 22 STC 298 (AP) (Hyderabad Chemicals and Fertilizers Ltd. v. State of Andhra pradesh), [1975] 35 STC 452 (Bom) (Commissioner of Sales Tax v. Rowers Chemicals Pvt. Ltd.), [1986] 61 STC 341 (Mad.) (State of Tamil Nadu v. State Trading Corporation of India ltd.) and [1968] 21 STC 312 (SC) (Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer) were referred. The revising authority under Section 22-A found that the order passed is erroneous and prejudicial to the interest of revenue and set aside the appellate order. Learned counsel for the appellant submitted that in order to constitute an inter-State sale, there must be agreement and movement of goods in pursuance of such agreement from one State to another and then only it could be considered to be an inter-State transaction.

(3.) REVIEWING the decision in State of Bombay v. United Motors (India) Ltd. AIR1953 SC 252 , (1953 )55 BOMLR536 , [1953 ]4 SCR1069 , [1953 ]4 STC133 (SC ), in Bengal Immunity Company Limited v. State of Bihar AIR1955 SC 661 , [1955 ]2 SCR603 , [1955 ]6 STC446 (SC ), it was held that the State Legislature has no power to levy tax in respect of inter-State sale. This decision gave birth to the Central Sales Tax Act. Section 3 deals with inter-State sales and section 4 refers to the sales or purchases' of goods which are said to take place outside the State and Section 5 deals with sales or purchase of goods which said to take place in the course of import or export. Provisions of Section 3 are overriding. In order to determine a sale that it is an inter-State sale, it was considered that there must be movement of goods from one State to another under the contract of sale, [endupuri Narasimham and Son v. State of Orissa AIR1961 SC 1344 , [1962 ]1 SCR314 , [1961 ]12 STC282 (SC )].