STATE OF KARNATAKA Vs. KHODAY ESHWARSA AND SONS

JUDGEMENT

(1.) As the question involved in both these petitions are one and the same, they are taken up for consideration together and disposed of by this common order. In S.T.R.P. No. 48 of 2008, the assessee is a company incorporated under the Companies Act, 1956 and a dealer registered under the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. The assessee/appellant operates three separate divisions, namely, a distillery for manufacture and sale of liquor, a sugar factory for production and sale of sugar and a division of execution of works contracts. The assessee is a flagship company of the Khoday Group of Industries.

(2.) It is the case of the assessee that, being a flagship company of Khoday Group of Industries, during the year 1994-95, they ran into serious financial difficulties, which compelled the Board of Directors of the group company to explore the several possibilities to tide over the financial difficulties and accordingly, the Board of Directors came out with an idea of sale-cum-lease back of its assets of oakwood barrels and vats with the lease financing companies and raise the required funds. This lead to passing of resolution by the Board of Directors, which provided the necessary authorisation to the assessee to go ahead with this issue. The assessee entered into agreements with five financing companies and raised invoices on them for sale-cum-lease back of oakwood barrels and vats for value aggregating to Rs. 17,00,34,809.

(3.) The assessee contended, under those circumstances, there was no actual sale and mere issuance of the sale invoices being paper transactions and in the absence of transfer of property in goods of the said oakwood barrels, there cannot be any sale and as such, no tax can be levied. However, the assessing authority acting on the invoices, which were not in dispute held that, it is sufficient to hold that the goods are sold for a sum of Rs. 17,00,34,809 and assessed the said amount to basic tax, surcharge and turnover tax. 'The appeal preferred by the assessee came to be dismissed by the first appellate authority.