SUNDARAM INDUSTRIES Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THESE two tax revisions relate to the assessment years 1975-76 and 1976-77 and since common questions of law and fact are involved, the same are being disposed of by this common order.

(2.) THE petitioner is the assessee, who is a dealer in high density polythene woven sacks. For the assessment year 1975-76, it was assessed under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Tamil Nadu Act) on a total taxable turnover of Rs. 23, 48, 630.92 by the Joint Commercial Tax Officer, vide his assessment order dated January 4, 1977. In this order, exemption was allowed on a sum of Rs. 6, 72, 861.47 on production of E1 form under section6(2) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act'), on sale of goods effected in the course of inter-State movement. It transpires that the premises of the petitioner-industry was inspected by the officers of the Inter-State Investigation Cell on August 7, 1978. THE inspection revealed that the exemption granted on a sum of Rs. 6, 72, 861.47, as sales effected in the course of inter-State movement of goods from one State to another was not in order and that the sale in question was intra-State and not inter-State. THE assessing authority found that the petitioner had entered into a contract with Southern Petro Chemical Industries Corporation Limited ("SPIC" for short) for supply of HDPE bags, according to which the assessee had agreed to supply 6 lakh numbers of HDPE bags to SPIC at Rs. 4.15 per bag. THE bags were required to be delivered at the premises of SPIC at Tuticorin and the payment for the bags was to be made after confirmation and verification of the specification, dimension, quality, etc., by SPIC. It was also found that the assessee was manufacturing HDPE bags in its own factory at Karappakkam in Madras also but, in order to fulfil the contract with SPIC, the assessee had supplied HDPE bags not only from its own factory but also by purchasing the same from manufacturers outside the State. It was in respect of the goods sold, out of the purchases made from the suppliers from outside the State, that the assessee had claimed and obtained exemption under section 6(2)(b) of the Central Act. THE assessing authority was of the opinion that whereas the transactions between the assessee and the non-resident dealer, outside the State, were inter-State sales, the transactions between the assessee and SPIC were not inter-State but intra-State sales. THE assessing authority was also of the opinion that the goods purchased from the non-resident dealer and supplied to SPIC at Tuticorin were not sold by any transfer of documents of title to the goods but by actual delivery of the goods at the premises of SPIC in accordance with the stipulations contained in the contract executed between the assessee and SPIC. Consequently, a notice was issued to the assessee on October 17, 1978, proposing to levy sales tax at 4 per cent under the Tamil Nadu Act on the turnover of Rs. 6, 72, 861.47 (the amount on which exemption had been allowed). In the notice, it was also proposed to levy surcharge and additional sales tax on the tax due on the escaped turnover. Objections were invited from the assessee and the same were filed. It was maintained by the assessee that since the despatches of the goods had been made from outside the State and consigned for door delivery to SPIC, the goods could not be said to be within the State at the time of their appropriation by the assessee. It was asserted that the transactions could not be treated as local sales but that the same were inter-State sales. It was also pleaded that the sales had been effected by transfer of consignment documents and that the endorsement of the goods consignment notes in favour of SPIC established the sale to have taken place during the inter-State movement of the goods.

(3.) FOR the assessment year 1976-77, the assessee was assessed by the Joint Commercial Tax Officer on a taxable turnover of Rs. 27, 88, 825, which included the "transit" sales effected to SPIC to the tune of Rs. 7, 47, 090. The claim for exemption under section6(2) of the Central Act was negatived. The appeals before the Appellate Assistant Commissioner failed in respect of both the assessment years. By a common order dated July 15, 1981, further appeals to the Tamil Nadu Sales Tax Appellate Tribunal were also dismissed.