SUNDARAM INDUSTRIES LIMITED Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) PETITION on being called today, upon hearing both sides, the Tribunal ordered as follows :

(2.) HOWEVER , the Tribunal remanded this part of the turnover to the assessing authority so as to fix the taxable turnover involving works contract under the Act by following the decision of the Supreme Court in [1989] 73 STC 370 (Builders Association of India v. Union of India) and the instructions of the Commissioner of Commercial Taxes. The assessee has preferred this revision aggrieved of the orders of the Appellate Tribunal in holding that the transactions relevant to retreading have to be taxed under the Act.

(3.) REFERRING to the decision of the Gauhati High Court in Projects and Services Centre v. State of Tripura reported in [1991] 82 STC 89 it was contended that in that case the use of materials made in a works contract in the State of Tripura was held to be inter -State nature in character and thus it was held that though the work was carried out in the State of Tripura still the goods moved from other State and therefore the transaction cannot be taxed as intra -State sale on the ground that the property therein passed to the buyer in the State of Tripura. In [1993] 90 STC 1, in the case of Co -operative Sugars Ltd. (Chittur) v. State of Tamil Nadu the Supreme Court has held that it was immaterial whether the sale/purchase took place within Tamil Nadu or within Kerala. So long as the movement of goods was an incident of sale/purchase it amounted to an inter -State sale/purchase. It is also not necessary that the contract of sale must expressly provide for the movement of goods. It is sufficient if the movement of goods is implicit in the sale. In East India Cotton Manufacturing Company Limited v. State of Haryana [1993] 90 STC 221 (P&H)[FB], the High Court held that "where grey cloth is sent by contractees from outside the State of Haryana and is processed in the State of Haryana into finished cloth by being subjected to processes such as bleaching, dyeing, sizing and printing and is thereafter sent back to the contractees outside the State, the movement of cloth is occasioned by the contract of sale within the meaning of Sub -clause (ii) of Clause (1) of Section 2 of the Haryana General Sales Tax Act and the transaction amounts to an inter -State sale within the meaning of Section 3 of the Central Sales Tax Act, 1956". In the case of Thomson Press (India) Ltd. v. State of Haryana [1996] 100 STC 417, the Punjab and Haryana High Court has held that once the contract occasions the movement of the end -product from one State to another, the inputs or the goods involved in the execution of the works contract shall also be deemed to have moved and the levy of sales tax in such a case would be outside the field of legislative competence of the State Legislature. By introducing a fiction, the State Legislature cannot convert a sale in the course of inter -State trade and commerce into a local sale. In fact, this is the view expressed by the Full Bench in conclusions 3 and 4 in the East India Cotton Manufacturing Company's case [1993] 90 STC 221 (P&H). This is also the position that emerges from the decision of the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204. In [1992] 87 STC 196 (SC) in the case of Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti it was held that purchase of goods on behalf of ex -U.P. principals and dispatch to them to places outside the State are to be held as inter -State purchases. Referring to the case of State of Travancore -Cochin v. Shanmugha Vilas Cashew -nut Factory reported in [1953] 4 STC 205 the expression "in the course of was explained as follows :