IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 25-09-2008 CORAM THE HONOURABLE MR.JUSTICE M.JAICHANDREN Writ Petition No.6102 of 2001 M/s.Handicrafts and Handloom Export Corporation of India Ltd. 143, Greams Road, Thousand Lights, Chennai-600 006. .. Petitioner. Versus 1.The State of Tamil Nadu rep. by the Secretary to Government Commercial Taxes and Religious Endowments Department, Fort St. George, Chennai-600 009. 2.The Secretary, Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, City Civil Court Buildings, Chennai-600 104. 3. The Commercial Tax Officer, Royapettah-I, Assessment Circle, (Formerly, Dy.Commercial Tax Officer, Royapettah-I, Assessment Circle), 46, Greenways Road, Chennai-600 028. .. Respondents. (R3 impleaded by an order of this Court in W.P.M.P.No.1472 of 2008, dated 25.9.2008.) Prayer: This petition has been filed seeking for a writ of Certiorarified Mandamus, to call for the records of the second respondent in its proceedings in T.A.No.306 of 1995, quash the orders therein, dated 10.2.97, and further direct that the disputed transactions be exempted under Section 6-A of the Central Sales Tax Act, 1956, as stock-transfers. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mr.K.J.Chandran For Respondents : Mr.J.Ganesan Additional Government Pleader (Taxes) O R D E R Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondents. 2. It has been stated that the petitioner Corporation is a Government of India undertaking. It is a registered dealer under the provisions of the Central Sales Tax Act, 1956, (hereinafter called `the Act'). The petitioner Corporation is an assessee on the files of the Deputy Commercial Tax Officer, Royapettah-I, Assessement Circle, Chennai. For Assessment years, 1985-86 and 1986-87, the petitioner Corporation was subjected to final assessments. Later, by way of revised orders of assessment, it was subjected to sales tax under the Act as if certain transfers of stocks made to its Bangalore Office, for the inter-state sales, were not stock transfers as claimed by the petitioner. Revised assessment orders came to be passed subsequent to an instruction, on 8.3.91, by the officials of the Enforcement Wing, Chennai. Evidently, based on the report of the Enforcement Wing officials revised assessment came to be made and the petitioner Corporation was subjected to sales tax and penalty. Aggrieved by the revised orders of assessment, the petitioner had preferred statutory appeals to the Appellate Assistant Commissioner (CT) II, Chennai. Since, the orders were not favourable, second appeals had been preferred before the second respondent. By a common order, dated 10.2.97, passed in T.A.Nos.305 and 306 of 1995, the second respondent Tribunal sustained the assessments on the disputed turn over. However, the penalty imposed, under Section 16(2) of the Tamilnadu General Sales Tax Act, 1959, had been deleted, holding it to be unsustainable. The orders passed by the second respondent Tribunal were served on the petitioner, on 12.5.97. The petitioner had preferred revisions, under Section 38 read with Section 9(2) of the Act. The said Tax Revision Cases were numbered as T.C.(R). Nos.129 and 130 of 1998. 3. In respect of the assessment orders for the years 1985-86 and 1986-87, the petitioner had imported yarn from abroad, cleared it from the Port at Chennai and stock transferred the yarns in Bulk to its Bangalore Office. The stock transfer of yarn done in bulk is purely general or standard goods not tailor-made for the requirement of any particular customer. The Branch Office at Bangalore is a registered dealer under the Local Act of Karnataka https://hcservices.ecourts.gov.in/hcservices/ State and the Central Sales Tax Act and it took physical delivery of the goods from the carrier, held in stock and thereafter, delivered it to the weavers, who are registered with the said branch. The silk yarn came to be ear-marked and delivered out of the bulk at the hands of the Branch office at Bangalore, State of Karnataka. Hence, when the imported silk yarn was transported in bulk to Bangalore from Chennai, it went as unascertained goods and came to be set apart and ear-marked for the particular customer at the Bangalore Office. Hence, the sale, under Section 4 (2) of the Act, took place at Bangalore, in the State of Karnataka. Being an inside sale in that State, it is an outside sale in so far as the State of Tamil Nadu is concerned. The petitioner has also furnished Form-F declarations and other proof in support of its case of the transfer of the Stock from Chennai to Bangalore. However, relying on the decision of the Supreme Court in the case of M/s.South India Viscose Limited Vs. State of Tamil Nadu (1981 48 STC 232), the second respondent had negatived the relief sought for. 4. In the said case there was a control order and deliveries were made in accordance with the Control Order to pre-determined customers. Hence, factually, the said decision has no application to the instant case. On the contrary, the second respondent without going into the facts and circumstances of the case furnished before it, came to a pre-determined conclusion by applying the said law, without properly appreciating the facts. From the evidence tendered before the second respondent, it was demonstrated that there was always a closing balance of silk yarn at the hands of the Bangalore Office. There was no conceivable link between the despatch of silk yarn from Chennai and the distribution made to various weavers by the Branch at Bangalore. Being a registered dealer in the State of Karnataka, the petitioner's Branch remitted, either local or Central Sales Tax, on the supplies made by it to the customers. It is therefore, not open to the first respondent to levy tax under the Act in respect of the same transactions that have suffered tax at the hands of the Sate of Karnataka. In such circumstances, the writ petition has been filed, under Article 226 of the Constitution of India. 5. No counter affidavit has been filed on behalf of the respondents. 6. At this stage of the hearing of the writ petition, the learned counsel appearing for the petitioner had submitted that even though the prayer in the writ petition is for a larger relief, it would suffice if the impugned orders of the second respondent is set aside and the matter is remitted back to the third respondent herein for a fresh assessment to be done, with regard to the petitioner Corporation, for the years 1985-86 and https://hcservices.ecourts.gov.in/hcservices/ 1986-87, in view of the decision of the Supreme Court in Ashok Leyland Ltd., Vs. State of Tamilnadu and another (2004 STC Vol.134 473), wherein it was held as follows: "Having regard to article 286 of the Constitution of India, it is within the exclusive domain of Parliament to fix the situs of sale. Once the situs of sale, whether by way of fiction or otherwise, is determined, the State Legislature will be denuded of its power to fix another situs By reason of Section 6-A(2) of the Central Sales Tax Act, 1956, a legal fiction has been created for the purpose of Central Sales tax to the effect that where the movement of goods takes place otherwise than as a result of a sale, the transaction would not be an inter- State sale. The initial burden of proof is on the dealer to show that the movement of the goods was occasioned by reason of transfer of such goods otherwise than by reason of sale. On a declaration being filed by the dealer, an inquiry is to be made by the assessing authority for the purpose of passing an order on arriving at a satisfaction that movement of goods was occasioned otherwise than as a result of sale. Whenever such an order is passed a legal fiction is created. If, through the means of a legal fiction, it is determined that the transaction in question is not an inter-State sale, then it amounts to a transfer of stock. This finding is made by the statutory authority who has the jurisdiction to do so and there is no provision for appeal. Therefore, the order made by such authority is conclusive, in that it cannot be reopened on the basis that there has been a mere error of judgment. It cannot also be reopened under the sales tax law of the State concerned when the order has been made under the Central Sales Tax Act. Section 9(2) of the Central Sales Tax Act is subject tot he other provisions of the Act, which would included Section 6-A(2). "Subject to" is an expression whereby limitation is expressed. The order in which a finding is given that the movement of the goods was occasioned by reason of transfer otherwise than by reason of sale, is conclusive for all purposes: it can only be reopened on a small set of grounds such as fraud, misrepresentation, collusion, etc. https://hcservices.ecourts.gov.in/hcservices/ Although it provides for a burden of proof, Section 6-A of the Central Sales Tax Act, 1956, has to be read in the context of Section 6. Section 6 provides for the liability to pay tax on inter-State sales. Any transaction which does not fall within the definition of "sale" in Section 2(g)-the burden whereof would evidently be on the assessee/dealer-would not be exigible to tax. Prior to the amendment of sub-Section (1) of Section 6-A, the dealer had an option of filing the declaration in Form F. After the amendment, the dealer does not have such an option. If the dealer fails and/or neglects to file such a declaration, the transaction would be deemed to be an inter-State sale. For this purpose also Parliament advisedly used the expression "deemed". The amendment was necessitated not only to make the dealer file such a declaration imperatively but also to see that such movement of goods becomes inter-State sale by raising a legal fiction as "having been occasioned in the course of inter-State sale". In other words, if, a declaration is filed, and, on an inquiry made pursuant thereto or in furtherance thereof, the particulars furnished are found to be correct by the assessing authority, the result thereof which is evidenced by the expression "thereupon" shall, in view of the legal fiction created, would be a transaction otherwise than as a result of an inter-State sale. Once such a legal fiction is drawn, the same would continue to have its effect not only while making an order of assessment in terms of the State law but also for the purpose of invoking the powers fo assessment contained in Section 9(2) of the Central Sales Tax Act. The legal fiction continues to have effect even in relation to the powers of reassessment contained in the State Tax law, e.g., Section 16 of the Tamil nadu General Sales Tax Act, 1959..... Section 6-A of the Central Sales Tax Act, 1956, as amended provides for a conclusive proof, except on a limited ground. The order of an authority under Section 6-A is conclusive for all practical purposes, and the reopening of an assessment is permissible only on limited grounds, such as fraud, collusion, misrepresentation or suppression of material facts or giving or furnishing of false particulars, since in such cases the order would be vitiated in law. When an order passed in terms of sub-Section (2) of Section 6-A is found to be illegal or void ab initio or otherwise voidable, the assessing authority derives jurisdiction https://hcservices.ecourts.gov.in/hcservices/ to direct reopening of the proceedings and not otherwise. Mere change in the opinion of the assessing authority or to have a relook at the matter would not confer any jurisdiction upon him to get the proceedings reopened. Discovery of new material, although it may form a ground, by itself may not be a ground for reopening the proceedings unless by reason of such discovery it turns out that a jurisdictional error had been committed." 7. The learned counsel appearing on behalf of the petitioner had also relied on a decision made in Ashok Leyland Limited V. Union of India and others [(2007) 5 VST 175 (Mad)], wherein this Court, while setting aside the orders of the Tribunal, had remitted the matter back to the assessing authorities for fresh consideration, as per the law enumerated by the Supreme Court. It was held that on an entire reading of the assessment order and the order of the Tribunal confirming the assessment, it is clear that the authorities have not exercised the jurisdiction and conducted enquiry as enunciated by the Supreme Court in 2004 STC Vol.134 473. But certain facts, which are otherwise clinching the issue, have been unearthed by the assessing authorities, which cannot be lost sight of by the Court. Hence, the claim of the revenue cannot be brushed aside in total by following the Judgement of the Supreme Court, as contended by the assessee. The assessing officer has to be given another opportunity to re-do the exercise, as per the exposition of law on this subject by the Supreme Court, in 2004 STC Vol.134 473. Furthermore, the decision of the Supreme Court, in 2004 STC Vol.134 473, was not available when the exercise has been done, i.e., the re-assessment and the issuance of notices in respect of the assessment for the assessment years 1986-87 and 1987-88 and the further proceedings of taking up the matter up to the Tribunal. In order to safeguard the interest of the Revenue and balance the hardship stated to be caused to the assessees, the matter has to be remitted back to the assessing authorities to re-do the exercise after giving due opportunity to the petitioner. 8. The learned counsel has further submitted that the issues involved in the present writ petition have to be decided by the third respondent assessing authority, in the light of the order passed by the Supreme Court in 2004 STC Vol.134 473, since the said order was not available for consideration when the impugned orders were passed. The matter has to be remitted back to the third respondent assessing authority, after setting aside the impugned order and this Court may direct the third respondent assessing authority to dispose of the matter in the light of the principles and parameters laid down in the decision of the Supreme Court. There is no dispute that the impugned orders have been https://hcservices.ecourts.gov.in/hcservices/ passed before the law was laid down by the Supreme Court in the case cited above. 9. The learned counsel appearing on behalf of the respondents has no serious objection for this Court passing such an order. 10. In view of the submissions made by the learned counsel appearing on behalf of the petitioner, the impugned order is set aside and the matter is remitted back to the third respondent authority for the passing of fresh orders after a fresh assessment, in the light of the decision of the Supreme court, reported in 2004 STC Vol.134 473, and in accordance with law, expeditiously. The writ petition is disposed of with the above directions. No costs. csh Sd/- Assistant Registrar / True Copy / Sub. Assistant Registrar To 1. The Secretary The State of Tamil Nadu rep. by Commercial Taxes and Religious Endowments Department, Fort St. George, Chennai-600 009. 2.The Secretary, Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, City Civil Court Buildings, Chennai-600 104. 3. The Commercial Tax Offier, Royapettah-I, Assessment Circle, (Formerly, Dy.Commercial Tax Officer, Royapettah-I, Assessment Circle), 46, Greenways Road, Chennai-600 028. bs (co) dv/14.11. Writ Petition No.6102 of 2001 https://hcservices.ecourts.gov.in/hcservices/