1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR Revision Petitions by Assessee Revision Petitions by Revenue 1. S.B. Sales Tax Revision Petition No.15/2005 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 1. S.B. Sales Tax Revision Petition No.66/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 2. S.B. Sales Tax Revision Petition No.16/2005 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 2. S.B. Sales Tax Revision Petition No.68/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 3. S.B. Sales Tax Revision Petition No.17/2005 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 3. S.B. Sales Tax Revision Petition No.70/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 4. S.B. Sales Tax Revision Petition No.18/2005 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 4. S.B. Sales Tax Revision Petition No.71/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 5. S.B. Sales Tax Revision Petition No.19/2005 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 5. S.B. Sales Tax Revision Petition No.72/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 2 Revision Petitions by Assessee Revision Petitions by Revenue 6. S.B. Sales Tax Revision Petition No.91/2006 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 6. S.B. Sales Tax Revision Petition No.73/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 7. S.B. Sales Tax Revision Petition No.125/2006 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 7. S.B. Sales Tax Revision Petition No.74/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 8. S.B. Sales Tax Revision Petition No.126/2006 Steel Authority of India Ltd. Vs. Asstt. Commissioner, Jaipur 8. S.B. Sales Tax Revision Petition No.75/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. 9. S.B. Sales Tax Revision Petition No.77/2005 A.C.T.O., Jaipur Vs. Steel Authority of India Ltd. REVISION PETITIONS UNDER SECTION 86 OF THE RAJASTHAN SALES TAX ACT, 1994 AGAINST THE ORDER DATED 5.10.2004 PASSED BY THE RAJASTHAN TAX BOARD, AJMER. Date of Judgment :: August, 2007 REPORTABLE 3 HON'BLE DR. VINEET KOTHARI, J. Mr. Davendra Kumar) Mr. Dinesh Kumar ), for the petitioner-assessee. Mr. Vinay Goyal, for the respondent-revenue. All these revision petitions filed by the assessee or by the revenue arise out of a common order of the Rajasthan Tax Board, Ajmer deciding cross appeals before it by order dated 5.10.2004, therefore, the same are being disposed of by this common judgment. 2. The question of law, which arises in the present matter as to whether the sale of TOR Steel manufactured on job work basis by M/s. Kamdhenu Ispat Limited, Bhiwadi for Steel Authority of India Limited ('SAIL', for short) in the State of Rajasthan to various customers of Steel Authority of India Limited situated outside the State of Rajasthan amounts to inter- state sale by SAIL or not? 3. The said question of law for the assessment years 1998-99, 1999-2000, 2000-2001, 2001-2002 and 2002-2003 arises in the following brief conspectus of the facts. The Steel 4 Authority of India Limited is a Government of India's undertaking, which has its registered office and head office at Calcutta. It has various branches all over the country and Branches involved in the present matter are its sales and Branch office at Delhi and Sales and Branch offices at Jaipur and Kota registered within the State of Rajasthan under the provisions of Rajasthan Sales Tax Act and the Central Sales Tax Act. The Steel Authority of India Limited (for short 'SAIL') entered into a contract with M/s. Kamdhenu Ispat Limited, Bhiwadi situated within the State of Rajasthan to manufacture for it by conversion of re-rollable material like billets, blooms and slabs into finished product, i.e., TOR Steel. The said conversion or manufacturing activities took place at manufacturing facility of M/s. Kamdhenu Ispat Limited, Bhiwadi. The said agreement, which has been reproduced by the Deputy Commissioner (Appeals) in his order dated 27.5.2003 would be extracted herein below to the extent of relevant clauses. Under the said agreement, the TOR Steel manufactured by M/s. Kamdhenu Ispat Limited, Bhiwadi are sent to Delhi address of yard of M/s. Kamdhenu Ispact Limited, Bhiwadi or directly to the customers of SAIL as per the instructions of Delhi Branch of SAIL with their proforma invoices, 5 which are prepared on authority by SAIL by M/s. Kamdhenu Ispat Limited, Bhiwadi itself. The said goods manufactured by M/s. Kamdhenu Ispat Limited, Bhiwadi are subject to inspection and quality control by SAIL and M/s. Kamdhenu Ispat Limited, Bhiwadi is paid conversion charges by SAIL. On a survey made by the assessing authority, namely, C.T.O., Anti Evasion, Zone-I, Jaipur on 4.5.2002 at the business place of M/s. Kamdhenu Ispat Limited, Bhiwadi, the said assessing authority found that finished goods were being dispatched by the said Company as per the instructions of SAIL to different customers of SAIL like Delhi Development Authority, Delhi, Municipal Corporation, Delhi and other customers and, therefore, the assessing authority found that since no C.S.T. was being paid by the said assessee SAIL to the State of Rajasthan, which was, according to him, the appropriate State as per the provisions of C.S.T. Act, 1956, a case of evasion of goods was made out against the assessee authority and after conducting further survey at the Jaipur Branch of SAIL and also Delhi Office of SAIL, the said assessing authority passed the impugned assessment order on 18.09.2002 imposing C.S.T. @ 8%, interest and also penalty under Section 65 of the Act for all the aforesaid assessment years. 6 4. The assessee carried the matter to the first appellate authority, who vide his order dated 27.5.2003 partly allowed the appeals of the assessee and while maintaining the imposition of tax and interest holding that the sales in question amounted to inter-state sales under Section 3(a) of the C.S.T. Act, learned Deputy Commissioner (Appeals) set aside the penalty imposed by the assessing authority under Section 65 of the Act. Both the assessee as well as the revenue went up in further appeal before the Rajasthan Tax Board, Ajmer, who disposed of all the appeals by a common order dated 5.10.2004 allowing the assessee's appeals holding that Jaipur Branch of SAIL could not be assessed in respect of the said transactions and directed the assessing authority to proceed against Delhi Branch of SAIL for imposition of tax, if any, and thus, the imposition of the tax, interest and penalty all against Jaipur Branch of SAIL was set aside. The revenue's appeals were also consequently dismissed. The Rectification applications filed by the assessee SAIL before the Tax Board were also rejected by the Tax Board. 5. It is against these orders that both the parties have 7 filed the aforesaid revision petitions before this Court under Section 86 of the Rajasthan Sales Tax Act, 1994. 6. I have heard the learned counsels for the parties at length and perused the record and the judgments cited at the bar. 7. Mr. Davendra Kumar, learned counsel appearing for the assessee submitted at the outset that the assessee was never given proper and reasonable opportunity of hearing in the present matter by the assessing authority and no adverse material collected against the assessee during the course of survey was ever supplied and confronted to the assessee despite specific opportunities asked for the same, nor any opportunity of cross-examination was allowed to it ever. He also submitted that he raised preliminary objections on the question of jurisdiction of C.T.O., Jaipur to proceed against Jaipur Branch of SAIL in the matter, but that question was also not decided by the assessing authority. Without prejudice to his submission on the preliminary issue, he strenuously urged before the Court that sales in question were not inter-state sales made by the assessee from 8 the State of Rajasthan and, therefore, no C.S.T. could be imposed upon the assessee. Without further prejudice to the same, he submitted that in case, even if such sales are held to be inter-state sales, the assessing authority has failed to take into account the various relevant notifications like notification S.No.929 dated 7.3.1994 whereby only 4% C.S.T. could be imposed even where no declaration in Form 'C' or certificate in Form 'D' was submitted. Notification S.No.1141 dated 9.7.1998 (Item No.30), which prescribed rate of tax of iron and steel is @ 4% under Section 5 of the R.S.T. Act and notification S.No.1093 dated 12.3.1997, which prescribed the rate of only 2% on the inter-state sales against the declaration in Form 'C'. He urged that in any case, the assessing authority could not have imposed the C.S.T. @ 8% as was done in the impugned assessment order. He further relied upon the judgment of the Hon'ble Supreme Court in C.S.T., Madhya Pradesh Vs. Minerva Minerals (1970) 25 STC 64 (SC) wherein the Hon'ble Supreme Court while referring to the provisions of C.P. And Berar Sales Tax Act, 1947 held that on an examination of section 2(c), 2(f), 4(1), 8 and 17 of the C.P. and Berar Sales Tax Act, 1947, and rules 7 and 8 and Forms I and II of the Rules framed 9 under section 28 of the Act, it is plain that the certificate of registration is granted to a dealer with reference to the place of business or places of business of the dealer and not with reference to the whole area of the State though for the purpose of determining the liability of the dealer, his turnover in respect of all places of business in the State including those not mentioned in the registration certificate is to be taken into consideration. Therefore, if a registered dealer carries on business in places not disclosed in the registration certificate he will have to be treated as an unregistered dealer vis-a-vis those places. The Hon'ble Supreme Court further held that the respondent, with its principal place of business in Nagpur, which was granted a certificate of registration under the C.P. and Berar Sales Tax Act, 1947, within the then Madhya Pradesh State prior to the reorganization of State in November, 1956, did not continue to be a registered dealer in the new State of Madhya Pradesh after the reorganization in respect of Chhindwara and Wara Seoni which were not shown in the registration certificate as places of business of the respondent, though it carried on business there. 10 8. He further relied upon the various judgments, viz., (i) Union of India and Another Vs. K.G. Khosla & Company Ltd. (1979) 43 STC 457, (ii) Tata Engineering and Locomotive Co. Ltd. Vs. Assistant Commissioner of Commercial Taxes, Jamshedpur and Another (1970) 26 STC 354, (iii) Commissioner of Sales Tax, U.P., Lucknow Vs. Suresh Chand Jain (1988) 70 STC 45 (SC) and State of Tamil Nadu Vs. Cement Distributors Pvt. Ltd. and Others (1975) 36 STC 389 (SC). On the strength of these judgments, he submitted that since there was no pre-existing contract between SAIL and its customers situated outside the State of Rajasthan in pursuance of which the movement of goods took place from the State of Rajasthan to other States, no C.S.T. was applicable and chargeable by the State of Rajasthan. He submitted that in the absence of any registered office of SAIL at Bhiwadi holding registration under R.S.T. Act and C.S.T. Act, no assessment could be framed against the assessee for imposing the C.S.T. on such movement of goods from Bhiwadi to Delhi or any other place outside the State of Rajasthan. He also tried to support his submission by showing certain documents of the transaction or movement of goods that the goods manufactured 11 by M/s. Kamdhenu Ispat Limited, Bhiwadi, in fact, moved to their own stock yard at Delhi and upon issuance of the delivery orders by Delhi Branch Office of SAIL, such goods were dispatched from such yard of M/s. Kamdhenu Ispat Limited at Delhi to other places of customers either in Delhi or outside Delhi upon which appropriate local Delhi sales tax or C.S.T. was paid to the assessing authority of SAIL at Delhi and, therefore, there was no question of any further payment of C.S.T. to the State of Rajasthan. For this proposition, he relied upon the judgment of the Hon'ble Supreme Court in the case of Ashok Leyland Ltd. Vs. Union of India (1997) 105 STC 152 (SC) and Bharat Heavy Electrical Ltd. Vs. Union of India (1996) 4 SCC 230. 9. Per contra, Mr. Vinay Goyal, learned counsel appearing for the revenue heavily relying upon the terms of the contract between the SAIL and M/s. Kamdhenu Ispat Limited, Bhiwadi, urged that the said agreement clearly established that the goods had moved from State of Rajasthan to Delhi and other places outside the State of Rajasthan in pursuance of pre- existing contract between the SAIL and its customers like Delhi Development Authority, Municipal Corporation, Delhi etc. and, 12 therefore, the C.T.O., Jaipur had jurisdiction to assess the sale in respect of such inter-state sales made by it. He relied upon the definition of “dealer” in Section 2(b) of the C.S.T. Act, 1956, which is reproduced hereunder and with particular reference to Explanation 1, and “every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarter whereof is outside that State, shall be deemed to be a dealer for the purpose of this Act”. He submitted that if the inter-state sales are taxable within the State of Rajasthan, even the Branch Office of SAIL at Jaipur could be assessed by the C.T.O., Jaipur as the said Branch clearly fell within the definition of “dealer” according to the aforesaid Explanation 1 of Section 2(b) of the Act. The said definition reads as under:- “Explanation 1 – Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as - (i) a mercantile agent as defined in the Sale of Goods Act, 1930, or (ii) an agent for handling of goods or documents of title relating to goods, or 13 (iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State, shall be deemed to be a dealer for the purposes of this Act”. 10. Mr. Goyal also relied upon the judgment of Bombay High Court in Commissioner of Sales Tax Vs. Indokem Private Limited (1975) 35 STC 433 and submitted that merely because a body corporate having different branches holding different registration certificates did not make them separate dealers and since legal entity was one, the assessee's sales in the present case could be assessed in respect of such inter-state sales made by them. The relevant extract of the said judgment relied upon by him is reproduced hereunder:- “A company incorporated under the Companies Act is a legal entity. In the instant case, the legal entity is Indokem Private Limited and not two legal entities, namely, Indokem Private Limited, head office, and Indokem Private Limited, Ahmedabad branch office. Both in respect of the transactions effected by the head office and the transactions effected by the branch office, the tax which is assessed is assessed against the respondent-company, namely, Indokem Private Limited. There will, however, be two separate 14 assessment orders, one in respect of the transactions of the head office and the other in respect of the transactions of the branch office. The tax which will have to be paid under these assessment orders will, however, be paid only by one legal entity, namely, Indokem Private Limited. The amount of tax which will be paid under both these assessment orders will find place only in one balance-sheet, namely, the balance-sheet of the Indokem Private Limited. Any provision for taxation which has to be made in the balance-sheet in view of pending assessments will be only made in one balance-sheet, namely, the balance-sheet of Indokem Private Limited. Therefore, in this case the taxpayer is the Indokem Private Limited. It is Indokem Private Limited which had purchased these goods and had paid sales tax on it to its own vendors. Instead of keeping these goods in Bombay, Indokem Private Limited kept them in stock in Ahmedabad and they were in stock Ahmadabad on “the appointed day”, namely, 1st January, 1960. Thereafter within a period of three months they were sold by Indokem Private Limited and the sales were effected in Ahmadabad and the goods, being situate in Ahmadabad, delivery thereof was given from Ahmadabad. This did not, however, make these sales the sales of a separate registered dealer. They continued to be the goods held in stock by Indokem Private Limited and the sales which were effected at Ahmedabad were the sale of Indokem Private Limited and Indokem Private Limited was entitled to claim a set-off in respect thereof, and we answer the question in the affirmative”. 11. On the issue of grant of reasonable and adequate opportunity of hearing, Mr. Goyal, learned counsel for the revenue, produced the relevant record of the assessing authority 15 before this Court and submitted that the assessee was given reasonable opportunity of hearing and was also supplied with the copy of the statement of one Mr. Anurag Sharma, Branch Manager of Delhi Branch of SAIL, which was relied upon by the assessing authority and, therefore, it cannot be said that the assessee was not given reasonable opportunity of hearing. He relied upon the terms of the agreement dated 30.08.2001 of SAIL Delhi and M/s. Kamdhenu Ispat Limited, Bhiwadi. The relevant extracts of which are reproduced hereunder:- “STEEL AUTHORITY OF INDIA LIMITED (A Government of India Enterprise) Branch Sales Offices Jeevan Deep Building, 10, Sansad Marg, New Delhi – 110001 Phones : 3361596, 3361950-51 Fax : 3732602 Dated : 30.8.01 M/s. Kamdhenu Ispat Ltd. A-1114, RIICO Industrial Area, Phase-III, Bhiwadi, Rajasthan – 301 019. SUB : CONVERSION OF REROLLABLES INTO FINISHED STEEL. 16 REF : YOUR LETTER DATED Dear Sir, 1. We are pleased to inform you that we are agreeable to extend our Agreement with you for conversion of our re-rollables supplied to you from time to time into TOR Steel situated specification as indicated by us. 2. Conversion means re-rolling of Semis (Billets, Blooms, and Slabs) into finished products (i.e. TOR Steel) etc. 3. Conversion charges includes the cost of transportation of re-rollables from SAIL stockyard to your premises, conversion costs, your profit margin, size and other extras twisting charges, bending bundling, metal tagging, weighing, testing, inspection, loading into our customers, transport(s) in your premises and any other services to be rendered to us as well as to our customers are fixed as agreed by you. In addition to these conversion charges the differential Excise Duty would be reimbursed to you on the basis of Excise Duty deposited by you on Finished products and credit of Excise Duty availed by you on semis supplied by us. The reimbursement would be further subject to Excise Law in force. 4. The terms and conditions are as follows: 4.1 SUPPLY OF RE-ROLLABLES: a) .......... b) .......... c) .......... 17 d) .......... e) .......... f) .......... g) .......... h) .......... i) On verification of the stockholding at your premises, our Branch Sales Office will issue delivery order for the supply of re-rollables which would be final and conclusive. j) .......... k) .......... 5. SUPPLY OF CONVERTED STEEL ITEMS : a) We shall be issuing delivery orders on you for supply of finished materials to our allottee/customer Finished steel items such as TOR steel etc. conforming to relevant BIS specification would be supplied by you in standard lengths or in the length separately indicated by us without any shorts. These should have rolling tolerances as per IS 1852. Any deviation in sizes, qualities of TOR steel would be rejected and such rejections shall be on your account. b) No material should be delivered to our customers without proper testing and inspection and must conform to the stipulated specifications. Regular inspection shall be carried out by the SAIL team. Upon specific requests from customers, inspection by outside agencies shall be carried out as and when required and you shall finish all necessary details as required by them. 18 c) .......... d) .......... e) .......... f) .......... g) .......... h) .......... i) Delivery Challan cum Invoices would be raised on our proforma and collected from our Branch Sales Office against proper authorization letter. j) You would keep delivery order register indicating there in our delivery order (s) number and date, names and addresses of our customers, size, quality and quantity of materials indicated on the delivery orders, as also the size, quantity and quality of materials actually delivered to our allottee(s) against specific challan number and date. k) .......... l) For every delivery to our customers, you would raise four copies of invoices. The original should be handed over to our customer, duplicate copy of the transporter of finished goods, third copy shall be sent to the excise authority with whom you are registered and the fourth copy shall be sent to our Branch Sales Office. Any extra copies made, shall clearly bear the words “EXTRA COPY NOT TO BE USED FOR MODVAT”. Every invoice should clearly indicate the amount of excise duty paid. Every invoice must invariably bear your signature or that of your duly authorized representative (for which you will attest the 19 signature) as also the signature of the authorized representative of our customer. The details of the invoice should be entered on the reverse side of the delivery order immediately on each delivery. m) .......... n) .......... o) .......... p) .......... q) .......... 6. GENERAL : a) .......... b) .......... c) .......... d) .......... e) .......... f) .......... 8. SAIL would endeavour to provide you orders received directly with us for finished products. It would be your responsibility to complete the order against DO issued by us and Semis supplied there against within the time schedule specified. Any delays in completion of order and liabilities there against due to either delay in your lifting of Semis or supply of finished products would be to your account. 9. You are requested to peruse carefully the above terms and conditions, and, if accepted, please 20 return one copy of this letter duly signed by you to enable us to commence the arrangement stipulated in this Agreement. 10. Disputes, if any, would be subject to Arbitration under the relevant Indian Arbitration Act(s). Thanking you, Yours faithfully, For Steel Authority of India Ltd. Sd/- (SUMITA DUTTA) BRANCH MANAGER/LP. Accepted. Signature of the party with date Full name and address of the party Seal CC: Associate Finance Branch Sales Office”. 12. Having heard learned counsels for the parties and given thoughtful consideration to the material before this Court, since position of law is clear that inter-state sale will take place only if the goods moved from one State to another in pursuance of pre-existing contract, this Court is of the opinion that since the burden of proof which lies upon the revenue to establish that such a taxable event of inter-state sale has taken place, has not been sufficiently discharged in the present case, the case 21 deserves to be remanded back to the assessing authority. 13. The Hon'ble Supreme Court in K.G. Khosla and Co. Ltd.'s case (supra) clearly held :- (i) that if a contract of a sale contains a stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-state sale. But for the purposes of section 3(a) of the Act it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A