Case: Bharat Heavy Electrical Limited Etc Vs. Union of India and Others Etc

Central Sales Tax is also included in those invoices. The certificates and details regarding payment of C.S.T. fro m time to time by Trichy unit in regard to the despatches from Hyderabad are also filed." * 14. The High Court has also referred to another contract entered into by BHEL with NTPC for setting up a super-thermal power project at Farakka, West Bengal. In the case of this work, it appears that no one unit of BHEL is designated as the executing unit. The manufacture of machinery etc. appears to have been distributed among various units. The factual position in t his behalf is stated in the following words by the Court: "...... allocation of responsibility was in the nature of an internal arrangement made by the Head Office of the petitioner. But, the reasonable presumption that should be drawn in the light of correspondence and despatch documents, that NTPC must be well aware of the division of responsibility as regards S.G. and T.G. packages between the various units. The documents relating to despatch of Boiler/Steam Generator equipment such as Bowl Mills by Hyderabad unit as per the request of the Trichy Unit are filed. They include loading adviced packing list, d ebit note raised by the Hyderabad unit on Trichy unit and the invoice raised by Trichy unit on NTPC which covers the components/equipment sent by Hyderabad unit directly to Farakka. The name of the consignee as per the Railway Receipt is Chief Erection Manager, NTPC, Farakka and the freight is pre-paid. The certificate regarding payment of CST confirms the payment of CST on the invoice value by the Trichy unit in respect of the components despatched by Hyderabad unit." * 15. Coming hack. to the findings recorded by the Andhra Pradesh Tribunals it held, so far as the parts and components sent to Tiruchi that they do not constitute inter-State sales inasmuch as there was an interruption of the movement of the said parts/components and more particularly because the said parts/components lost their identity by incorporation into the main system before they were despatched by the executing unit to the work-site. This part of the Tribunals Order has become finals not having been questioned by the State of Andhra Pradesh. So far as the parts/components sent by the Hyderabad unit directly to the work-site at Angul or for that matter, to Farakka in West Bengal are concerned the Tribunal has taken the view that they do not constitute inter-State sales and that Central Rules Tax is leviable thereon in the State of Andhra Pradesh. This conclusio n of the Tribunal has been affirmed by the High Courts though on a some what different reasoning. The contention urged by Sri V.R.Reddy, learned Additional Solicitor General appearing for BHEL, is that even the direct despatches [i.e. p arts/components/material sent by the Hyderabad unit directly to work-site at Angul] do not constitute inter-State sales and that they are not taxable in the State of Andhra Pradesh. His submission is that in principle, there is no difference between the material sent to Tiruchi for being incorporated and the material sent directly to Angul because both of them get ultimately incorporated into the main equipment/boiler system which was being manufactured by the Tiruchi unit, which happened to be the executing unit for the Angul project. be find it difficult to agree with the learned Additional Solicitor General in the light of the factual position set out hereinabove. The parts/components, i.e., the goods in question, did move from the State of Andhra Pradesh to the State of Orissa - or West Bengal, as the case may be and the said movement is occasioned by the supply contract entered into by BHEL which is in truth a contract of sale. The manner in which and the documentation under which these goods were sent to Angul - in particular, Clause 3.3.0 of the Supply Contract do clearly establish that it was not a case of branch transfer but one of sale of the said goods to NALCO, pursuant t o the supply contract.Further, because the movement of the said goods has commenced in the State of Andhra Pradesh, it is in the State of Andhra Pradesh that the Central Sales Tax is leviable according to Section 9(1) of the Act. We the refore, agree with the view taken by the Andhra Pradesh High Court that in the facts and circumstances concerning NALCO and NTPC [Farakka] contracts and the terms thereof, the direct despatch of goods by the Hyderabad unit to Angul or Farakka constitutes an inter-State sale with in the leaning of Section 3(a) and that tax thereon is leviable in the State of Andhra Pradesh according to Section 9(1) of the Act.16. The Andhra Pradesh Tribunal and High Court have stated that there are as many as forty eight contracts during the relevant assessment years and that though the contracts and other documents relating to these contracts have not been filed or have not been filed in full, the parties before them did not dispute that "the salient features of the contracts and the pattern of transactions ...are substantially similar to the two contracts, i.e., NALCO and NTPC contracts." The correctness of this statement has not been challenged by either party before us.17. So far as Civil Appeals Nos.5362-68 of 1996 are concerned, the issues raised therein are identical to the issues raised in Civil Appeals Nos.5369-75 of 1996 except the direction asked for by BHEL far adjustment of tax amounts between the concerned States in such a manner that appropriate tax is collected in the State wherein it is lawfully leviable and the State which is not entitled to collect the tax but has yet collected it unlawfully, refunds the same to BHEL o r sends it to the State wherein it is lawfully due and payable. We see no valid objection to making such a direction. In fact, such a direction was made by this Court in K.G. Khosla and Company Limited [supra].

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]3. Article 269 specifies the duties and taxes levied and collected by the Government of India but assigned to the States in the manner provided therein.Clause (2) of Article 269 inter alia provides that "the net proceeds in any financial year of any such duty or tax...shall be assigned to the State within which that tax duty or tax is laviable in that year". It is, therefore, extremely important, from the States point of view, in which State is the Central Sales Tax leviablefor it is to that State that the tax so collected ultimately goes back, not with standing the fact that the tax is levied and collected by the CentralCentral Sales Tax Act has not created a machinery of its own to assess and collect the tax levied by it. It has entrusted the job in each State to the machinery created by the State Sales Tax enactment [Section 9(2)]. The Central Sales Tax leviable in that State will be collected by that machinery no doubt for and on behalf of the Central Government, which will, of Course, make it over to that State as contemplated by Article 269. The provision in the Central Sales Tax Act giving effect to the said provision in Article 269(2) of the Constitution is(1) of Section 9, as it stands now.It is thus clear that as originally enacted it was clause (a) in Section 2 and in particular, the Explanation appended thereto which specified the State in which the duty or tax was leviable within the meaning of Article 269(2). By Central Sales Tax (Second Amendment) Act, 1958, the Explanation to clause (a) in Section 2 was omitted with effect from October 1, 1958 and simultaneously Section 9 was substituted.Then again by Central Sales Tax (Amendment) Act, 1969, Section 9 was substituted with retrospective effect. It is this substituted Section 9 which is in force now. Subsection (1) of Section 9 as it stands now has already been set out by us hereinabove. Thus, notwithstanding the legislative changes, the idea has remained the same, viz., that the State from which the goods have moved by reason of the sale is the State in which the Central Sales Tax is leviable, within the meaning of Article 269(2). We must make it clear that what we have said with respect to Section 9 is in the context of clause (a) of Section 3 of the Act which alone falls for consideration in these appeals.Whether a particular sale is aninter-State sale oran inter-State sale isessentially a question offact. Perhaps, it may be more appropriative to say that it is a mixed question of face andfind it difficult to agree with the learned Additional Solicitor General in the light of the factual position set out hereinabove. The parts/components, i.e., the goods in question, did move from the State of Andhra Pradesh to the State of Orissa - or West Bengal, as the case may be and the said movement is occasioned by the supply contract entered into by BHEL which is in truth a contract of sale. The manner in which and the documentation under which these goods were sent to Angul - in particular, Clause 3.3.0 of the Supply Contract do clearly establish that it was not a case of branch transfer but one of sale of the said goods to NALCO, pursuant t o the supply contract.Further, because the movement of the said goods has commenced in the State of Andhra Pradesh, it is in the State of Andhra Pradesh that the Central Sales Tax is leviable according to Section 9(1) of the Act. We the refore, agree with the view taken by the Andhra Pradesh High Court that in the facts and circumstances concerning NALCO and NTPC [Farakka] contracts and the terms thereof, the direct despatch of goods by the Hyderabad unit to Angul or Farakka constitutes an inter-State sale with in the leaning of Section 3(a) and that tax thereon is leviable in the State of Andhra Pradesh according to Section 9(1) of the Act.16. The Andhra Pradesh Tribunal and High Court have stated that there are as many as forty eight contracts during the relevant assessment years and that though the contracts and other documents relating to these contracts have not been filed or have not been filed in full, the parties before them did not dispute that "the salient features of the contracts and the pattern of transactions ...are substantially similar to the two contracts, i.e., NALCO and NTPC contracts." The correctness of this statement has not been challenged by either party before us.17. So far as Civil Appeals Nos.5362-68 of 1996 are concerned, the issues raised therein are identical to the issues raised in Civil Appeals Nos.5369-75 of 1996 except the direction asked for by BHEL far adjustment of tax amounts between the concerned States in such a manner that appropriate tax is collected in the State wherein it is lawfully leviable and the State which is not entitled to collect the tax but has yet collected it unlawfully, refunds the same to BHEL o r sends it to the State wherein it is lawfully due and payable. We see no valid objection to making such a direction. In fact, such a direction was made by this Court in K.G. Khosla and Company Limited [supra].We find it difficult to appreciate the reasoning and approach of the Tribunal. The first and main ground upon which it has been held that it is notan inter-State sale isthat the goods sent [by rail or road] do not answer the description of the goods mentioned in the annexure to the LOI/supply contract. Obviously, the annexure mentions only the major items of machinery and equipment. These major items cannot be transported as such; transport has to be effected in sections and parts and assembled at the spot. For that reason, it cannot be said that the goods transported are not the goods agreed to be supplied. It is nobodys case that BHEL supplied some other goods than the goods agreed upon. Having thus erroneously excluded Section 3 of the Central Sales Tax Act, the Tribunal went to Section 4 and held that in the circumstances, the sales must be held to have taken place inside the State of Orissa. The discussion about endorsement of goods by NALCO to BHEL in Orissa and so on is rather ambiguous. Indeed, we need not pur sue this discussion further for the reason that both Sri Mohanty and Sri V.A.Mohta, appearing for the State of Orissa, stated frankly that they cannot support the reasoning of the Tribunal.There can be no dispute about the proposition that the question whether a particular sale is an inter-Statesale or anintra-State sale isessentially a question offact. It must be said, at the same time, that it is not a pure question of fact inasmuch as the fact of a given case have to be examined in the light of the provisions contained in Section 3 of the Central Sales Tax Act. The main reason for entertaining the present appeals under Article 136 of the Constitution is the grievance of BHEL that the same transaction of sale is being subjected not only to Central Sales Tax more than one State that the Orissa State is treating the very same transaction of sale as an intras-State sale and levying the Orissa State Sales Tax thereon. The grievance cannot be said to be not justified. The dispute is not only between BHEL and the States, it is also, in a sense, a dispute between the States interse.