CENTRAL SALES TAX APPELLATE AUTHORITY NEW DELHI

Transcription

1 CENTRAL SALES TAX APPELLATE AUTHORITY NEW DELHI 17 th Day of June, 2009 P R E S E N T Mr.Justice P.V.Reddi (Chairman) Mr.A.Sinha (Member) Mr.K.Jose Cyriac (Member) Appeal Nos /CST/2008 Name & address of : M/s.Ricoh India Ltd. the appellant A-38, Sector 58, NOIDA Respondents : The Commissioner of Trade Tax, U.P., Lucknow & 10 others Present for the appellant : Mr.N.Venkataraman, Sr.Advocate Mr.Achin Goel, Advocate Mr.Prashanth Agarwal, Sr.Consultant Present for the Respondents : Mr.Aarohi Bhalla, Advocate[for Res.1&2] Mr.Subodh S.Patil, Advocate Mr.Babulal, Dy.Commissioner of Trade Tax, Sector 9, Noida O R D E R [By Hon ble Chairman] The appellant which has its registered office at Mumbai, is engaged, inter alia, in the business of import and sale of office automation equipments such as photocopiers, faxes, etc. and spare parts. The appellant has a branch office and logistic centre in Noida, U.P. wherein the goods imported from outside India are stocked and thereafter stock-transferred to various branches of the appellant company located all over India. The branches, in turn, 1

2 sell the goods so dispatched and pay the local sales-tax applicable in the concerned States. The appellant is a registered dealer under the U.P. Trade Tax Act as well as Central Sales-tax Act (hereinafter referred to as CST Act ). 2. The Special Investigation Wing of the U.P. Sales-tax Department inspected the business premises of the appellant on 21 st November, On examination of some of the documents relating to the years , and , it was found that the branch at Noida dispatched the goods to other branches in order to comply with the orders already received by the branches and communicated. The Order Contract Number (OCN) was found noted on the stock transfer challans relating to machines. By the date of inspection and survey, the assessment orders under the CST Act for the year , and have already been passed accepting the appellant s claim of stock transfer. No CST was, therefore, demanded. However, these assessments were reopened on the basis of inspection report received from the investigating team and the revised assessment orders were passed on 30 th /31 st March 2005 for the said three years treating the stock transfers as inter-state sales and demanding CST thereon. Such orders were passed in exercise of powers under Section 9(2) read with S.21 of U.P.Trade Tax Act. 2

3 Against these orders, the appellant preferred appeals. The Joint Commissioner (Appeals-I), Trade Tax, Noida, by his order dated remanded the cases to the assessing officer for a fresh survey and inspection and to reframe the assessments in the light of the observations made in the order. The appellate authority while observing that the resort to re-assessment was justified, held that there was no comprehensive inquiry in relation to the spareparts. Hence, the cases were remanded. Thereafter, fresh assessment orders under CST Act were passed on 21 st September, 2006 reiterating the earlier finding of inter-state sale under section 3(a) of the CST Act and subjecting the value of stock transfers to Central sales tax. However, on a part of the turnover for the first two years, the tax rate on electronic office equipment was reduced. As against the fresh re-assessment orders passed after remand, appeals were preferred. The appellate authority, namely JC(Appeals) Noida dismissed the same by a common order dated 26 th March, Aggrieved by the rejection of appeals, the appellant filed further appeals to the Trade Tax Tribunal, Noida Bench. These appeals too met with the same fate. The learned Members of the Tribunal rejected the appeals by a common order dated 28 th July, It is against this order of the Tribunal that 3

4 the present appeals have been filed under section 20 of the CST Act. 3. It may be stated that before preferring these appeals, the appellant filed Tax Revision Cases in the High Court of Allahabad. However, on being apprised of the proper remedy available under the amended provisions of the CST Act, the appellant took the steps to prefer the appeals together with a petition for condonation of delay. The delay of 166 days was condoned after putting the respondents on notice. Thereafter, at the instance of the appellant, the tax revision cases were dismissed as withdrawn. During the pendency of the Revision cases in the High Court for a short period, stay was granted on condition of furnishing bank guarantee. Soon after the revision petitions were withdrawn, the department took steps to encash the bank guarantees. The stay order granted by this Authority on 5/12/2008 thus became infructuous. 4. The main contention of the appellant before the Tribunal as well as this Authority has been that it has discharged the burden of proof by filing the F forms as required by Section 6A(1) of the CST Act and the said F forms have been accepted by the assessing authority after due inquiry. The deeming fiction under sub-section (2) of Section 6A therefore applies and the movement of goods 4

5 from Noida (UP) to other states shall be deemed to have been occasioned otherwise than as a result of sale. Once the F forms are so accepted and an assessment has been made excluding the stock transfers, it is legally impermissible to reopen the assessment on a change of opinion or on finding some new material except on the grounds of fraud and misrepresentation, as ruled by the Supreme Court in the case of Ashok Leyland Ltd. vs. Tamil Nadu *. It is pleaded that it has not been found nor established that the appellant had committed any fraud or misrepresentation. Therefore, it is submitted that the correctness of the assessment originally made cannot be called in question by initiating reassessment or revision proceedings under the State Act. It is also submitted that there is no clinching proof to the effect that the goods moved to fulfill specific prior orders received from the out of state customers and on the basis of few documents noticed at the time of survey, the reassessment has been made without examining all the transactions and without even considering the distinguishing features in regard to spare parts which forms the major part of the turnover. In the course of arguments, the learned counsel for the appellant concentrated mainly on the point that the impugned assessments cannot be sustained in view of the law * 2004, 3 SCC 1; 134 STC 473 5

6 categorically laid down by Ashok Leyland case. It must however be mentioned that no specific arguments were advanced on the merits i.e. whether on the analysis of the material on record, the alleged stock transfers can be construed to be inter-state sales. However, it was broadly contended that the goods were despatched in the routine course of business to the branches on the basis of the estimated requirements and the branches sold the goods in the respective states, realized the sale price and paid the local sales tax in each state. The appellant cannot therefore be called upon to pay the tax twice over on the same transactions, it is contended. 5. The main argument of the learned counsel for the respondent (UP State) was that the delay in filing the appeals beyond 150 days cannot be condoned in view of the bar contained in the proviso to sub-section(3) of Section 20 of CST Act. For filing an appeal, section 20(3) prescribes the time limit of 90 days from the date of service of the order appealed against. However, the proviso to sub-section (3) provides that the Authority may entertain an appeal after the expiry of the said period of 90 days, but not later than 150 days from the date of service of the order, if it is satisfied that the appellant was prevented by sufficient cause for filing the appeal. In the present case, the appeal was preferred 166 days after the date of service of the order. As it falls beyond the outer 6

7 limit prescribed by the proviso to section 23 of the CST Act, it is contended that this Authority has no power to condone the delay and to decide the appeal on merits. In other words, it is submitted that the order passed earlier condoning the delay is not valid in the eye of law. The learned counsel for the respondent-state has placed reliance on a recent decision of Supreme Court in M/s Singh Enterprises v. Commissioner of Central Excise, Jamshedpur * and the decision of Bombay High Court in the case of Commissioner of Central Excise, Pune II v. Shruti Colorants Ltd. ** which held that the limitation under section 35G of Central Excise Act cannot be extended in the absence of specific provision permitting condonation of delay. Another decision on the point is that of Commissioner of ST vs. Parson Tools ###. 6. In reply to the above plea, the learned counsel for the appellant, apart from contending that this objection cannot be raised at this belated stage, has invoked Section 29(2) read with Sections 14(2) and 5 of the Limitation Act and submitted that the period between the date of filing the revision cases in the High Court and their pendency in the High Court ought to be legitimately excluded. It is contended that sub-section(3) of section 20 of the * [2007 (14) Scale 610: 2008(221) ELT 163(SC)]. ** 233 ELT 171 ### (1976) 35 STC 413 7

8 CST Act does not expressly exclude the application of Section 14 of the Limitation Act. Reliance has been placed on a three Judge Bench decision of the Supreme Court in Commissioner of Sales Tax, UP v. Madanlal Das & Sons ***, and another decision of the Supreme Court in Mangu Ram v/s Delhi Municipality **** as well as a Division Bench decision of Punjab and Haryana High Court in Vijay Brothers v. Union of India *****. Further, it is pointed out that the Supreme Court and the High Courts have in many cases condoned the delay on the ground of bona fide prosecution of a matter in a wrong forum notwithstanding the fact that the statute prescribes an upper limit for the condonation of delay. It is submitted that the appellant was not remiss in taking the legal steps to question the order of the Tribunal as it filed the revisions in the High Court promptly under a mistaken belief as to the correct remedy available. 7. The issue whether Section 14(2) or 5 of the Limitation Act can be pressed into service in construing the proviso to Section 20(3) of the CST Act is not free from difficulty. The point is at least debatable. We would have decided the objection raised by the Revenue one way or the other if it had been raised at the *** 1976, 38 STC 543 **** AIR 1976 SC 105 ***** 76 STC 375 8

9 appropriate stage and at the earliest opportunity. The effect of upholding such an objection at this stage would result in immense prejudice to the appellant who had withdrawn the revision petitions` in the High Court in order to pursue the appeals before this Authority. Specifically, the department was put on notice before passing orders on the petition for condonation of delay of 166 days. On the date of first hearing of that application, no one was present on behalf of the respondents 1 and 2. When we pointed out at that stage to the appellant that he cannot pursue two parallel remedies, the appellant took steps to file an application to withdraw the revision petitions filed in the High Court. In fact the revision may not lie in view of the specific provision in section 20 of the CST Act starting with a non-obstante clause. On the date of next hearing, the official of the department was present and the petition for condonation of delay was not opposed on the ground now put forward. No counter was filed. The delay was condoned by the order of this Authority on The revision was dismissed as withdrawn by the Allahabad High Court on For the first time in the counter filed on , i.e. on the verge of hearing of the appeal on merits an objection was taken that the delay could not have been condoned by reason of the proviso to section 20(3) of CST Act. The said objection was reiterated in the 9

10 course of arguments by the learned counsel for Revenue. If such objection had been raised before or in the course of hearing of the condonation delay petition, the appellant would have at least approached the High Court to make suitable observations for pursuing the appeal before this Authority, notwithstanding the delay caused by reason of choosing a wrong forum. The appellant who took prompt steps to assail the orders of the Trade Tax Tribunal by filing revisions in the High Court, apparently not being aware of the new remedy provided by the CST (Amendment) Act, should not be made remediless at this point of time. The appellant refrained from raising the objection as to limitation and thus paved the way for hearing on merits. It is, therefore, unjust and improper to take note of the objection belatedly raised by the appellant and to review the order condoning the delay. 8. Before proceeding to consider the rival contentions on merits, we shall refer to Sections 3 and 6A of CST Act and highlight the interpretation placed on them by the Supreme Court. Section 3. A sale or purchase of goods shall be deemed to take place in the course of inter-state trade or commerce if the sale or purchase (a) occasions the movement of goods from one State to another; or 10

11 (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Section 6-A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale. (1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods [and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale]. (2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained 11

12 in the declaration furnished by a dealer under sub-section (1) are true he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration related shall be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale. 8.1 The scope of section 3 of the CST Act was succinctly stated by the Supreme Court in Tara Iron & Steel case * in the following words: In our view, therefore, within Clause (b) of Section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto: Clause (a) of Section 3 covers sales, other than those included in Clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State. We are concerned here with Section 3(a) and not (b). We may mention that in a recent case of A&G Projects and Technologies Ltd. vs. State of Karnataka **, the Supreme Court analyzed the difference between clause (a) & (b) of Section 3 in the following words : * (1960) 11 STC, 655 ** (2009) 2 SCC p

13 The dividing line between sales or purchases under Section 3(a) and those falling under Section 3(b) is that in the former case the movement is under the contract whereas in the latter case the contract comes into existence only after the commencement and before termination of the inter-state movement of the goods. 8.2 In Commissioner of Sales-tax, U.P. vs. Bakhtawarlal Kailash Chand a three-judge Bench of the Supreme Court explained the scope of Section 3(a) in the following words: According to Clause (a) of Section 3, an inter-state sale or purchase is one which occasions the movement of goods from one State to another. In other words, the movement of goods from one State to another must be the necessary incident the necessary consequence of sale or purchase. A case of cause and effect the cause being the sale/purchase and the effect being the movement of the goods to another State. The decision in K.G. Khosla s case [1979] 43 STC 456(SC) explains that to be called an inter-state sale or purchase, it is not necessary that the contract of sale must expressly provide for and/or stipulate the movement of goods from one State to the other; it is enough if such movement of goods is implicit in the contract of sale. If, however, the movement of goods is neither expressly provided for in the contract nor implicit in it, the movement of goods from (1992) 87 STC

14 State to another, - even if one takes place cannot be related to the sale/purchase. In such a case the movement of goods would be unconnected with and independent of the sale/purchase. It would not fall under Section 3(a). To fall thereunder, the sale and the movement of the goods must be parts of the same transaction. 8.3 Now, we shall refer to the relevant passages in Ashok Leyland * case which interpreted Section 6-A(2): 45. When the dealer furnishes the original of form F to its assessing authority, an enquiry is required to be held. Such enquiry is held by the assessing authority himself. He may pass an order on such declaration before the assessment or along with the assessment. Once an order in terms of sub-section (2) of section 6A of the Central Act is passed, the transactions involved therein would go out of the purview of the Central Act. In other words, in relation to such transactions, a finding is arrived at that they are not subjected to the provisions of the Central Sales Tax Act. [para 35 of STC] Then, at para 48 of SCC (para 37 of STC), the statement of law was elaborated as follows: On an analysis of the aforementioned provisions, therefore, the following propositions of law emerge: (i) The initial burden of proof is on the dealer to show that the movement has occasioned by reason of * (2004) 3 SCC 1; 134 STC P 14

15 (ii) transfer of such goods which is otherwise than by reason of sale. The assessee may file a declaration. On a declaration so filed 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 has occasioned otherwise than as a result of sale. Whenever such an order is passed a legal fiction is created. Legal fiction, as is well known, must be given its full effect. At para 53 of SCC (para 41 of STC) it was observed: Once it is held, as we do, that Section 6A of the Central Act provides for a conclusive proof, except on a limited ground, reopening of assessment would not be permissible. The observations at paragraph 113 (para 94 in STC) may also be noticed. mere change in the opinion of the assessing authority or to have a re-look at the matter would not confer any jurisdiction upon him to get the proceedings reopened. Discovery of a new material although may be a ground but that itself may not be a ground for reopening the proceedings unless and until it is found that by reason of such discovery, a jurisdictional error has been committed. In other words, 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 15

16 authority derives jurisdiction to direct reopening of the proceedings and not otherwise. While so holding, the three Judge Bench of the Supreme Court dissented from the view taken in the earlier Ashok Leyland case *. 9. In the present case, the propositions laid down in Ashok Leyland as discernible from the passages extracted above squarely apply. The appellant is entitled to invoke the benefit of deeming fiction and the conclusive proof enacted by section 6A(2). In this context, it is significant to note that the assessing authority at the time of original assessments perused the F-forms filed and other records produced by the dealer and recorded a finding that the F forms were correct and then accepted the appellant s claim of stock transfers. Later on, on the basis of additional material that came to light, the assessments were reopened and the claim was disallowed. The alleged stock transfers were held to be inter-state sales. The fact situation in Ashok Leyland was the same. 9.1 The next question is whether the appellant s case falls within one of the exceptions spelt out by the Supreme Court so as to afford legal justification for reopening the assessments. Lack of jurisdiction, fraud and mis-representation including willful suppression of material facts are those exceptions. We do not * (1997) 105 STC 152; (1997) 9SCC 10 16

17 think that any of these situations do exist in the present case. In the course of arguments, there was a faint reference to wilful concealment of material facts in that the purchase orders placed by specific customers on the branches and assigning the OCNs to such orders was not brought to the notice of the assessing officer. 9.2 There is no legal or factual basis for such argument. The first and foremost point to be noticed is that there was no whisper either in the re-assessment orders or the appellate orders that the appellant was guilty of fraud or mis-representation or that the applicant deliberately withheld the production of material documents before the assessing authority. Even while distinguishing Ashok Leyland case, it was never found that the appellant s case fell within one of the exceptions specified in that case. Secondly, the information which led to the initiation of reassessment proceedings was based on the stock transfer challans and the notings therein. They are all documents kept in regular course of business. The re-assessment was not based on any material clandestinely kept in the custody of the appellant in furtherance of any design to avoid tax. The original assessment orders show that the books of accounts and other relevant records including stock registers were produced before the assessing officer. May be, by reason of inadvertence or lack of 17

18 comprehensive scrutiny, the assessable turnover escaped assessment to tax. But, that does not give rise to the inference of fraud etc. It is not the case of the department that the assessee dodged to produce the records called for by the original assessing authority who accepted the Forms. Above all, we find that the assessee does not stand to gain by manipulating the inter-state sales as local sales. CST rate will not be higher if C Forms are obtained from the registered dealers. We are, therefore of the view that the appellant s case cannot be brought within the exceptions laid down in Ashok Leyland case for reopening the assessments. A similar view was taken by this Authority in Steel Authority of India Ltd. vs. Secretary, Finance, Govt. of Karnataka *. 10. The Trade Tax Tribunal observed thus in the concluding paras: On examination of books of accounts and copies of challans produced by the appellant company for all the three years, it is proved that for the purpose of purchase orders placed by the particular customer, the O.C.N. (Order Control No.) is mentioned on the relevant challan at the time of dispatch of machine in which machine no. is also mentioned and year-wise details thereof have been given by the 1 st Appellate Authority in its order. At the time of survey dated , the procedure adopted by the appellant company came to notice whereupon * (2007), 10 VST,

19 action for tax assessment under section 21(2) was initiated for the years 98-99, and under the rules. The ld. 1 st Appellate Authority after discussing all the facts has clearly stated that the referred judgment of Hon ble Supreme Court in the case of M/s Ashok Leyland Ltd. is not applicable in the present case. In fact, principle laid down in judgments of the Hon ble Supreme Court in the case of M/s. English Electric Company (supra) and M/s. Sahney Steel and Press works (supra) are applicable in the appeals in question and on checking the challans of all the three years produced before the Tax Assessment Officer, it has been proved that actually consequent to purchase order received from the specific particular customer, movement of goods had taken place from one State to another State and appropriation of the concerned machines for the specific customer had been done at Noida itself and the depot/branch was not authorized to give/supply the same to any other customer. In the light of the facts and circumstances stated hereinabove, in our opinion, the stock transfer claimed by the appellant company during the relevant years was not liable to be accepted In holding so, the Tribunal, in our view, virtually ignored the law laid down in Ashok Leyland case by the highest Court. The Tribunal was merely content with making a cryptic observation that after discussing all the facts, the first appellate authority has clearly stated that the judgment of Hon ble Supreme Court in the case of Ashok Leyland is not applicable to the present case. The first 19

20 appellate authority virtually brushed aside the said judgment by merely stating that the facts relating to the appellant s case were different from the facts of Ashok Leyland case. What is the difference in facts that makes the principle inapplicable is not spelt out. The cases referred to by the Tribunal viz. English Electric Co *. and Sahney Steel and Press Works ** dealt with the aspect whether on the facts of the case, the inter-state movement of goods was the result of covenant or incident of the contract of sale as envisaged by section 3(a) of the CST Act. It is also worthy of note that in those cases, there was prior contract for the manufacture and supply of goods according to the specifications given. The interpretation of section 6A and the manner of discharging the burden of proof did not come up for consideration in those cases. 11. As already stated, arguments were not addressed before us specifically in detail touching on the factual aspects, i.e., whether the finding of inter-state sale is justified on facts tested in the light of legal position expounded by the Supreme Court. It was only contended broadly, without going into the specifics, that the stock transfers were effected to the branches on the basis of estimated requirements, and the branches effected the sales on receipt of * (1976), 38 STC 475 ** (1986), 60 STC

21 goods in the usual course of business. In this context, we may briefly refer to the findings of the assessing authority which have been affirmed in appeal. As far as machines are concerned, the Order Control Numbers were found noted on the stock transfer challans. The OCNs are referable to the orders placed by the specific customers and forwarded by the branches. It is not contended otherwise. That means the inter-state movement of goods was triggered by the contracts of sale already on hand and the mere fact that the sales were routed through the branches does not detract from the character of inter-state sales. The instances of such branch transfers of where OCNs were noted on the relevant dispatch documents are furnished in the assessment order for each of the relevant years. The appellant has not come forward with any evidence at any stage to establish that it happened only in the case of a few transactions. That is not the case set up by the appellant at any point of time Coming to the spare parts, it appears from the order of the appellate authority dated (by which remand was directed) that there was no mention of OCNs on the stock transfer documents. That distinguishing feature has been pointed out by him broadly. However, there is no definite indication that he perused all the relevant documents. As the matter was being 21

22 remanded, apparently, he would not have made a comprehensive analysis. The appellate Commissioner ultimately remanded the proceedings to the assessing authority to delve into the exact modalities of the stock transfers of the spare parts. In the fresh assessment order passed after remand, the assessing officer did not refer to any OCNs but he observed that on perusal of the bills, it was found that the appellant sent spare parts on imertal request and not in regular course. The word imertal request is not intelligible. None of the counsels were able to say what exactly the word meant. However, it has been stated that it perhaps, means internal request by the branch. Even if such request had emanated from the branch it cannot be said that inter-state movement was occasioned by prior contracts. It is trite that a dealer having branches dispatches the goods to the branches for sale on assessing the approximate requirements of the branches. The branches feed information in this regard. From that it does not follow that inter-state movement shall be ascribed to antecedent contracts of sale especially when the goods are standard but not tailor-made goods. At the same time, the dealer in reply to the show-cause notice has not come forward with a specific case that there were no prior orders nor any such orders have been noted in the records of Noida branch. However, the second reason given by 22

23 the assessing authority raises some question marks about the correctness of the appellant s claim of stock transfer of spare parts. The assessing officer has pointed out in the show-cause notice itself that the stock registers of branches submitted by the assessee revealed that the stock receipts were nil. For this, the assessee has given a vague reply stating that the stock register was in a closing stock format and the receipt details were not mentioned in the computer generated documents. The assessing authority found it difficult to accept this explanation. There is nothing to show that even before the appellate authority, the appellant furnished the extracts from the records of the branches showing the receipts of stock from time to time from Noida before their sales to the customers. In this state of affairs, it is possible to draw an inference that the spare parts dispatched to the branches were sold out to the customers even before they were unloaded and taken into stock and such a course was possible only if there were prior orders. Added to this, there was reluctance on the part of the appellant to furnish the relevant records and the details of spare parts for scrutiny as seen from the re-assessment order. Thus, the finding of the assessing authority as regards the tax liability on spare parts cannot be said to be without basis. As we are not invited to examine the factual aspects in detail, we do not 23

24 propose to express a final opinion on the question whether the stock transfers to branches in respect of spare parts stand on the same footing as machines. We are, therefore, left with the examination of the only point raised by the appellant that in view of the decision of the Supreme Court in Ashok Leyland case interpreting the deeming provision in section 6(2), the reassessments made under section 9(2) of the CST Act read with section 21 of UP Sales Tax Act are legally unsustainable It is obvious that in regard to the turnover not covered by the F forms, the decision of the Supreme Court cannot be called in aid by the appellant. We are mentioning this fact for the reason that for the assessment years and , there is a part of the turnover for which F forms were not filed by the appellant but at the same time the claim of stock transfers were accepted on other proof by the original assessing authority though he did not furnish any details of other proof. We shall deal with this aspect further in the next paragraph. 12. The disputed turnover representing stock transfers relate to two items i.e. (i) office equipment mainly photocopiers and fax machines (which are described in the assessment orders as machines), and (ii) spare parts. The major part of turnover relates 24

25 to spare parts. F-forms covering stock transfers to the Branch were filed and found to be correct and, therefore such transfers were excluded from taxable turnover by the original assessing authority. During the relevant years, filing of F-forms was not mandatory but once they are filed and accepted to be correct, the dealer must be deemed to have discharged the burden of proof and consequentially the stock transfers to branches outside the state of despatch are not to be treated as inter-state sales. During the relevant years, even without filing the F-forms, other satisfactory proof of stock transfer as opposed to inter-state sale can be adduced to discharge the burden of proof. Accordingly, in respect of some of the transactions not covered by F-forms, exemption was still allowed on the ground that other satisfactory proof in support of the claim was available. In so far as such transactions unsupported by F-forms, evidently, the deeming fiction in sub-section (2) of Section 6A which has been considered by the Supreme Court in Ashok Leyland cannot enure to be benefit of the assessee In this context, we may recall the observations of Supreme Court in Ashok Leyland case supra. The initial burden of proof is on the dealer to show that the movement has occasioned by reason of transfer of such goods which is otherwise than by reason of sale. The assessee may file a declaration. On a declaration so filed an inquiry is to be made by the assessing authority for the purpose of passing an order on arriving at a satisfaction 25

26 that movement of goods has occasioned otherwise than as a result of sale. [para 37 of STC, Para 48 of SCC] In the case of Steel Authority of India [2007, 10 VST, 451), this Authority observed thus: On a careful reading of various passages in the 2 nd Leyland case [2004] 134 STC 473; [2004] 3 SCC 1, we are inclined to think that as per the law enunciated by the Supreme Court in that case, the conclusive presumption comes into play as a result of the finding recorded by the assessing authority that the F-forms are true and acceptable. In order to quality for conclusive presumption, the order need not necessarily incorporate a further and specific observation that the transaction is a genuine stock transfer and not inter-state sale. That does not however mean that an inquiry whether the goods moved to another State in the guise of stock transfers in order to fulfil the prior contracts of sale is ruled out because such enquiry is essential to make the charging provision workable In the light of foregoing discussion, the appeals No. 323 and 324/2006 are partly allowed. The re-assessment proceedings as confirmed by the Appellate Authority for the two years are set aside and the demands are quashed except in respect of the following turnovers for which F-forms were not filed by the appellant. Accordingly, the appeals shall stand dismissed as regards the following turn over: Rs. 3,28,87,242/- (apart from the turnover originally disallowed i.e. Rs.1,71, 54, 009) Rs. 67,48,841/- 26

27 Appeal No. 325/2008 (A.Y ) 13. As far as the year is concerned, the case stands on a different footing. At the time of original assessment made on 20 th February, 2003, F-forms were not filed. However, time was allowed upto 31 st May, 2003 to file F-forms. The appellant did file the F-forms. But, no order was passed after the scrutiny of F-forms and no finding was recorded to the effect that the F-forms were in order and that the stock transfers were acceptable. This was the position till the re-assessment proceedings were initiated in the year 2000 which led to the passing of the final order dated whereby the entire claim of stock transfer was disallowed and the turnover of Rs.11,40,25,950/- was subjected to CST at the rate of 2 per cent. A turn over of Rs.8,00,65,770/- relating to spare parts was taxed at the rate of 10 per cent. The inter-state sales of photocopier and fax machines to the tune of Rs.3,39,60,180/- were, however, assessed to CST at the rate of 2 per cent. This order was passed on under Section 9(2) of CST Act read with Section 21 of U.P.Act. This gave rise to further appeals including the present appeals filed before this Authority Having regard to the above facts, the ratio of the decision in Ashok Leyland and the proposition laid down therein has no application to the proceedings relating to the year because 27

28 the fundamental pre-requisite for invoking section 6A(2) of CST Act, namely, an order accepting the F-forms as correct is lacking. There is no scope to apply the deeming fiction to the benefit of the appellant The theory of implied acceptance cannot possibly be pressed into service to invoke the benefit of deeming provision in Sec. 6A(2) in the face of express language employed in the provision and the specific observations in Ashok Leyland case. However, in regard to rate of tax, we are inclined to grant some relief. It may be mentioned that in the original assessment order of and the re-assessment order of , the entire disputed turnover relating to stock transfers of spare parts was subjected to tax at 2 per cent treating them as electronic items. No distinction was made between machines (i.e. photocopier, etc.) and the spare parts. The appellate authority while remanding the matter gave directions to ascertain which of the spare parts can be regarded as electronic goods/components because there were many items like screws, rings, bushes, switches, etc. which were of general use. After remand, the assessing authority having observed that the appellant did not give the details of spare parts for the purpose of classification, subjected the entire turnover to tax at 10 per cent. Of course, under the proviso to section 21, the 28

29 assessing authority is bound to charge the tax at the appropriate rate while assessing the escaped turnover. Though we see some justification for applying the higher rate of tax on the spare parts by reason of appellant s failure to furnish the details, we are of the view that the assessing authority was not justified in treating all the spare parts as general goods and denying the benefit of concessional rate available to electronic goods. Notwithstanding the failure of the appellant to furnish the details, the assessment cannot be punitive. Some reasonable estimate should have been made by the assessing authority especially in view of the fact that in the earlier orders, the benefit of 2 per cent rate of tax was given to the assessee. A reasonable estimate should have been made instead of totally denying the lower rate of tax. Taking an overall view, we therefore direct that 25 per cent of the turnover relating to spare parts for the year shall be subjected to CST at the rate of 2 per cent. To this extent, the appeal for the year (appeal No. 325/2008) is allowed. 14. Before parting with the case, we have to deal with one more point raised by the counsel for the Respondent-state. As regards the machines (photocopiers, etc) dispatched to the branches on stock transfers, the learned counsel has raised a contention that the finding of the appellate authority in its order dated

30 has become final and it cannot be challenged now by relying on the decision of the Supreme Court in Ashok Leyland or otherwise. We find no force in this contention. It is true that the appellate authority made the observation that the machines were dispatched for delivery to the particular customer whose orders were reflected in the Order Control Numbers noted in the stock transfer documents and that the steps taken to reopen the assessment under section 21(2) of the U.P. Trade-tax Act were valid. It must also be noted that as regards the spare parts the appellate authority found that there was no proper inquiry because the OCNs were not found on the dispatch documents perused by him. The appellate authority further observed that there should be proper analysis of the spare parts in order to determine the correct rate of tax. So holding, the appellate authority allowed all the appeals and remanded the matter to the assessing officer for fresh survey and assessment. The language in which the operative part of the appellate order is couched indicates that the remand was not confined only to the spare parts. The entire matter was remanded for passing fresh orders after inquiry. There is no indication in the order that the appeals as far as the machines (photocopiers, etc) are concerned were rejected. Apparently, the observation made by the appellate authority in regard to the branch transfers of machines were only 30

31 tentative in nature. The terms of remand are not confined to a particular item or items of dispute. The appeal was not dismissed in so far as machines are concerned. Therefore, the appeal having been allowed and remanded as a whole, the assessee cannot be expected to file further appeal or revision at that stage against a tentative finding given in relation to the taxability of machines. Assuming that a definite finding has been recorded on one of the points in issue while remanding the matter, it does not preclude the party concerned to re-agitate the issue in the proceedings taken up after remand before the higher fora. There is abundant authority for the proposition that an order of remand is interlocutory in nature and the lis is kept pending till a further order is passed pursuant to remand. The finding is nothing but provisional in nature unless there is a clear and express language to the contrary. The failure to file an appeal against the order of remand does not therefore preclude the party aggrieved from agitating the issue in an appeal against the final order. The principle analogous to section 105(2) of Civil Procedure Code cannot be taken to be a principle of general application governing the proceedings under a special enactment. Section 105(2) of CPC enjoins that if a party aggrieved by an order of remand from 31

32 which an appeal lies does not appeal therefrom, he shall thereafter be precluded from disputing its correctness A full bench of the Kerala High Court in the case of Syed Alavi v. State of Kerala * has thoroughly discussed these aspects and held that appealablity of an order passed in the course of a proceeding and the liability of that order being challenged in appeal against the ultimate order are two distinct things and the principle underlying section 105(2) of CPC did not stand in the way of the petitioner raising the question of liability to assessment before the appellate Tribunal after the final order was passed on remand. That was a case in which the appellate Asstt. Commissioner confirmed the order of the assessing authority as regards the liability to assessment but remanded the case to the assessing authority with a direction to pass fresh assessment order in the light of the observations made in the order as regards the specific disputed items. After remand, the petitioner took the stand that it was not liable to be assessed in view of the fact that it discontinued the business. The assessing authority held that the plea was not available to him in the light of the order of AAC. The Appellate Tribunal also took the same view. The High Court reversed the order of the Tribunal and remitted the matter to the Tribunal for * [1981] 48 STC

33 deciding the question of liability for assessment afresh. The learned judges observed: In the instant case, it is true that no appeal was filed against the decision dated 12 th April, 1976 of the Appellate Assistant Commissioner. The effect of non-filing of an appeal is that the finding is binding on the assessing authority when the case went back to that authority and also on the Appellate Assistant Commissioner while disposing of the appeal from the revised decision of the assessing authority; but It is not binding on the Appellate Tribunal in the appeal filed under section 39 against the decision of the Appellate Assistant Commissioner. The Appellate Tribunal was free to arrive at its own decision on the question of liability of the petitioners to assessment to sales-tax In the case of Jasraj vs. Hem Raj^ observed thus: the Supreme Court Viewed simplistically, the remand order by the High Court is a finding in an intermediate stage of the same litigation. When it came to the Trial Court and escalated to the High Court, it remained the same litigation. The appeal before the Supreme Court is from the suit as a whole and therefore the entire subject-matter is available for adjudication before us.. Intermediate stages of litigation and orders passed at those stages have a provisional finality. ^ AIR 1977 SC

34 14.3 In the decision of the Supreme Court in Sukhrani vs. Harishanker ** the position of law was stated thus: It is true that a decision given at an earlier stage of a suit will bind the parties at later stages of the same suit. But it is equally well-settled that because a matter has been decided at an earlier stage by an interlocutory order and no appeal has been taken therefrom or no appeal did lie, a higher court is not precluded from considering the matter again at a later stage of the same litigation Thus, viewed from any angle, the alleged omission on the part of the appellant to challenge the finding in the appellate order dated as regards the turnover of machines does not create a legal impediment in his way to agitate the issue in the fresh round of litigation starting from the assessment proceedings initiated after remand. The order of the remand of the first appellate authority cannot be construed in any other manner. 15. What remains is giving appropriate directions in regard to the refund of the excess tax collected. The appellant sought stay pending disposal of appeals. While condoning the delay by the order dated , the following observations were made by this Authority in regard to stay. As regards the stay of recovery of disputed tax, it is stated that substantial amount of tax has already been ** AIR 1979 SC

35 paid and for the balance amount bank guarantee was furnished. As we do not see immediate threat of recovery of tax, we give liberty to the appellant to move the stay if need arises before the next date of hearing. The appeals were posted for hearing on 21 st November, Thereafter, the appeals were adjourned at the request of one or both the parties and the next date of hearing was fixed to 16 th December, By that time, no counter was filed by the respondent and even later, adjournment was sought on the ground that counsel for the State could not be engaged. While so, on 5 th December, 2008, the concerned Departmental official addressed a letter to the bank in Delhi to encash the bank guarantee on the same day. An urgent application for stay was moved on the same day. By an order dated 5 th December, 2008, this Authority granted stay till the next date of hearing; but, on the same day the bank guarantee was encashed and an amount of Rs. 1,15,64,176/- was realized before the stay order was received. The sequence of events would show that the respondent acted in undue haste in realizing the tax by way of encashing bank guarantee. In the circumstances, we direct that the excess tax paid by and collected from the appellant shall be refunded within a period of two months from the date of receipt of this order with 9 per cent per annum on Rs. 1,15,64,176/- from 5 th December, 2008 upto the 35

36 date of payment. This direction is without prejudice to the appellant s right to claim refund of further amount as a sequel to this order. 16. Accordingly, all the three appeals are allowed partly and to the extent indicated in the text of the order. Sd/- Sd/- Sd/- (A.Sinha) (P.V.Reddi) (K.Jose Cyriac) Member Chairman Member F.No /CST/2008 dated the 17 th June, 2009 This copy is certified to be a true copy of the Order and is sent to: 1. The appellant 2. The Commissioner of Trade-tax, U.P. Lucknow. & others. (Sanjay Puri) Secretary, AAR (IT 36