JUDGMENT
Abdul Hadi, J.
1. The question involved in this tax case revision by the Revenue against the deletion by the Sales Tax Appellate Tribunal, of the levy of penalty on the respondent-assessee. The original levy by the assessing officer was under section 10(d) read with section 10-A of the Central Sales Tax Act, 1956 (hereinafter referred to as “the Act”). The Appellate Assistant Commissioner reduced the quantum of penalty from 1 1/2 times the tax to an amount equal to tax. In other words, the original penalty was Rs. 17,15,445 and it was reduced to Rs. 11,43,630 and thereby the first appeal by the assessee was allowed partly. However, The Tribunal held, in the appeal filed by the assessee, that the penalty was not leviable and, therefore, deleted the entire penalty.
2. Before actually seeing the facts in the present case, we may briefly set out the relevant provisions of law involved in this case. The Act grants to the selling dealer concessional tax of 4 per cent under section 8(1)(b) of the Act, in certain cases, if as per section 8(3)(b) of the Act, the goods sold are goods of the class specified in the certificate of registration of the registered dealer purchasing the goods (inter alia) as being “intended for resale”, and, as per section 8(4)(a) of the Act read with relevant rules, the said selling dealer furnishes prescribed declaration in “C” form signed by the purchasing dealer of the said goods. As per section 10(d) of the Act if any person after purchasing any goods for the purpose of resale “fails without reasonable excuse”, to make use of the goods for such purpose, it is an offence punishable under the said provision. However, section 10-A of the Act provides that if any person purchasing the goods is guilty of an offence under section 10(1)(b) or (c) or (d) [not under section 10(1)(a)] of the Act, penalty could be imposed in lieu of transaction under section 10 of a sum “not exceeding 1 1/2 times” the tax.
3. Now, coming to the facts, the assessee, Cholamandalam Investment and Finance Co. Ltd., a dealer under the Act, had purchased computers and spares and components to the tune of Rs. 76,24,203 by issuing the above said “C” forms during the years 1980-81 and 1981-82. In other words, the assessee, on whom the abovesaid penalty was levied is the abovesaid purchaser under an inter-State sale, who has signed the abovesaid “C” form declaration and gave it to its selling dealer for furnishing the said form to the authority concerned, enabling the selling dealer to avail of the abovesaid concessional rate of tax, and pass on the said concession to it (the assessee-purchaser). The penalty has been levied by the assessing officer on the ground that even though as per the said “C” form declaration the abovesaid goods were purchased by the assessee for resale, the assessee actually let them on lease to various concerns and collected the rentals as per the lease agreements executed by the assessee and the respective lessees. It is so stated in the penalty pre-assessment notice dated August 26, 1981. To the said notice, the assessee sent reply dated September 9, 1981, stating in essence that there were only resales by it under a system of selling similar to hire purchase system and in view of Balabhagas Hulaschand v. State of Orissa and the definition of the term “sale” under the Act, the transactions entered into by the assessee after the purchase do not warrant any levy of penalty under section 10-A read with section 10(d) of the Act. Regarding the abovesaid “system of selling” alleged by the assessee, the assessee states in the said reply that two agreements with each of its customers were entered into one is, a “lease agreement” and another is a “lease-cum-sale arrangement” for the sale of goods covered by the lease agreement on the expiry of the lease period or even before the completion of the lease period.
4. The assessee also produced copies of the lease agreement as well as lease-cum-sale arrangement, in respect of two customers, stating that in respect of other various customers also similar documents were entered into. The said lease-cum-sale arrangement is in the form of letter by the assessee addressed to the customer. Both the lease agreement and this letter bear the same date. The lease agreement, inter alia, shows that the lease is for five years and provides for monthly rental payments. It also stipulates that at the expiration of the lease period, the goods should be returned to the assessee in working condition. The other lease arrangement letter, however, says that the entire deal is a lease-cum-sale arrangement and that the customer would complete the deal by purchasing the goods, at the end of the period of lease. It also says that the customer however has right to exercise his “option” to buy much earlier as per the schedule of prices enclosed therein and it also states that the prices have been fixed taking into consideration the lease, rentals, depreciation to the goods and its cost. But the said lease-cum-sale arrangement letter contains the signature of purchasing customer at the foot of the said letter (without any date). (It should be noted here that the abovesaid lease agreements were executed by both the parties).
5. In view of the above features, the assessing officer in his penalty order found that the original intention of the assessee was not for resale and its intention was only to lease. He further held that without any reasonable excuse the assessee made use of the goods purchased for purposes other than these mentioned in section 8(3)(b) of the Act and the registration certificate, and levied the penalty as per section 10-A, read with section 10(d).
6. The Appellate Assistant Commissioner concurred with the reasoning of the assessing officer and reiterated that the assessee had issued “C” forms, knowing fully well that the goods purchased would be let on lease in the first instance. He further observed that the assessee should have purchased the goods against “C” forms and the registration certificate issued to it did not entitled it to purchase the goods against “C” forms for being let on lease primarily. However, the Appellate Assistant Commissioner reduced the quantum of penalty as stated above.
7. But, the Appellate Tribunal, as stated above, has deleted the entire levy of penalty. Relying on the observations of the Patna High Court in Bihar State Agro-Industries Development Corporation Ltd. v. State of Bihar [1973] 31 STC 484 the Tribunal observed thus :
“These observations are sufficient authority for the proposition that in the instant case the goods have been purchased only with an intention for resale and there has been no violation of any of the conditions in the certificate of registration.”
The Tribunal further observed thus :
“It is argued that the department has not established that there was no reasonable excuse and that there has been no finding to this effect tin the order. Another plea raised is that the Act has used the expression ‘fails without reasonable excuse’ said that the expression ‘fails’ denotes a point of no return in the sense that the property ceases to be the property of the appellants. On this basis, it is pleaded that on the facts here this point of no return has not been reached, because if the lessee does not fulfil the conditions of the lease the property only reverts back to the appellant and therefore there has been no failure. But in the view we have taken already that there is no case for penalty, it is unnecessary to pursue this line of reasoning.”
8. Learned counsel for the Revenue argues that the Tribunal grossly erred in setting aside the penalty, despite the fact that it is clear from the above referred to two documents that there was only a lease and not a resale and that, therefore, the assessee violated section 10(1)(d). He also points out that the Tribunal has erred in relying on the observations in Bihar State Agro-Industries Development Corporation Ltd. v. State of Bihar [1973] 31 STC 484, which is a case of clearcut hire purchase transaction, unlike the present case. He also points out that the above referred to lease arrangement letter, unilaterally given by the assessee to this customer, cannot alter the lease agreement entered into between the parties, which was signed by both the parties, while the said letter is only by the assessee addressed to the customer.
9. We have considered the rival submissions. It is clear to us that the Tribunal has grossly erred in relying on the observations in Bihar State Agro Industries Development Corporation Ltd. v. State of Bihar [1973] 31 STC 484 (Pat) and on that footing alone holding that “in the instant case the goods have been only with an intention for resale”. The relevant portions of these observations are as follows :
“Transactions on the basis of hire purchase agreements are so well-known to the commercial world that it does not seem possible to take the view that a registered dealer after having purchased goods for resale utilised them for any purpose other than resale by merely entering into such transactions. It is well-known that such transactions are entered into with the ultimate object of passing the property in the goods to the hirer.”
But, as already pointed out, the present transactions entered into by the assessee with various customers are not hire-purchase transactions. We have gone through the relevant assessment filed produced by the learned counsel for the Revenue. They contained the abovesaid lease agreement and the lease arrangement letter both executed on the same day. The former one has been signed by both the assessee and the customer. The latter is only a letter written by the assessee addressing it to the customer concerned. No doubt in the said letter, the customer at the end of the letter purports to have merely put his signature. But, that cannot be taken as acceptance of what is stated in the said letter written by the assessee. At best it can only be taken as acknowledgment of the said letter as found by the assessing officer. The original lease agreement entered into by both the parties on the same day is signed by both the parties and also contains the signatures of two witnesses. While so, if really the parties modified the terms of the lease agreement as contended by learned counsel for the assessee, that should be borne out by some valid document in accordance with law. The abovesaid letter cannot be taken as a valid document converting the earlier lease document into hire-purchase transaction. The facts in Bihar State Agro Industries Development Corporation Ltd. v. State of Bihar [1973] 31 STC 484 (Pat) are different from the present case, and the Tribunal erred in relying on the observations in Bihar State Agro Industries Development Corporation Ltd. v. State of Bihar [1973] 31 STC 484 (Pat).
10. No doubt, as per the definition of the term “sale” under section 2(g) of the Act, it also includes “a transfer of goods on the hire-purchase or other system of payment by instalments”. But, it must be noted that this does not mean that “an agreement of sale” also would be a sale as per this definition. The significant of the word “transfer” used in the abovesaid inclusive definition shows that even as per this inclusive definition, for “sale” there must be a transfer of title in the goods from the seller to the buyer even though that transfer may be on the hire-purchase or other system of payment by instalments. No doubt in Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 the Supreme Court observed in relation to the term “sale of goods” as used in section 3(a) of the Act, which defines inter-State sale, that it includes an agreement to sell. Section 3(a) runs as follows :
“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.”
Only in this context, the Supreme Court observed in the said decision as follows:
“…… if there is a movement of goods from one State to another, not in pursuance of the sale itself, but in pursuance of an agreement to sell, which later merges into a sale, the movement of goods would be deemed to have been occasioned by the sale itself wherever it takes place… we can hardly conceive of any case where a sale would take place before the movement of goods. Normally what happens is that there is a contract between the two parties in pursuance of which the goods move and when they are accepted and the price is paid the sale takes place. There would, therefore, hardly be any case where a sale would take place even before the movement of the goods.”
Thus, in interpreting section 3(a) of the Act in the light of the words used therein, the Supreme Court has made the abovesaid observation, that the term “sale” in section 3(a) would include agreement to sell. This does not mean that the same meaning would be given for the term resale used in section 8(3)(b) read with section 10(d) of the Act.
10A. In this connection, it must be noted that while dealing with the term “sale” in section 5(3) of the Act, the Supreme Court in Consolidated Coffee Ltd. v. Coffee Board, Bangalore has also explained the abovesaid Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 thus :
“In other words, wherever the word ‘sale’ occurs in the Central Sales Tax Act, 1956, it is this definition given in section 2(g) that will be applicable and therefore the word ‘sale’ in section 5(3) must mean transfer of the goods by one person to another for cash or for deferred payment or for any other valuable considerations; it cannot mean ‘agreement to sell’. Moreover, there is nothing in the context of section 5(3) to suggest that the word ‘sale’ occurring therein should be understood differently. In Balabhagas Hulaschand’s case , this Court in the context of the question as to when a sale could be said to take place in the course of inter-State trade or commerce gave an extended meaning to the word ‘sale’ as defined in section 2(g) and as used in sections 3(a) and 4(2)(a) and (b) of the Central Sales Tax Act, 1956, and what was said by this Court was that the word ‘sale’ as used in section 3(a) and 4(2)(a) and (b) was wide enough to include not only a concluded contract of sale but also an agreement of sale provided that the latter stipulated that there was a transfer of property or movement of goods; the ratio of that decision will be inapplicable to section 5(3) which deals with the question as to when a penultimate sale shall also be deemed to be in the course of export and there is nothing therein to suggest that the word ‘sale’ should have any such extended meaning; on the contrary, the context suggests that the word ‘sale’ in the phrase ‘if such last sale or purchase takes place after’ refers to a completed sale, i.e., a sale as defined in section 2(g) of the Act.”
10B. Further as already indicated, the term “transfer” used in the latter part of the definition of the term ‘sale’ is also significant. The Supreme Court also, while dealing with similar term in Explanation III to section 2(1)(n) of the Andhra Pradesh General Sales Tax Act, 1957 in Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer [1968] 21 STC 312 (SC) has observed thus :
“The real effect of the third Explanation is to impose the tax only when there was a transfer of title to the goods and not where there is a mere contract of agency. The Explanation says in effect that where there is in reality a transfer of property by the principal to the agent and by the agent in his turn to the buyer, there are two transactions of sale. In our opinion, the phrase ‘when the goods are transferred’ in clause (1) and (2) of Explanation III on a proper construction means ‘when title to the goods is transferred’ and so construed it is impossible to say that the Explanation enlarges the scope of the main section.”
In this connection the use of the abovesaid term “transfer” in the latter part of section 2(g) could also be contrasted with the relevant expression used in article 366(29A)(c) of the Constitution of India. The said clause was introduced by the Constitution (Forty-sixth Amendment) Act, 1982 and it defines “tax on the sales or purchase of goods”. In the abovesaid sub-clause (c), it is stated that “tax on the sale or purchase of goods” includes “a tax on the delivery of goods of hire-purchase or any system of payment by instalments”. Thus in section 2(g), the term “transfer” is used, and in the abovesaid sub-clause (c) the term “delivery” is used. In other words, while after the abovesaid amendment, though it may be agreed, the term “sale” would include even “such delivery” (even without transfer of title) prior to the amendment, with which alone we are concerned in the present case, in view of the use of the term “transfer” in section 2(g), it can be safely said that there can be no Central sales tax when there is no transfer of title from one person to another. Thus, in the light of the other decisions of the Supreme Court, Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 must be understood only in the context of section 3(a) of the Act.
11. Even assuming the abovesaid meaning as stated in Balabhagas Hulaschand v. State of Orissa could be given to the term “resale” used in section 8(3)(b) also, it must be stated that in the present case, the above referred to lease agreement executed, only shows that after the purchase of the goods by the assessee it has only leased out to the customer concerned, and not effected any agreement to resell the said goods to the customer. If it is to be concluded that there is such an agreement to resell between the assessee and its customer, there must be valid proof for such agreement between the parties. But there is no such proof in the present case. The above referred to lease-cum-sale arrangement-letter has only been written unilaterally by the assessee and though it is addressed to its customer and though the customer has put his signature underneath the said letter, that does not mean that an agreement as such between them for sale, also has come into being. Therefore, neither section 2(g) nor the observation in Balabhagas Hulaschand v. State of Orissa can support the argument of learned counsel for the assessee.
12. Despite the above referred to discussion, we must point out that once as stated above, it is held that the Tribunal has erred in law in coming to the conclusion that there was intention on the part of the assessee at the time it purchased the goods in question, to resell the same, section 10(d) of the Act will not be attracted since section 10(d) has got three ingredients, one of whom is, purchasing for any of the purposes specified in section 8(3)(b). The other two ingredients are, (1) the failure to make use of the goods purchased for purposes specified in section 8(3)(b) and (2) the absence of reasonable excuse for such failure (vide also State of Mysore v. S. S. Umandi [1969] 24 STC 11 (Mys) and A.S. Mohammedkutty and Company v. Sales Tax officer . In other words, this means, in the context of the present case, purchasing any goods for resale, that is purchasing any goods with the intention to resell. When such an intention to resell is not there at the time of the purchase, section 10(d) will not come into operation. As per the contention of the Revenue throughout and also as per the finding of the first two authorities below, there was no intention on the part of the assessee at the time of the purchase of the goods to resell the same. When such is the case, section 10(d) is not attracted, though section 10(a) may in such a case be invoked on the footing that the assessee, while furnishing the above referred to “C” form declaration knew or had reason to believe that the said declaration (that he purchased the said goods with intention to resell the same) is false. But, if section 10(a) is attracted, there could be only prosecution for the offence under section 10(a) and there cannot be imposition of penalty in lieu of prosecution under section 10A of the Act since in section 10-A, section 10(a) is not referred to.
13. The net result is the authority concerned, may, if he is of the view that the ingredients of section 10(a) are present in the case on hand, seek to prosecute the assessee accordingly. But, the present levy cannot be sustained. Therefore, we have to dismiss this revision, though we do not agree with the reasoning of the Tribunal. Accordingly, the revision is dismissed. No costs.
14. Petition dismissed.