JUDGMENT
Yogeshwar Dayal, C.J. and Jagannadha Rao, J.
1. The tax revision case (T.R.C.) filed by the State will decide the main issue between the parties and the relief for refund sought for in the writ petition by the assessee depends upon our decision in the T.R.C. We shall, therefore, first deal with the T.R.C. We are concerned with the assessment year 1984-85.
2. The T.R.C. is filed by the State questioning the decision of the Andhra Pradesh Sales Tax Appellate Tribunal in T.A. No. 310 of 1986 dated 23rd February, 1989, by which the appeal filed by the assessee was allowed and the orders of the Appellate Deputy Commissioner (C.T.) (Company Division), Hyderabad, dated 12th February, 1986 and the order of assessment passed by the assessing authority were set aside, in so far as certain turnover which according to the assessee was not chargeable to tax under the Central Sales Tax Act.
3. The assessee is Gromor Chemicals (P) Ltd., Patancheru, Medak district, Andhra Pradesh, and has its manufacturing unit at Patancheru. Its registered head office is at Calcutta with the same name. The Patancheru factory manufactures basic drugs, i.e., chlorophenical I.P., paracitimal, etc. It is not in dispute that M/s. Dey’s Medical Stores (Mfg.), Calcutta, is one of its main customers. The drugs manufactured by the assessee in its factory at Patancheru in Andhra Pradesh are sent to the head office at Calcutta and M/s. Sri Enterprises at Bombay by raising stock transfer invoices accompanied by delivery challans. The dispute concerns the stock transfers mainly made to Calcutta to the head office which stocks were later sold to Dey’s Medical Stores, Calcutta. The assessing authority and the first appellate authority construed the correspondence between Dey’s Medical Stores, Calcutta, and the assessee as amounting to a contract pursuant to which the goods must be deemed to have been moved from Andhra Pradesh and also relied upon certain applications for licences made to the Director, Drug Control Administration, for import of raw material, as corroborative evidence of the contract and held that the disputed turnover was exigible to tax. The assessee appealed to the Tribunal. The Tribunal framed two points for consideration as follows :
(i) Whether the Assistant Commissioner (Int) has jurisdiction to make the assessment ?
(ii) Whether the original assessing authority and the appellate authority are justified in subjecting the turnover of Rs. 2,10,07,675 to tax under Central Sales Tax Act, 1956, treating the transaction as inter-State sales ?
4. It held on both points in favour of the assessee. On the first point it held that the Assistant Commissioner (Int) did not have jurisdiction to make the assessment. On the second point it held, on an elaborate consideration of the documentary evidence, that the correspondence between Dey’s Medical Stores, Calcutta and the assessee at Hyderabad did not show that there was any contract for sale of goods which was the cause for movement of the goods and that the case of the assessee that it was only stock transfer was true. It opined that the applications for licences to import could not also be corroborative evidence of any contract. In the result, the appeal of the assessee was allowed.
5. In this T.R.C. the learned counsel on both sides agreed that it may not be necessary to decide point No. (i) mentioned above in case this Court is inclined to agree with the Tribunal on point No. (ii). We, therefore, leave open the finding of the Tribunal on point No. (i) and proceed to examine the correctness of the decision of the Tribunal on point No. (ii).
6. The point for decision therefore is : whether the Tribunal was right in holding that the turnover of Rs. 2,10,07,675 is not liable to sales tax under the Central Sales Tax Act, treating the transaction covered by the said turnover, as an inter-State sales ?
7. We shall first refer to the finding arrived at by the Tribunal and also to the material on which it is based. Now the assessee is a registered dealer in Andhra Pradesh and in West Bengal. It manufactures different basic drugs and its factory is at Patancheru, near Hyderabad. These drugs are marketed in Maharashtra and Calcutta. It is not in dispute that in West Bengal the assessee maintains a sales office with seven employees including an accountant and a man in-charge of the stores. At Bombay, sales are made by a commission agent M/s. Sri Enterprises. The goods are sent by air to Bombay and Calcutta.
8. Under the West Bengal law, there is a system for issue of permits to cover notified goods including drugs imported into West Bengal. The assessee applied to sales tax authorities at Calcutta under rule 15 of West Bengal Sales Tax Rules and obtained necessary permits for importing the basic drugs manufactured by it at Patancheru. With the aid of these permits, the employees of the assessee take delivery of the parcels and transfer the same to the sales office. The goods are entered in the stock register maintained at the Calcutta office. The assessee’s office at Calcutta issues F forms as required under rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957, read with section 6-A of the Central Sales Tax Act. These forms are being regularly filed with the Commercial Taxes Department.
9. M/s. Dey’s & Co., Calcutta is a large concern which has its factories in Calcutta and U.P. and it purchases a small portion of its requirements from the assessee’s depot at Calcutta. During the assessment year there were negotiations between the assessee and M/s. Dey’s & Co. This correspondence has a very important bearing on the case.
10. Now the correspondence relates to the probable quantities which could be purchased by M/s. Dey’s & Co. from the assessee and the terms and modus operandi of the transactions.
11. The case of the department rested mainly upon (1) two purchase orders by Dey’s stores, Calcutta, addressed to the assessee at Patancheru, Hyderabad and (2) correspondence by assessee at Patancheru with the Drug Control Administration.
12. We shall first refer to the material covered by (1) above and the discussion thereof the Tribunal and its findings.
(1) Two purchase orders : Two letters which were described as “purchase orders” by M/s. Dey’s & Co. are strongly relied upon for the department. But, according to the Tribunal, the real purport of these letters has to be judged in the context of the entire correspondence and not merely on the basis of the said two letters alone.
In response to the so called order, the assessee wrote back indicating that it could not commit itself and requested M/s. Dey’s & Co. to get in touch with the assessee’s Calcutta depot and get the requirement from them. Then there was an exchange of communication indicating the requirements of Dey’s and a modus operandi was broadly indicated that the Dey’s should keep in touch with Calcutta stock depot for getting its requirements. The letter dated 7th May, 1984, by the assessee to Dey’s Medical Stores says :
“We confirm that this indicates only your overall needs and does not constitute a firm order. We should clarify that we cannot bind ourselves to supply these materials which will depend on availability of materials at Calcutta and price confirmation. We would advise you to keep in periodic touch with our Calcutta sales depot and indent on them. Supplies will be effected subject to availability of materials at Calcutta and the prevailing price.”
After referring to this letter of the assessee from Hyderabad to Calcutta office of M/s. Dey’s & Co., the Tribunal observed :
“This communication makes it clear that there was no contract concluded between the parties.”
(2) The correspondence with Drug Administration : While applying for supplementary licence a reference was made by the assessee, to the orders of Dey’s & Co. The context is like this. For manufacturing the drugs at Patancheru, the assessee has to import certain raw material. Without such material, the assessee cannot manufacture the drugs. The existing capacity being insufficient, the assessee made an application to the Drug Administration Department for a supplementary licence. The Tribunal referred to the contents of the annexure to the assessee’s application, which read as follows :
“M/s. Dey’s Medical Stores (Manufacturing) Ltd., Calcutta and Naini, are prepared to buy from us monthly 2,00,000 kgs. of chlorophenical I.P. and 25,000 kgs. of chlorophenical palmitate I.P. per month. Because of inadequate import licence and corresponding lack of materials (imported materials), we are unable to book orders for more than 3 months at a time as bigger formulations are in the habit of making risk purchases on account of mere fulfilment of contract/orders.”
13. Regarding this material, the Tribunal observed :
“While the fact that M/s. Dey’s & Co., are interested in purchasing large quantities of assessee’s products is not relevant, the programme for import is not dependent on this factor. The import of goods would have necessarily to be done within the period of validity of licence and this is the prime factor. The endeavour of the assessing authority to link up the imports to orders of Dey’s Medical Stores is factually and legally untenable.”
14. After thus scrutinising the evidence on materials (1) and (2) as categorised above, the Tribunal summarised as follows : “The transport of goods from time to time were in small parcels. The journey of goods from Hyderabad to Calcutta was not in consequence of any incident or covenant of any contract of sale. If the dealer moves goods to another state for better enjoyment as per the convenience of its business, the journey is not an inter-State journey. In this case, the appellant has its registered office at Calcutta. Better price is fetched in West Bengal and Maharashtra for the assessee. The assessee has godowns at Calcutta, the goods are imported into the State in accordance with the procedure prescribed by Bengal Sales Tax Act. Under rules 14, 15 of West Bengal and of the notified goods into West Bengal. The appellant applied and obtained such permits as its products are notified goods. With the aid of these permits, the appellant’s employees took delivery of the parcels from the airlines office and took them to their depot. The goods are then entered in the registers maintained for this purpose. The Calcutta office issues F forms under rule 12(5) and section (6A). Subsequently, they are sold by Calcutta office to different parties including Dey’s Medical Stores against indents placed by them. The sale bills are issued at Calcutta. Simultaneously goods are appropriated to the contract and delivered at Calcutta. Simultaneously goods are appropriated to the contract and delivered at Calcutta. Price is received at Calcutta. In these circumstances, the finding of the assessing authority that the sales in question are inter-State sales is not justifiable.” “… in the present case, there are no specifications of individual customers. The appellant manufactures the goods according to its standards and in accordance with statutory restrictions …… the goods ….. manufactureed … are not earmarked for any purchaser.” “In this case, goods sent to Calcutta may be sold to any person and not necessarily to Dey’s & Co …. in the instant case, there is no such contract of sales to which the movement of goods could be attributed ….. the goods made inter-State journey as the goods of the assessee alone. …. The appellant has full discretion to sell their goods to whomsoever he chooses at Calcutta, without infringing any contract. The possibility of diversion of goods by the appellant sticks at the root of the theory of inter-State sale.” “The full correspondence between M/s. Dey’s Medical Stores and the appellant clearly shows that these so called purchase orders are only efforts to purchase and not contracts of sale. The assessee’s replies clearly specify that it is not committing itself to supply goods. There is no acceptance and hence there is no concluded contract. The Hyderabad office or factory, has no connection with its sales have now been taxed.”
15. We are of the view that on the facts found by the Tribunal, the findings are clearly justified and there is no error of law whatsoever warranting interference. We may add that the basic findings of fact have not been impugned by the counsel for the State before us – obviously because they are based on unimpeachable documentary evidence – and on those facts, we are unable to see any error of law.
16. Further in our view, the Tribunal had rightly distinguished English Electric Company of India Ltd. v. Deputy Commercial Tax Officer , as a case where there was, in fact, an agreement to sell and there was a stipulation, express or implied, regarding the movement of goods from one State to another in pursuance of such an agreement. Again, the Tribunal rightly distinguished Union of India v. Khosla and Co. Ltd. , as a case where goods conforming to agreed specifications were manufactured at Faridabad and the contract could be performed by the assessee only by movement of goods from Faridabad with the intention of delivering them to the particular purchaser. Although the contracts of sale did not require or provide that the goods should be moved from Faridabad to Delhi, the movement of goods was occasioned from Faridabad to Delhi as an incident of the contract of sale made in Delhi. The sales were rightly treated there as inter-State sales.
17. Coming to the facts in English Electric Company of India Ltd.’s case , there the freight was payable by the buyer and the order placed with the Bombay branch was communicated to Madras factory and the goods were then transported. The inter-State movement of goods from Madras to Bombay was the result of the contract of sale and it was held that the fact that the contract emanated from correspondence which passed between the Bombay branch and the company, could not make any difference. In our view, the Tribunal rightly distinguished this case on the ground that there the freight was payable by the buyer and the goods were transported after contract of sale and as an incident of it.
18. We, therefore, hold that the inferences of law on the proved facts by the Tribunal, are correct and the finding that there is no inter-State sale when the goods are moved from Patancheru, Hyderabad to Calcutta to its office and that the movement of goods is not in pursuant to any contract of sale entered into by the Patancheru office, that in fact there is no contract of sale but only a transfer of the stock from Hyderabad to the assessee’s branch at Calcutta which has godown facility and the goods moved were never earmarked for Dey’s Medical Stores, Calcutta and could be sold to anybody.
19. We, accordingly, dismiss the T.R.C. but without costs.
W.P. No. 17795 of 1989 :
This writ petition is filed by the assessee for refund of Rs. 2,00,764.92 with interest as allowable under section 33-F of the A.P. General Sales Tax Act, 1957. The petitioner is the assessee in whose favour we have held in the T.R.C. above referred to for the assessment year 1984-85. The assessee averred in the writ petition that the amount of Rs. 4,70,128 paid by it was refundable, but that the petitioner is seeking refund only in a sum of Rs. 2,00,764.92 with interest after setting off the balance amount towards admitted tax payable for 1982-83 up to November, 1989, as set out in para 4 of the affidavit filed in support of the writ petition.
20. It is, no doubt, contended by the learned Government Pleader that some more amounts beyond November,1989, might have fallen due but it must be noted that, these are likely to be small amounts and according to the petitioner’s counsel, the State is holding other refundable sums with it for the subsequent years. In that view of the matter, we are inclined to allow the writ petition as a consequence of our decision in the T.R.C.
21. Under section 33-C of the Andhra Pradesh General Sales Tax Act, the amount refundable to an assessee could be withheld if the matter is under an appeal or further proceeding or where any other proceeding is pending. The cases of refund in such cases are finally governed by section 33-F. Sub-section (2) of section 33-F state that “where the refund is withheld under the provisions of section 33-C, the State Government shall pay interest at the aforesaid rate (i.e., 12 per cent simple per annum) on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding, for the period commencing after the expiry of six months from the date of the order referred to in section 33-C to the date the refund is granted.”
22. In the present case before us, the assessee became entitled to refund for the first time by virtue of the order of the Tribunal dated 23rd February, 1989 and inasmuch as the amount was withheld under section 33-C pending disposal of the T.R.C., simple interest at 12 per cent annum becomes payable by the State with effect from 23rd August, 1989, under section 33-F(2).
23. We, therefore, allow the writ petition and direct the respondent to refund to the petitioner, the sum of Rs. 2,00,764.92 with simple interest at 12 per cent per annum with effect from 23rd August, 1989, till date of payment. Time for payment will be four weeks from today.
24. In the result the T.R.C. is dismissed and the writ petition is allowed as stated above. There will be no order as to costs in the two cases. Advocate’s fee Rs. 250 in each.
25. Tax revision case dismissed. Writ petition allowed.
