Disposed

M/S.Diamond Engineering v. the Commissioner of

Madras HC12 Feb 2020WP/5401/2013

Case brief

AI extract

What is this about?

The High Court disposed of writ petitions challenging the denial of interstate sales status to an ancillary unit. The Court upheld a government clarification stating that interstate movement of goods, not party location, determines sales nature. Directing authorities to allow E1 certificates if statutory conditions are met.

What did the court decide?

Petitions disposed with direction to respondent to consider the Government clarification and pass appropriate orders within three months.

M/S.Diamond Engineering Vs the Commissioner of — GST and Indirect Tax | Madras HC (2020)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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CORAM

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THE HON'BLE MR.JUSTICE C.SARAVANAN W.P.Nos.5401 to 5406 of 2013 and W.M.P.Nos.1, 1, 1, 1, 1 and 1 2013

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M/s.Diamond Engineering (Chennai) Pvt. Ltd, 179, Old Mahabalipuram Road, Sholinganallur, Chennai – 600 119. ... Petitioner in all W.Ps. Vs. 1.The Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai – 600 005. 2.The Assistant Commissioner (CT), Thiruvanmiyur Assessment Cricle, No.98, Annai Velankanni Church Road, Besant Nagar, Chennai – 600 090. ...Respondents in all W.Ps. Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified Mandamus, to call for the records of the 2^nd respondent in his proceedings in TIN No.33900923473/2006-07, TIN No.33900923473/200708, TIN No.33900923473/2008-09, TIN No.33900923473/2009-10, TIN No.33900923473/2010-11, TIN No. 33900923473/2011-12 dated 12.11.2012 and 18.12.2012 respectively and quash the notice passed therein and further direct the respondent to drop all further proceedings in the matter.

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For Petitioner : M/s.R.L.Ramani, Senior Counsel for M/s.Hema Muralikrishnan in all W.Ps. For Respondents: Mr.R.Swarnavel Government Advocate (T) in all W.Ps.

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https://hcservices.ecourts.gov.in/hcservices/

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C O M M O N O R D E R

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Heard the learned senior counsel for the petitioner and the learned Government Advocate for the respondents.

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By this common order all the writ petitions are being disposed in the light of the clarification dated 28.10.2016 issued by the Additional Chief Secretary/Commissioner of Commercial Taxes who has clarified as under:-

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The BHEL Small and Medium Industries Association, Trichy have contended in their representation that they are ancillary units of BHEL, Trichy. They supply goods to the customers of BHEL located in other states, as per instructions of BHEL treating the sales as inter-state sales under Central Sales Tax Act, 1956. BHEL in turn effects transit sales to other State buyers. But their claim is not entertained by this assessing authorities on the ground that the seller and the buyer are located within the State and hence, the E-1 declaration which they claim for production to BHEL is being denied by the assessing authorities.

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2.As per Section 3 of CST Act, a sale would fall under the definition of interstate sales, if such sale occasions the movement of goods from one State to another State. Such interstate sales can also be effected by transfer of documents of title to the goods (by endorsement of LR/RR in favour of the buyer) during their movement from one State to another. Therefore, the main criteria which decides the nature of inter-state sales is not the location of the buyer and seller, but the interstate movement of goods and the link between such interstate movement of goods and the contract of sales. Therefore, as long as there is an inextricable link between the agreement of sales and the interstate movement of goods, two local dealers situated within the state can effect interstate sales. Similarly, even if the buyer and the seller are located in different States and if there is no interstate movement of goods in connection to the sale effected between them or there is no link between the sale and the

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interstate movement of goods, such sale would not fall under the definition of interstate sales. The above ratio has been upheld in many High Court and Supreme Court judgments.

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3.As far as the sale in the course of interstate movement of goods by transfer of documents of title to goods, which is called transit sales is concerned, the Hon'ble Madras High Court has held in the case of M/s.Duvent Fans Pvt.Ltd Vs.Sate of Tamil Nadu in ((1999) 113 STC 431 (Madras)) that two local dealers can effect such transit sales. The objections raised by AG against exemption allowed on such sales was not accepted by the Department and based on the above judgment of the High Court, the connected paras were also dropped. In the above circumstances, the view taken by the assessing authorities of Trichy Division to deny the interstate sales and issue of E1 declaration to the ancillary units of BHEL for the transit sales effected by BHEL under Section 6(2) of Central Sales Tax Act, 1956 is not legally correct. Therefore, all the assessing authorities are instructed to allow such inter-state sales and issue E1 certificate, in case the conditions prescribed under Section 3 and 6(2) of Central Sales Tax Act, 1956 are fulfilled.

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It appears that the 2^nd respondent has also passed orders following the above circular under similar circumstances for the Assessment Years 2013-14, 2014-15 and 2012-13 vide orders dated 21.11.2016, 21.11.2016 and 23.12.2016 respectively.

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In the light of the above, these writ petitions are disposed with the direction to the respondent to pass appropriate orders considering the above clarification dated 28.10.2016 of the Additional Chief Secretary/Commissioner of Commercial Taxes within a period of three months from date of receipt of copy of this order.

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5.The petitioner may file objections/representations before the 2^nd respondent within a period of thirty days from the date of receipt of a copy of this order. The 2^nd respondent shall also consider the same and pass appropriate orders within the

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aforesaid period of three months after affording an opportunity to the petitioner. No cost. Consequently, connected miscellaneous petitions are closed.

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-s/d-
Assistant Registrar
True Copy
Sub-Assistant Registrar
jas
To
1.The Commissioner of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai – 600 005.
2.The Assistant Commissioner (CT),
Thiruvanmiyur Assessment Cricle,
No.98, Annai Velankanni Church Road,
Besant Nagar, Chennai – 600 090.
+1 cc to Mr.B.Raveendran Advocate sr11570
+1 cc to the Special Government Pleader sr12604
W.P.Nos.5401 to 5406 of 2013 and
W.M.P.Nos.1, 1, 1, 1, 1 and 1 2013
aa12/05/2020
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Page No 4 of 4

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M/S.Diamond Engineering v. the Commissioner of

Case brief

What is this about?

What did the court decide?

M/S.Diamond Engineering v. the Commissioner of

Case brief

What is this about?

What did the court decide?

What the court decided

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