Goods movement under CST terminate when delivery is taken from carrier – SC

Goods movement under CST terminate when delivery is taken from carrier. There is no concept of constructive delivery-Supreme Court  

ABCAUS Case Law Citation:
ABCAUS 3303 (2020) (05) SC

Important case law relied upon by the parties:
CTO  vs.  Bhagwandas  &  Sons
Guljag Industries Limited vs. State of Rajasthan & Another
Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax

The instant case involve adjudication on a  common question of  law arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956 (Act). The question was as to whether as a condition of giving the benefit of  Section  6(2)  of  the Central Sales Tax Act, 1956 (the Act),   the tax authorities can impose a limit or timeframe within which delivery of the  respective  goods has  to  be taken from  a  carrier when the goods are delivered to a carrier for transmission in course of inter-state  sale.

The respondent company had purchased goods from out of State and sold them to purchasers within the State. For such sales, the company obtained the benefit of exemption u/s 6(2) of the Act.

However, when dispatched for sale, the said goods had remained with the transport company upon arrival for more than a month.

The Revenue’s case was that after importing these goods in to the State, sale was effected through bilty (transport receipt) on obtaining separate orders. Such sale, thus constituted sale within the State and hence taxable.

Accordingly, the claim of benefit under Section  6(2) of the Act was rejected and tax along with interest and penalty was imposed by the Commercial Tax Officer, Anti-Evasion.

The dispute travelled to Hon’ble High Court upheld the appellate order in favour of the assessee and quashed the two circulars sought to impose a time limit on retention of goods in the carrier’s godown, beyond which time the revenue was to treat obtaining of constructive delivery of the goods involved.

Aggrieved by the judgment of the Hon’ble High Court, the Revenue was in appeal before the Hon’ble Supreme Court.  

Goods movement under CST terminate when delivery is taken 

The Hon’ble Supreme Court observed that the respondent assessee had taken benefit of sub-section (2) on the ground that this was a case involving inter-state sale and the sale took place by way of transfer of documents of title of such goods during their movement from one State to another. It was also the respondents’ case that the requisite forms and certificates were duly furnished pertaining to such sales.  

Whereas, the Commercial Officer relied on the two said circulars and treated the retention of goods beyond 30 days in the transporters’ godown as the cut-off period after which the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State was held to be local sales.

The Apex Court noted that as per the said circulars, retention of goods by the transporter beyond the time stipulated therein (being 30 days) would imply that constructive delivery of the goods has been made by the transporter to the consignee. In such a situation, the transit status of the goods would stand terminated and the deeming provision in first explanation to Section 3 of the Act conceiving the time-point of delivery as termination of movement shall cease to operate.

The Hon’ble Supreme Court stated that when the goods are delivered to a carrier for  transmission, first explanation to Section 3 of  the Act specifies that movement of the goods would be deemed to commence at the  time when goods are delivered to a carrier and shall terminate at the time when delivery is taken from such carrier.

The Hon’ble Supreme Court opined that the abovesaid provision does not qualify the term ‘delivery’ with any timeframe within which such delivery shall have to take place. Therefore, fixing of timeframe by order of the Tax Administration of the State would be impermissible.

The Hon’ble Supreme Court also rejected the reliance placed by the Revenue on Section 51 of the Sale of Goods Act, 1930 as in the instant case, the condition that the carrier sends an acknowledgment to the buyer or his agent that he held the goods on his behalf, was not met.

The Hon’ble Supreme Court stated that a legal fiction is created in first explanation to Section 3 of the Act. That fiction is that the movement of goods, from one State to another shall terminate, where the good have been delivered to a carrier for transmission, at the time of when delivery is taken from such carrier. 

The Hon’ble Supreme Court opined that there is no concept of constructive delivery either express or implied in the said provision. On a plain reading of the statute, the movement of the goods, for the purposes of clause (b) of Section 3 of the Act would terminate only when delivery is taken, having regard to first explanation to that Section. There is no scope of incorporating any further word to qualify the nature and scope of the expression “delivery” within the said section. The legislature has eschewed from giving the said word an expansive meaning.

The Hon’ble Supreme Court opined that the interpretation of the Division Bench of the Delhi High Court does not lays down correct position of law. In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the Act, then the proper view that the interpretation of the Division course would be legislative amendment.

The Hon’ble Supreme Court held that the Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. This administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature.

Accordingly, the appeal of the Revenue was dismissed.

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