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Held, dismissing petition, the bill of entry not a document of title and admittedly it carried the name of the ultimate buyer and that there was no denial of the fact that the assessee had transferred the goods before it crossed the customs station, the only ground on which the claim was rejected was the difference in the name found in the bill of entry available with the assessee and the one with the customs authorities. With the title to the goods thus endorsed even before it crossed the customs station, the claim of the assessee could not be denied just based on the bill of entry which is admittedly not a document of title. Under section 46 of the Customs Act - Entry of goods on importation - the importer has to file bill of entry before the proper officer, which may be for home consumption or for warehousing. Only on filing the bill of entry for home consumption that the goods are allowed to be cleared after the payment of required customs duty. In the absence of any details as to whether the said entries relate to the one in the bill of entry for home consumption or any bill of entry for warehousing, the dealer's claim could not be denied.

High seas sales


52 VST 306 (Karn)

Essar Telecom Infrastructure (P.) Ltd. V.Union of India and Others

The petitioner having entered into contract with various telecom/cellular operators is required to render service in relation to passive telecom network including operating and maintenance. The assessing authority proposed to impose tax on providing of cellular tower on rent to various service providers stating that the transaction fell under the definition of deemed sale.

Providing cellular telephony towers on rent to various telecom companies amounts to transfer of right to use.

Transfer of right to use


52 VST 330 (Karn)

State of Karnataka. V.Anantha Refinery Pvt. Ltd.

The assessee sold oiled cake in course of inter-State trade and produced C forms. In the reassessment order, the sales tax was levied at four per cent.

Held:- Oil cake and de-oiled cake are different commodity : concessional rate of tax on de-oiled cake can not be extended to oil-cake.

Schedule entry


52 VST 447 ((AP)

Indus Tower Ltd. V. Commercial Tax Officer, Begumpet Circle, Hyderabad and Others.

The petitioner is in the business of providing telecom infrastructure support services to several telecom operators (such as Airtel, Vodafone, Idea, Reliance, Aircel, BSNL, etc.). The dealer builds, operates and maintains passive telecom infrastructure, also owned and controlled by it. He purchased material on form C intended for use in telecommunication network. But he was not having license issued by Dept. of Telecommunication and hence he was not telecom service provider and CTO levied the penalty as the dealer has misused the form.

Held, allowing the petition, 1) the dealer was registered as infrastructure provider by the dept. of telecommunication. It constituted a federal recognition that the reaction and maintenance of telecom towers is an activity falling within the legislative field. The dept. was not entitled to contend that the dealer was not comprehended within generic area "telecommunication network" an expression employed in sec 8(3)(b) of the CST Act. 2) That the RC under CST Act described the dealer as telecommunication network service provider. The goods purchased by them against issue of C forms during the course of inter-State transactions are goods specified for purchase for use in telecommunications network specified in its application for reg. and the goods in respect of which the penalty orders were passed under the provisions of section 10A of the CST Act were goods specified in the list of goods stated by the petitioners while applying for registration under the CST Act and enumerated in the respective certificates of registration, They were used for the erection and maintenance of the passive telecommunication infrastructure. While initial RC did state the specified goods as for use in manufacture or processing, the revised RC clearly stated in clause (f) that the goods were for use in telecommunication network as per the list attached. Therefore, the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates of registration under the CST Act granted to them, against issue of C forms and where the goods have been employed in erection and maintenance of cell phone towers which are integral to telecommunication network, fall within the ambit of section 8(1) read with section 8(3)(b) of the CST Act and are entitled to be taxed accordingly. The fact that the goods purchased by the petitioners were neither sold nor used in the manufacture of goods for re-sale does not constitute violation of the C forms. Consequently, levy of penalty, on the factual parameters apparent on the record of these cases, is unsustainable.



52 VST 484 (Karn)

Assistant Commissioner of Commercial Taxes, Bangalore and Others. V. Pink City

The dealer has not filed the return within the time prescribed nor have they paid the tax. Therefore, a penalty has been imposed under section 72(1) of the Act. The dealers have preferred writ petitions challenging the virus of section 72(1) of the Act on the ground that it is arbitrary.

Power to impose penalty within competence of State legislature.



53 VST 226 (Karn)

Ali Singhania Bulk Carriers. V. State of Karnataka.

The petitioner own fleet of vehicles and was engaged in transporting concrete mixture. The agreement to provide vehicles for transport the produce of company from its plant to the various customers in the city. The adequate number of vehicles is made available 24 hours on all the seven days of the week. The company also agreed to reimburse the dealer for diesel and lubricants. On this ground that the transaction amounted to transfer of right to use.

Held, dismissing the petition, it amounts to transfer of right to use goods as effective control of vehicles with company.

Transfer of right to use


53 VST 271 (Uttara)

Gujarat Co-op Milk Marketing Fed Ltd. V. Commissioner of Commercial Taxes, (Uttarakhand)

The assessing officer held that the product sold by the petitioner 'Amul Masti spiced Buttermilk" was not one of the item mentioned in entry Sch-I-25 of the Act which exempt tax in respect of " fresh milk, pasteurized milk, buttermilk, separated milk, curd and Lussi". Accordingly assessing authority levied tax on the dealer.

Held, allowing the petition, 'Amul Masti spiced Buttermilk" is exempt as buttermilk.

Schedule entry


53 VST 355 (Gauhati)

State of Tripura and Others. V. Joy Kali Radio Stores.

The petitioner is dealer dealing in electronic goods. The assessing authority examined the books of accounts and was of the opinion that the turnover did not appear to have been correctly disclosed. it was held that the assessee had not declared the turnover correctly. This inference was based on the observation that the dealer had not correctly declared margin of profit and closing stock.

Held, allowing the appeal, declaration of low profit and high closing stock warrants rejection of books of accounts and assessment to the best of judgment in absence of explanation.



53 VST 382 (Mad)

Sriram Refrigeration Ind. Ltd. V.State of Tamil Nadu.

The petitioner its factory at Hyderabad and supplied refrigerators to customers in Tamil Nadu. The defective compressors were brought to the petitioner for repairs at Chennai. When the defective compressor is handed over, the dealer replaced the defective compressor by a reconditioned compressor of the same model. The defective compressor received was subsequently transferred to the factory in Andhra Pradesh for rectification of the defects. The dealer collected repair charges for the defective compressors. On finding that the dealer carried out works contract of repairing the defective compressors received from their customers at Chennai and received repair charges, the assessing authority assessed the replacement of defective compressor as works contract, he gave relief of deduction at 30 per cent towards labour charges and levied tax at 70 per cent of the turnover in respect of the works contract and levied penalty.

Held, dismissing the petition, it is transaction of works contract taxable.

Sale price works contract


53 VST 401 (Gauhati)

Brahmputra Vally Construction and Suppliers. V. Oil and Natural Gas Corpn. Ltd. And Others.

ONGC entered into contract with the dealers, under which the dealers undertook to provide manned cranes according to technical specifications with the necessary accessories with valid permits, insurance, for performing of the duties as advised by ONGC, at appointed time and place. The question was whether the transaction involved the transfer of the right to use goods, taxable under the Act?

Held, hire of manned crane to ONGC amounts to transfer of right to use goods as ONGC alone entitled exclusive use.

Transfer of right to use


53 VST 489 (Karn)

Mitsubishi Corporation. V. State of Karnataka.

Under the contract, the consortium, was to supply certain 60 trains sets manufactured indigenously in India. It was contract for design, manufacture, supply and commissioning of trains for metro rail project of DMRC. The components of car body shells imported from outside country and finished propulsion system, materials were imported sent as property of consortium to BEML Bangalore for assembly, BEML, the subcontractor, after receiving the propulsion system, fits them in the car body structure fabricated by them. After car body structures are ready, the same are sent for functional tests at BEML's testing shop. Subsequent to issuance of inspection certificate arranged for the despatch of the finished car body structures to Delhi for the remaining work to be done under the contract. Thereafter, integrated testing and commissioning of the trains are done and thereafter the passenger rolling stock is transferred/ supplied to DMRC under the RSI contract. It is at that stage consortium raises sales invoice for the train set handed over to DMRC. A show-cause notice under section 12(3) of the Karnataka Act was served upon the consortium leader, i.e., Mitsubishi Corporation. for levy of tax , on the sales made by the consortium to DMRC as inter-State sales effected from the State of Karnataka to DMRC, New Delhi.

.Held, dismissing the petitions, 1)that for the manufacturing train in India, the members of consortium imported the parts and not consortium. The contract was entered in between the Consortium and DMRC. There was no privity of contract between the DMRC and the firm at Japan or Korea to supply those materials. Thus it could not be said that the sale took place in the course of import within the meaning of sec 5(2) of CST Act. 2) After these materials were procured by the members of the consortium and not the consortium they were delivered to BEML. These cars were assembled/fabricated/manufactured. That is what is agreed to under the agreement. The Tribunal had observed that the various services like testing, interfacing, commissioning, etc., employed at Delhi before the delivery of the trains sets to DMRC are in the nature of post manufacturing activity and therefore they are incidental to the main objective of supply of train sets to the DMRC and whatever that had been attended to at Delhi is in the nature of curing the defects and making the train in the presentable form. thus it could not be said that the goods reached the deliverable state only after the incorporation of electronic and telecommunication item into these coaches. Though the sale has taken place at Delhi, as the agreement of sale occasioned the movement of goods from Bangalore to Delhi, it is an inter-State sale as defined under section 3 of the Act and consequently section 6 is attracted. Karnataka state had the authority to levy tax as per sec 9 of the Act. There was no question of the very same goods suffering tax over and over again as the Govt. of India has granted exemption from payment of custom duty and excise duty and the Delhi state subsequently exempted the assessee from payment of sales tax. 3) for the very same assessment year the Tribunal has held that no sales tax is leviable in respect of the transaction i.e. goods moved from Faridabad to BEML on behalf of Rotem Company for the execution of works contract at BEML work at Bangalore and that on the fact s there was no sale either in Karnataka or interstate sale did not operate as res judicata as the subject matter of the appeal was different and the question whether the consortium was liable under sec 6 of CSTR Act was neither raised therein nor answered by Tribunal.

Sale in the course of import


53 VST 526 (All)

Rathi Industries Ltd. V. Commissioner of Trade Tax, (UP), Lucknow.

Whether the appeal against the order levying penalty under UP Tax Act was dismissed time-barred, an application u/s 10B of the Act was rejected by Dy. Commr. On the ground of dismissal of appeal and The Tribunal on appeal held on merit that the order levying penalty was not erroneous or improper and on revision petition contending that the levy of penalty was not legal in absence of any adverse inference in assessment proceeding.

Held- Assessment order passed subsequent to penalty order cannot be looked into for revising order of penalty.



54 VST 271 (Bom)

National Organic Chemical Industries Ltd. V. State of Maharashtra.

The petitioner entered into a contract with Assam Gas for the performance of the work of laying HDPE pipe for transportation of natural gas. The assessing officer considered the transaction with Assam Gas as a divisible transaction which could be divided into two parts, namely, sale of HDPE pipes and installation of the same as per the contract with Assam Gas. DC(Appeal) as well as Tribunal affirmed order.

Held, (1) that the agreement between the applicants and the Assam Gas was a works contract and it could not be divided into two parts, namely, contract to supply the pipes and a contract to lay down the pipelines. The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants. In order to comply with the contractual obligation cast on the applicants, the applicants were required to do various acts set out in clause 3 "scope of work" ultimately to see that the HDPE pipes are laid for transportation of natural gas. The acts to be committed by the applicants could not be divided into two parts, namely, supply of pipes and laying down the pipes. The use of this term contract value clearly indicates that the consideration payable to the applicants was to be calculated as a whole and not in parts. The payment terms set out in the said agreement speak in favour of the applicants that the contract was to be read as an inter-State indivisible works contract. Clause 21 specifically mention that the work was awarded to the applicants on a turnkey basis. The invoices raised at the time of taking out pipes out of the factory premises by the dealer for the purposes of compliance of excise duty provisions specifically mentioned that the articles were for home consumption and not to be sold in the market but to be used in performing contract. Looking to the terms of the agreement as a whole, the property in pipes which were to be used for creation of a pipeline would pass on only after the applicants completed acts to be performed by them as per the terms of the agreement. The transaction to supply and laying down the pipe being inseparable, it would constitute works contract and to such a works contract, the liability to pay Central sales tax would arise only after May 11, 2002 and since the transaction in the present case pertains to the period prior to May 11, 2002, the applicant would not be liable for Central sales tax.(ii) that the distinction between a divisible contract and an indivisible contract came to an end after the 46th Amendment to the Constitution of India, however, liability to pay Central sales tax covered by property in goods involved in the works contract could be fastened only after May 11, 2002 when the definition of term "sale" was amended on account of Act 20 of 2002.

Whether divisible or indivisible


54 VST 442 (Ker)

Trivendrum Club. V. Sales Tax Officer (Luxury Tax) and Another.

Whether luxury tax is payable on Club allowing guest the to stay in cottages and rooms attached to it on rent and other charges under the provisions of the Kerala tax on Luxuries Act.

Held- dismissing petition, the expression "hotel" as defined under Act has a wide meaning. Explanation thereto covers even guest house run by the Government or a company or a corporation. Renting out of rooms by the club need not be as business to attract liability under the Act. Club as a person liable to luxury tax is recognised by the charging sections and in fact, specific provisions stated above are there for charging luxury tax on clubs on membership fee at the rate of Rs. 100 per member per year, and also on rent collected for auditorium, kalyanamandapam, etc., attached to clubs. So much so, we feel there is no necessity for the Department to prove that the accommodation provided to guests in cottages and rooms attached to clubs for residence is a business activity of the club to levy luxury tax thereon. Further, there was no prohibition against club making profit by renting out cottages and rooms to its members or to members of affiliated clubs, and what was required to prove was that the rooms were rented out in excess of the charges provided in the Act attracting liability of luxury tax.

Luxury Act


55 VST 1

ABB Ltd. V.Commissioner, Delhi Value added Tax.

The questions of law which arise for consideration in this case are :"(i) Whether the sale transactions in the present case were in the course of the inter-State trade, so as to attract the provisions of CST Act, 1956 ?
(ii) Whether an inter-State trade is deemed to have been taken place in the course of movement of goods into and inside the country? and
(iii) Whether the sale made to the Delhi Metro Rail Corporation is in the course of import and consequently exempt from the Delhi VAT Act, 2, especially section 7(c) of the DVAT Act, read with section 5(2) of the CST Act.

Held, allowing the appeals, express stipulation of interstate movement of goods in agreement not necessary to constitute a sale in course interstate sale.

Interstate sale


55 VST 81 (Ker)

MGF Motors Ltd. V.State of Kerala.

Whether the replacement of parts of automobile during warranty period without collecting any price for the same from the vehicle owner amounts to sale that attracts sales tax.

Held, Free replacement of parts during warranty period amounts to sale



55 VST 89 (Karn)

Sasken Communication Technologies Ltd. V. Jt. Commissioner of commercial Taxes (Appeals)-3, Bangalore and Another.

Whether software development according to specification of customer sales?

Held- allowing the appeal, the parties had entered into an agreement whereby the assessee renders service to the client for development of software, i.e., for software development and other services. The dealer agreed, that all patentable and unpatentable, inventions, discoveries and ideas which are made or conceived as a direct or indirect result of the programming or other services performed under the agreement shall be considered as works made for hire and shall remain exclusive property of the client and the assessee shall have no ownership interest therein. Therefore, even before rendering service, the assessee has given up his rights to the software to be developed by the assessee. The considerations under the agreement is not for the cost of the project, the consideration is for the service rendered, based on time or man hours. The Software so developed even before it is embedded on the material object or after it is embedded on a material object exclusively belongs to the customer. In the entire contract there is nothing to indicate that the assessee after developing the software has to embed the same on a material object and then deliver the same to the customer so as to have title to the project which is developed. The title to the project/software to be developed lies with the customer even before the assessee starts rendering service.

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