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CASE NO.: Appeal (civil) 2255-56  of  1999

PETITIONER: STATE OF TAMIL NADU

       Vs.

RESPONDENT: M/S.   KERALA  STATE  SMALL   INDUSTRIES  DEVELOPMENT  &

DATE OF JUDGMENT:       10/04/2001

BENCH: S.P. Bharucha, N. Santosh Hegde & Y.K. Sabharwal

JUDGMENT:

L...I...T.......T.......T.......T.......T.......T.......T..J

Y.K.SABHARWAL,J.

   The   respondent,   Kerala    State   Small   Industries Development and Employment Corporation Ltd., imported cement into  India under an import licence.  The ships were berthed at  Tuticorin port in Tamil Nadu and the cement unloaded  at the  said port.  The respondent had opened its branch office at  Tuticorin  to  undertake  the   delivery  of  cement  at Tuticorin  port  and  to  further transport  it  to  various parties  including  those  in  the  State  of  Kerala.   It, however,  did  not make any payment of central sales tax  to the  State of Tamil Nadu.  In respect of the cement directly despatched  from Tamil Nadu to the customers in Kerala,  the respondent  took  the stand that it had no liability to  pay the  sales tax in the State of Tamil Nadu as the goods  were imported with the intention to deliver the same to customers and  sub-allottees at Kerala.  The Enforcement Wing Officers of  the  Sales  Tax Department of the State  of  Tamil  Nadu conducted  investigation, seized the record and on the basis thereof  came to the conclusion that direct sales were  made by  the respondent-corporation from the State of Tamil  Nadu to  the State of Kerala and the said sales were  camouflaged as  sales from Kerala depots with a view to avoid payment of inter-state  sales  tax  by  showing  that  the  cement  was despatched  to  the  warehouse of the Corporation  shown  as stock-transfer whereas, in fact, it was sent directly to the customers.   The  fact  that  it was sent  directly  to  the customers  was  only  noted in the separate papers  and  not shown  in  despatch notes.  The assessing authority  on  the basis  of  documents  on record assessed the  respondent  to central sales tax in respect of assessment years 1982-83 and 1983-84  holding  that  the  documents  had  established  an inter-state  sale of imported cement and the respondent  had attempted  to  camouflage  the  transaction  in  the  manner aforestated.   The  appeals  filed by  the  respondent  were dismissed  and  the orders of assessment were upheld by  the Appellate   Assistant  Commissioner.    The  second  appeals preferred  by the respondent before the Tamil Nadu Sales Tax Appellate Tribunal were also dismissed.

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   The  aforesaid orders of the Tribunal were challenged by the  respondent  in  two revision cases filed  in  the  High Court.   The  High Court by the impugned judgment and  order has  set aside the orders of assessment and also the  orders passed  in the first and second appeals.  The State of Tamil Nadu is in appeal.

   The  only ground on basis whereof the High Court has set aside  the  orders of assessments is that the  unloading  of cement  at  the  Tuticorin port in Tamil Nadu was  purely  a fortuitous  circumstance  as, according to  the  respondent, when  the  ship came, the port of Cochin was  congested  and there  would  have  been considerable delay  and  additional expense  if the ship had to wait for a berth at Cochin  and, therefore,  Tuticorin being the nearest other port, the ship berthed  at the said port and cement was unloaded there  for the  purpose of transportation from the State of Tamil  Nadu to  the State of Kerala.  Learned counsel for the  appellant contends  that  before the High Court there was no  material whatsoever  for  coming  to  the conclusion  that  the  ship berthed  at  Tuticorin because of congestion at Cochin  port and  that being the only basis for setting aside the  orders of  Sales Tax authorities, the impugned judgment is  clearly erroneous  and  unsustainable.   Learned   counsel  for  the respondent-corporation  was unable to draw our attention  to any material which may show that the unloading of the cement at   Tuticorin  Port  had  to   be  undertaken   under   the circumstances found by the High Court.  It is evident that a submission in this regard was made across the Bar before the High Court which was accepted and made the basis for setting aside  the  findings  of fact arrived at  by  the  assessing authority  and  confirmed in first and second appeals.   The authorities,  on  consideration of material on  record,  had recorded  factual findings that the respondent had opened  a branch  office at Tuticorin before arrival of ships;  during the  period  of  nearly  9 months  cement  was  unloaded  at Tuticorin;   sale of cement from Tuticorin was directly made to  the  parties  in  Kerala   and  the  transactions   were camouflaged to show as if cement was being sent to warehouse of respondent in Kerala.  These findings have been set aside by  the  High Court without any material whatsoever.   There was  no basis for the High Court to hold that the respondent in the normal course would have transferred the entire stock of  cement  to its own godowns at Kerala and from  there  it would  have delivered the cement to its customers in  Kerala but  it  had to be unloaded at Tuticorin on account  of  the unforeseen  congestion  in the port in Kerala which  led  to ship  being diverted to Tuticorin.  There was also no  basis for  the  High Court to conclude that :  "The fact that  the lorries  loaded with cement at Tuticorin were moved directly to the premises of the customer in Kerala, in the background of  these facts, cannot be regarded as a factor tilting  the scales  in  favour of a finding that these were  inter-state sales."

   It  may  also be noticed that the Sales Tax  Authorities had  also come to the conclusion on the basis of record that well  before the arrival of the shipment at Tuticorin  port, the  respondent had opened its office at Tuticorin and  that no  material had been produced about the non-availability of berth at Cochin when the ship reached Indian Ocean.

   For  the  foregoing reasons, we set aside  the  impugned judgment  and order of the High Court and allow the  appeals with costs.

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