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Vega Cotton represented by its proprietor V. Vivekanandan v/s The Check Post Officer, Deputy Commercial Tax Officer, Check Point-II, Hosur & Another


Company & Directors' Information:- THE COTTON CORPORATION OF INDIA LIMITED [Active] CIN = U51490MH1970GOI014733

Company & Directors' Information:- J. K. COTTON LIMITED [Active] CIN = U17111UP1924PLC000275

Company & Directors' Information:- P D COTTON PRIVATE LIMITED [Active] CIN = U52321GJ2007PTC051857

Company & Directors' Information:- I. B. COMMERCIAL PRIVATE LIMITED [Active] CIN = U70101MH2007PTC167888

Company & Directors' Information:- R. M. COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909WB2007PTC119841

Company & Directors' Information:- G L COMMERCIAL LIMITED [Active] CIN = U74130DL1985PLC020182

Company & Directors' Information:- R. I. COTTON PRIVATE LIMITED [Active] CIN = U17120GJ2010PTC061139

Company & Directors' Information:- T. R. COMMERCIAL PRIVATE LIMITED [Active] CIN = U67120OR2008PTC010275

Company & Directors' Information:- H C COMMERCIAL LTD [Active] CIN = U72300WB1970PLC027736

Company & Directors' Information:- M B COMMERCIAL CO LTD [Active] CIN = L51909WB1960PLC024849

Company & Directors' Information:- M B COMMERCIAL CO LTD [Active] CIN = U51909WB1960PLC024849

Company & Directors' Information:- D D COTTON PRIVATE LIMITED [Active] CIN = U17120MH1994PTC156054

Company & Directors' Information:- A R COMMERCIAL PRIVATE LIMITED [Active] CIN = U17210WB2011PTC170257

Company & Directors' Information:- P. I. COTTON PRIVATE LIMITED [Active] CIN = U17120GJ2007PTC050747

Company & Directors' Information:- V & G COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909MH2011PTC213338

Company & Directors' Information:- H G COMMERCIAL PVT LTD [Active] CIN = U52190WB1991PTC050743

Company & Directors' Information:- B V COTTON PRIVATE LIMITED [Active] CIN = U17111GJ2004PTC044704

Company & Directors' Information:- S K COTTON PRIVATE LIMITED [Active] CIN = U17110GJ2006PTC047511

Company & Directors' Information:- S B P COMMERCIAL PVT LTD [Active] CIN = U51101AS1996PTC004692

Company & Directors' Information:- S R COTTON PRIVATE LIMITED [Active] CIN = U17120KA2013PTC071881

Company & Directors' Information:- R K COMMERCIAL LTD [Active] CIN = L65993WB1982PLC035298

Company & Directors' Information:- L R COMMERCIAL PVT LTD [Active] CIN = U70102WB1995PTC073665

Company & Directors' Information:- S D S COTTON PVT LTD [Active] CIN = U17115PB1991PTC011007

Company & Directors' Information:- J K COMMERCIAL CORPN LTD [Strike Off] CIN = U65923UP1943PLC001188

Company & Directors' Information:- M M K COMMERCIAL PRIVATE LIMITED [Active] CIN = U27100WB2008PTC128229

Company & Directors' Information:- P A COTTON PVT LTD [Active] CIN = U74999WB1992PTC055525

Company & Directors' Information:- D D COTTON PRIVATE LIMITED [Not available for efiling] CIN = U17115PB1994PTC014981

Company & Directors' Information:- M G B COMMERCIAL PVT LTD [Amalgamated] CIN = U74950WB1993PTC060732

Company & Directors' Information:- V A M COMMERCIAL CO LTD [Active] CIN = U51909WB1983PLC036163

Company & Directors' Information:- R C COMMERCIAL PRIVATE LIMITED [Active] CIN = U67120UP1992PTC014057

Company & Directors' Information:- D G COMMERCIAL PRIVATE LIMITED [Converted to LLP] CIN = U52100AS2007PTC008457

Company & Directors' Information:- J B COMMERCIAL CO PVT LTD [Active] CIN = U51909WB1980PTC033099

Company & Directors' Information:- V & S COMMERCIAL PVT LTD [Active] CIN = U51909CT2006PTC001660

Company & Directors' Information:- A-Z COMMERCIAL PRIVATE LIMITED [Active] CIN = U51109DL1993PTC053697

Company & Directors' Information:- K S COTTON PRIVATE LIMITED [Active] CIN = U17299WB2003PTC096994

Company & Directors' Information:- G N M COMMERCIAL PVT LTD [Active] CIN = U51909WB1996PTC080365

Company & Directors' Information:- P J COMMERCIAL PRIVATE LIMITED [Strike Off] CIN = U52190WB2009PTC140508

Company & Directors' Information:- P M COMMERCIAL CO LTD [Active] CIN = U51909WB1982PLC035383

Company & Directors' Information:- J M COMMERCIAL & CO LTD [Converted to LLP] CIN = U67120DL1982PLC242476

Company & Directors' Information:- S P COMMERCIAL CO LTD [Strike Off] CIN = U45201WB1982PLC035237

Company & Directors' Information:- B B COMMERCIAL LTD [Active] CIN = L51909WB1980PLC033130

Company & Directors' Information:- T T COMMERCIAL CO PVT LTD [Active] CIN = U70101WB1995PTC075032

Company & Directors' Information:- W & F COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909WB2004PTC098442

Company & Directors' Information:- N P P COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909DL2004PTC127585

Company & Directors' Information:- POINT S INDIA PRIVATE LIMITED [Active] CIN = U50400DL2020FTC372920

Company & Directors' Information:- A. T. COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909WB2008PTC127621

Company & Directors' Information:- U S COMMERCIAL PVT LTD [Active] CIN = U51502WB1992PTC057239

Company & Directors' Information:- B D COTTON PRIVATE LIMITED [Active] CIN = U51909GJ1978PTC003234

Company & Directors' Information:- A D COMMERCIAL INDIA PRIVATE LIMITED [Active] CIN = U51109AS1999PTC005668

Company & Directors' Information:- I D COMMERCIAL PRIVATE LIMITED [Active] CIN = U51109WB1980PTC032739

Company & Directors' Information:- P C POINT (INDIA) PRIVATE LIMITED [Active] CIN = U21010MH1999PTC122222

Company & Directors' Information:- G K COTTON PVT LTD [Active] CIN = U00309BR1982PTC001698

Company & Directors' Information:- S G COMMERCIAL CO PVT LTD [Strike Off] CIN = U15312WB1955PTC022120

Company & Directors' Information:- A & M COMMERCIAL PRIVATE LIMITED [Active] CIN = U72900DL2000PTC106023

Company & Directors' Information:- S P N COMMERCIAL PRIVATE LIMITED [Active] CIN = U52390WB2010PTC140826

Company & Directors' Information:- J. D. COMMERCIAL PRIVATE LIMITED [Active] CIN = U72200DL2009PTC188147

Company & Directors' Information:- J. D. COMMERCIAL PRIVATE LIMITED [Active] CIN = U34100DL2009PTC188147

Company & Directors' Information:- B E & I COMMERCIAL PVT LTD [Active] CIN = U24231WB1986PTC040618

Company & Directors' Information:- R R COTTON PRIVATE LIMITED [Active] CIN = U17111DL1998PTC094459

Company & Directors' Information:- B COMMERCIAL PRIVATE LIMITED [Strike Off] CIN = U60230OR2011PTC014188

Company & Directors' Information:- M G COMMERCIAL PVT LTD [Active] CIN = U51109WB1960PTC024564

Company & Directors' Information:- K P COMMERCIAL PRIVATE LIMITED [Active] CIN = U72200GJ1999PTC036317

Company & Directors' Information:- B S COMMERCIAL COMPANY PVT LTD [Strike Off] CIN = U70101WB1985PTC038889

Company & Directors' Information:- A S COMMERCIAL PVT LTD [Active] CIN = U51909WB1989PTC047016

Company & Directors' Information:- S N H P COMMERCIAL PRIVATE LIMITED [Active] CIN = U51109WB2005PTC101704

Company & Directors' Information:- H M COMMERCIAL PRIVATE LIMITED [Strike Off] CIN = U52599WB2007PTC112975

Company & Directors' Information:- S. V. COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909WB2010PTC145115

Company & Directors' Information:- VEGA PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057672

Company & Directors' Information:- S R COMMERCIAL PVT LTD [Active] CIN = U27209WB1987PTC041901

Company & Directors' Information:- G R COMMERCIAL PRIVATE LIMITED [Active] CIN = U74899DL2000PTC108839

Company & Directors' Information:- S W E COMMERCIAL PVT LTD [Active] CIN = U51909WB1987PTC042129

Company & Directors' Information:- Y-POINT (INDIA) PRIVATE LIMITED [Amalgamated] CIN = U72900MH2000PTC126767

Company & Directors' Information:- VEGA COMMERCIAL PRIVATE LIMITED [Active] CIN = U51109WB2007PTC114974

Company & Directors' Information:- T J COMMERCIAL PRIVATE LIMITED [Strike Off] CIN = U51434WB2001PTC093979

Company & Directors' Information:- C R COTTON INDIA PRIVATE LIMITED [Active] CIN = U17299DL2006PTC145903

Company & Directors' Information:- A S J COMMERCIAL PRIVATE LIMITED [Active] CIN = U15497DL2012PTC230407

Company & Directors' Information:- P K C COMMERCIAL INDIA LIMITED [Active] CIN = U00800BR1995PLC006542

Company & Directors' Information:- S B COMMERCIAL PVT LTD [Strike Off] CIN = U99999MH1982PTC028334

Company & Directors' Information:- P P COMMERCIAL PVT LTD [Strike Off] CIN = U51909WB1986PTC041237

Company & Directors' Information:- B V COMMERCIAL PVT LTD [Active] CIN = U51109WB2006PTC108218

Company & Directors' Information:- D S COMMERCIAL PVT LTD [Strike Off] CIN = U26101WB1958PTC023936

Company & Directors' Information:- S R M COMMERCIAL PRIVATE LIMITED [Active] CIN = U51909WB2009PTC137093

Company & Directors' Information:- H T COMMERCIAL PRIVATE LIMITED [Active] CIN = U51109MH2010PTC209413

Company & Directors' Information:- B C COMMERCIAL CO PVT LTD [Active] CIN = U51109WB1987PTC043138

Company & Directors' Information:- K B J COMMERCIAL COMPANY PVT LTD [Strike Off] CIN = U51109WB1991PTC051045

Company & Directors' Information:- M V COMMERCIAL PRIVATE LIMITED [Active] CIN = U18101WB2010PTC150651

Company & Directors' Information:- VEGA INDIA PRIVATE LIMITED [Converted to LLP] CIN = U74999DL2017PTC326249

Company & Directors' Information:- N K COMMERCIAL PRIVATE LIMITED [Active] CIN = U74999DL2020PTC370258

Company & Directors' Information:- A G S COMMERCIAL PVT LTD [Strike Off] CIN = U45400WB1990PTC050079

Company & Directors' Information:- U B COMMERCIAL PVT LTD [Strike Off] CIN = U51229WB1996PTC077559

Company & Directors' Information:- Hosur [] CIN = AAL-5058

Company & Directors' Information:- COMMERCIAL CORPORATION LIMITED [Dissolved] CIN = U99999MH1912PTC000353

Company & Directors' Information:- COMMERCIAL INDIA LIMITED [Under Liquidation] CIN = U99999MH1937PTC002591

Company & Directors' Information:- COMMERCIAL COMPANY OF INDIA LIMITED [Dissolved] CIN = U99999MH1941PTC003335

    W.P. Nos. 22802 to 22804 of 2013 & M.P. Nos. 1, 1 & 1 of 2013

    Decided On, 19 May 2020

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE C. SARAVANAN

    For the Petitioner: S. Raveekumar, Advocate. For the Respondents: R. Swarnavel, G.A.



Judgment Text


(Common Prayer:Writ Petitions filed under Article 226 of the Constitution of India praying to issue Writ of Certiorari, to call for the records of the 1strespondent in GDR No.8016/2013-14, 8017/2013-14(Invoice No.424 dated 12.08.2013) and 8017/2013-14(Invoice No.423 dated 12.08.2018) dated 15.08.2013 and quash the same.)

1. Common Order:

1. By this common order all the three writ petitions are being disposed. The petitioner has challenged three impugned proceedings dated 15.8.2003 bearing reference GDR No. 8016/2013-14; GDR No. 8017/2013-14; and GDR No. 8017/2013-14 wherein not only tax at 5% has been proposed and demanded but also compounding fees being twice the amount of the duty proposed has been imposed on the petitioner. The petitioner has been given an option to pay the aforesaid amount as compounding amount in lieu of prosecution.

2. The petitioner claims to have received purchase orders from M/s. Sri Vishnu Mills, Coimbatore, M/s. Varun Mills, Udumalpet and PSM Textiles, Coimbatore

3. It is the case of the petitioner that the petitioner purchased cotton from a supplier namely Balaji Cotton Trading Company, Maharashtra for being supplied to the above customers. The tax invoices was raised by the supplier directly in the name of the above three persons to whom the supply was to be affected directly. The tax invoices specifically stated that the consignee were the three above named persons and the sale was on account of M/s. Vega Cotton, Karikal, the petitioner.

4. While in transit, the three consignments of goods were detained by the 1st respondent near Kuppam, Krishnagiri District vide two different detention notices as one of the lorry had two consignments for being delivered in Coimbatore.

5. Pursuant to the aforesaid detention of the three consignment of goods, the petitioner sent a representation dated 14.8.2013 and requested for immediate release of the detained lorry and the consignment of goods on the ground that the transaction was covered by E1 sales invoice and therefore the transaction outside the purview of the respondents under Tamil Nadu Value Added Act, 2006. The detention notice however reportedly stated that the transactions in the invoice were doubtful and would require further investigation.

6. Thereafter, the impugned orders titled as “Draft Compounding Notice” were issued to the petitioner which not only demanding tax but also compounding/composition fee for the three consignments for the petitioner.

7. The petitioner is aggrieved by the same and submits that the 1strespondent is neither authorised to detain the goods/vehicle nor call upon the petitioner to pay the compounding/composition fee/amount under section 72 of the Tamil Nadu Value Added Tax Act, 2006.

8. It is submitted that the respondent has no power to include gross profit in the tax. It is further submitted that only 2nd respondent is competent to levy and collect tax, if at all, tax was payable by the petitioner and was not paid by the petitioner.

9. It is specifically submitted that the 1st respondent being an Enforcement Wing Officer, has no power to take any action other than those mentioned in section 67 of the Tamil Nadu Value Added Tax Act, 2006.

10. It is further submitted that rule 15 of the Tamil Nadu Value Added Tax Rules, 2007 specifically excludes authority of the 1st respondent to deal with the provisions of section 71 and 72 of the said Act.

11. Per contra, the 1st respondent has filed 2 separate common counters dated April, 2014 and 2nd December, 2019. In both the counters it has been stated that the two lorries carrying three consignments were detained on 14.8.2013 and it was found that the consignment had originated from a trader from Maharashtra and on verification it was found that the 3 local purchases were willing to pay tax at 5% on the transaction.

12. It is only thereafter, the impugned draft compounding notices dated 15.8.2013 were issued to the petitioner. It is submitted that petitioner has an alternate remedy under section 54 of the Tamil Nadu Value Added Tax Act, 2006. It is further submitted that as per rule 15 (1) Of the Tamil Nadu Value Added Rules, 2007, the Deputy Commercial Tax Officer/Check Post Offices are competent to conclude whether the petitioner had evaded payment of tax in their earlier transactions also and therefore in lieu of prosecution, the petitioner was given an opportunity to compound the offence on payment of the amount prescribed under section 72 (1) of the Tamil Nadu Value Added Tax Act, 2006 by way of the impugned notices.

13. It is further submitted that as per section 71 of the Tamil Nadu Value Added Tax Act, 2006, any person who violates the provisions of the Act or commits an offence is liable to be prosecuted after obtaining written consent of the Joint Commissioner under section 73 of the Tamil Nadu Value Added Tax Act, 2006 and therefore it is for the petitioner to opt for compounding of the offences to avoid prosecution. As far as taxes concerned, payment if any would be subject to further proceedings. It is therefore submitted that it is for the petitioner to opt for the compounding of the offence by paying the composition fee or in the alternate face the prosecution proceedings as and when same is sanctioned by the competent authority.

14. I have considered the rival submissions made on behalf of the petitioner and the respondents by their respective counsels. The question of petitioner evading tax in respect of a transaction which has emanated from outside the State cannot be taxed on its entry within into the State of Tamil Nadu as in the present case.

15. If at all, the Check Post authorities at Maharashtra border had found that the goods were not charged to tax on such inter-state sale, they would have detained the goods and the lorry there. In fact, they would have collected appropriate central sales tax before the goods left the Maharashtra border under the provisions of the Central Sales Tax Act, 1956. As such, no taxable event had taken place within the State of Tamil Nadu. The 1st respondent thus had no authority to tax the above transaction. For the same reason, there was also no scope for invoking Section 72 of the TNVAT Act, 2006 under the circumstances.

16. At the same time, the argument of the learned counsel for the petitioner that there was an E1 Transaction appears to be misplaced in as much E1 Transaction takes place only after the goods have been put to the possession of the transporter for being supplied to the buyer outside the State and the said buyer effects a subsequent sale while the goods are in the possession of the transporter or in transit.

17. Central Sales Tax Act 1956 envisages a single point of taxation i.e. tax at the first point of sale. Subsequent sales during the movement of the goods from one state to another is exempted under section 6(2) of Central Sales Tax Act 1956.

18. As per the prevailing trade practices, when the goods are put in possession of the carrier for transportation, the carrier issues a receipt to the seller [i.e. “lorry receipt” in case of road transport; a “railway receipt” in case of transport by rail, an “airway bill” in case of transport by air and a “courier receipt” in the case of transportation though the courier services.] This receipt issued by carrier is the document of title to goods.

19. As per Section 2(4) of the Sales of Goods Act, 1930 transfer of goods can be by an “endorsement or delivery of documents of title”. Thus, receipt is either transferred by a mere delivery or with an endorsement on the document. Even though goods can be transferred by mere delivery of documents without endorsement on such document, as a prudent practice, the transfer the documents generally accompanies a written endorsement on the documents. The seller sends such receipt to the buyer. The buyer takes delivery of goods from the carrier, on production of the receipt to the carrier.

20. As per Section 3(b) of the Central Sales Tax Act 1956, a sale or purchase can be effected by transfer of documents of title to the goods during their movement from one state to another shall be deemed to take place in the course of interstate trade or commence. As per Explanation 1 to section 3 of the Central Sales Tax Act 1956 the movement of goods commences with the delivery of goods to carrier or other bailee or transmission and terminates when delivery is taken from the carrier.

21. As per Explanation 2 to section 3 of the Central Sales Tax Act 1956, it shall not be deemed to be a movement of goods from one state to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other state where the movement of goods commences and terminates in the same state.

22. Section 6(2) of CST provides exempts from payment CST on subsequent sales, which has been effected by transfer of documents of title of goods during their movement in the cost of interstate sales.

23. In A & amp; G Projects and Technologies Ltd v. State of Karnataka [2009] 2 SCC 326 , the Supreme court held that once the first transaction in the inter state sale has suffered CST, subsequent sales effected by transfer of documents during transit is exempt provided conditions prescribed u/s 6(2) are satisfied. The Supreme court observed as such:

15. Section 6(1) of the CST Act, 1956 imposes a liability to pay tax on sale of goods other than electrical energy effected by a dealer in the case of inter-State trade or commerce during a year. Sub-section (1) of Section 6 appears to provide for multi-point tax but this is subject to the other provisions of the Act. This qualification which is reflected in the other provisions of the Act restricts the levy to a single point subject to certain conditions, restrictions and circumstances. Sub-section (2) of Section 6 exempts from levy a subsequent inter-State sale to a registered dealer of goods [described in Section 8(3)] and also to the Government, provided conditions of the proviso to subsection (2) are fulfilled. However, a subsequent sale not falling within Section 6(2) will, however, attract tax because of Section 9(1), notwithstanding the fact that the first sale has been subjected to tax under Section 6(1) of the CST Act, 1956. Thus, Section 6 makes every dealer liable to pay tax under the 1956 Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade.

16. Analysing Section 6(2), it is clear that sub-section (2) has been introduced in Section 6 in order to avoid cascading effect of multiple taxation. A subsequent sale falling under sub-section (2), which satisfies the conditions mentioned in the proviso thereto, is exempt from tax as the first sale has been subjected to tax under sub-section (1) of Section 6 of the CST Act, 1956. Thus, in order to attract Section 6(2), it is essential that the sale concerned must be a subsequent inter-State sale effected by transfer of documents of title to the goods during the movement of the goods from one State to another and it must be

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preceded by a prior inter-State sale. It is only then that Section 6(2) may be attracted in order to make such subsequent sale exempt from levy of sales tax. However, the proviso to sub-section (2) of Section 6 prescribes further conditions and it is only on fulfilment of those conditions that the subsequent sale stands exempted. If those conditions are not satisfied, then notwithstanding the fact that the sale is a subsequent sale, the exemption would not be admissible to such subsequent sales. This is the scheme of Section 6 of the CST Act, 1956. 24. Thus, the argument of the learned counsel for the petitioner that there was an E-1 transaction cannot be countenanced in the facts of the present case. 25. Only such transaction would be exempted under section 6 (2) of the Central Sales Tax Act, 1956. This is on the underlying principle under the Central Sales Tax Act, 1956 that subsequent sale of goods in the course of interstate trade and commerce are not taxed twice. 26. In the light of the above discussion, I am inclined to allow the above writ petitions. Accordingly, all the writ petitions are allowed and the impugned orders are quashed. Consequently, connected miscellaneous petition are closed. No costs.
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