While issuing notice to the respondents on Friday, a bench headed by Justice S H Kapadia said the interim order passed on June 27, not to initiate coercive steps by Karnataka for collecting crores of rupees as sales tax against consortium, would continue.
Senior Counsel Ashok Desai submitted that according to the special provisions, Delhi Metro was not liable to pay any sales tax to any authority for any purchase. Desai said 50 per cent of the total tax amount had been deposited with the Karnataka High Court which dismissed the petition of consortium comprising Mitsubishi Corporation, Japan, Rotem Company, Korea and Mitsubishi Electric Corporation, Japan (MRM).
The High Court in a 23-page judgement said: “The movement of goods from Bangalore to Delhi fulfils the obligation under the main contract entered between the consortium and Delhi Metro Rail Corporation and therefore it is an inter-state sale. In view of this, it squarely falls within the provisions of Section 3a of Central Sales Tax Act and therefore Karnataka can levy tax from the consortium.”  Acting on the application filed by Counsel Dushyant Dave, the court impleaded the Delhi Metro Rail Corporation (DMRC) in the case.
Mitsubishi had argued that the Karnataka High Court had erroneously held that the consortium would have to pay sales tax to the Karnataka government, even though the company had been importing the components from abroad and only assembling the cars in collaboration with the Bharat Earth Movers Limited (BEML), a public sector organisation at Bangalore.
Citing the provisions of the Central Act and State Act, he said there must be a sale to attract the provisions of Sections 3 of the Central Act. The movement of goods from Karnataka to Delhi do not constitute a sale since there is no transfer of property in this case.
The movement of the cars occasioned in pursuance of a job work contract, independent of the main contract sale and payments to the job-worker, were made only as per the job.
Moreover, the consortium had been paying sales tax and VAT to the Delhi government ever since it was supplying the cars to start the metro service in the capital.
It was only assembling of rolling stocks at Bangalore imported from Japan and Korea by the consortium — Mitsubishi Corporation, Japan, Rotem Company, Korea and Mitsubishi Electric Corporation, Japan (MRM) and the trains are pulled for testing and commissioning at DMRC depot, Delhi, said Salve.
The MRM entered into a contract with the DMRC for the supply of the train bodies. The consortium tied up with the BEML on June 28, 2002 on a job work contract for the fabrication of the car body out of the knocked-down and semi-knocked down components sourced from Rotem Company, Korea.
“The material is delivered to the BEML as a free issue material for the job work purpose. The Rotem has transferred the technology to the BEML to do the welding job at its workshop to manufacture the cars,” the petition said.