Form F and stock transfer claims may be rebutted by material showing direct inter-State sales; penalty needs wilful nondisclosure.

Filing of Form F under section 6A of the Central Sales Tax Act, 1956 shifts the initial burden on a stock transfer claim, but the assessing authority may still test the genuineness of the declarations against other material. Here, the reassessment was partly sustained because the record contained suspicious circumstances indicating direct inter-State sales, yet the material did not justify treating the entire disputed turnover as such, so only 25 per cent was upheld. A penalty imposed under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was unsustainable because the dispute was over transaction character and there was no wilful nondisclosure; the penalty was therefore set aside.

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Issues: (i) Whether the reassessment sustaining part of the disputed turnover as direct inter-State sales, despite the dealer's claim of stock transfers supported by F forms and other records, was justified. (ii) Whether the penalty levied on the reassessed turnover was sustainable.

Issue (i): Whether the reassessment sustaining part of the disputed turnover as direct inter-State sales, despite the dealer's claim of stock transfers supported by F forms and other records, was justified.

Analysis: Filing of form F under section 6A of the Central Sales Tax Act, 1956 discharges the dealer's initial burden of proving stock transfer, but the assessing authority may still examine the genuineness of the declarations and rely on material showing inter-State sales. The record showed that the F forms and supporting books were filed, and the reassessment proceeded on an incorrect assumption that they had not been produced. At the same time, the enforcement material disclosed suspicious circumstances, including inadequate storage facility, same-day sales, and a specific instance in which the goods were found to have moved directly to a buyer at Ernakulam rather than to the branch. On a balanced appraisal, the material did not justify treating the entire turnover as inter-State sales, but it did support rejection of the stock transfer claim to a limited extent.

Conclusion: The reassessment was upheld only in part, and 25 per cent of the disputed turnover was sustained as direct inter-State sales in favour of the Revenue.

Issue (ii): Whether the penalty levied on the reassessed turnover was sustainable.

Analysis: The penalty was imposed under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, but that provision applied to original assessment and not to escaped turnover proceedings. The appropriate provision was section 16(2), yet its ingredients were not satisfied because there was no wilful nondisclosure of turnover. The entire turnover had been disclosed, and the dispute concerned only the character of the transactions as stock transfers or inter-State sales. A wrong claim on characterization did not amount to concealment warranting penalty.

Conclusion: The penalty was unsustainable and was set aside in favour of the Assessee.

Final Conclusion: The appeal succeeded only to the extent of reducing the turnover treated as inter-State sales and in setting aside the penalty, while the balance of the reassessment was maintained.

Ratio Decidendi: Production of form F shifts the burden on stock transfer claims, but reassessment may still be sustained to the extent supported by reliable material showing direct inter-State sales; penalty cannot be imposed merely because a turnover claim is rejected unless wilful nondisclosure is established.

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