2009 (10) TMI 857 - HC - VAT and Sales Tax

Inter-State Sales Proof: C Forms Insufficient. Concrete Evidence Required for Assessments.

The court held that the mere production of C forms is insufficient to prove inter-State sales without accompanying evidence of physical transport of ... Whether the Tribunal was justified in holding that mere production of C forms is sufficient proof of inter-State sales? Held that:- In view of our finding that failure of the respondent to prove inter-State movement will justify assessment of the turnover under the KGST Act, we have to necessarily reverse the order of the Tribunal which has allowed the appeal just based on C forms produced. However, we feel one more opportunity can be granted to the respondent to produce available proof of inter-State movement of goods before the assessing officer within a period of two months from the date of receipt of copy of this judgment for the officer to reconsider the matter and if required, cross-check the check-post records if available. We make it clear that if proof of inter-State movement is produced for substantial quantity of the turnover, then the entire claim should be allowed because at this distance of time the respondent may not be able to produce L.Rs. for all the transactions. It is up to the respondent to produce copies of L.Rs., details of freight paid through cheques, etc. If evidence is produced, the assessing officer will revise the assessments granting concessional rate. On the other hand if the respondent fails to produce documents for substantial turnover of inter-State sales, then the Tribunal's order will stand reversed and the assessments made under the KGST Act will stand confirmed. Issues:1. Whether mere production of C forms is sufficient proof of inter-State sales.Analysis:The primary issue in this case is whether the mere production of C forms can be considered as sufficient proof of inter-State sales. The respondent, a reputed company engaged in sales, faced a challenge from the assessing officer who demanded proof of transport of goods from Kerala to Mahe, which the respondent failed to provide. The Tribunal based its decision solely on the C forms produced by the respondent, leading to the State filing a revision.The Government Pleader argued that mere production of C form is not conclusive evidence of inter-State sale, citing a Division Bench decision. The court highlighted the importance of physical movement of goods in inter-State sales under section 3(a) and 3(b) of the CST Act. The court emphasized the necessity of transport documents such as lorry receipts or railway receipts to establish the movement of goods from one state to another.The court expressed doubts regarding the genuineness of the transactions and criticized the respondent for failing to produce documents proving the transport of goods from Cochin to Mahe. The court noted that the absence of such evidence raised suspicions about the nature of the transactions, especially considering the unnecessary transportation of goods over long distances.In light of the findings, the court concluded that the mere production of C forms is insufficient to prove inter-State sales without accompanying evidence of physical transport of goods. The court granted the respondent an opportunity to produce proof of inter-State movement within a specified timeframe for the assessing officer to reconsider the matter. Failure to provide substantial evidence would result in the confirmation of assessments under the KGST Act, overturning the Tribunal's decision based solely on C forms.In summary, the judgment underscores the importance of substantiating inter-State sales with concrete evidence of physical movement of goods and highlights the risks associated with relying solely on C forms for such transactions.