Branch transfer proof and assessment limitation under CST sustained as recovery demand survived collateral challenge

Form F declarations under section 6-A of the Central Sales Tax Act are the statutory proof for branch transfers and consignments; in their absence, movement of goods outside the State is treated as a sale for CST purposes, and the demand was upheld. Assessment orders were also found to be within the applicable limitation periods under the State sales tax laws incorporated by section 9(2). Limitation runs from the making of the assessment, not its service, and assessments completed near the end of the period are not illegal if timely. The Court further held that voidness, new factual pleas raised only in reply, mala fides, and a common post-assessment demand notice were not established, so the recovery notice stood.

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Issues: (i) whether the goods sent outside the State were inter-State sales taxable under the Central Sales Tax law or only branch transfers and consignments covered by the statutory declaration requirement; (ii) whether the assessment orders were barred by limitation; (iii) whether limitation had to be tested with reference to the date of service of the assessment orders; (iv) whether assessment orders passed towards the end of the limitation period were illegal; (v) whether the assessment orders could be ignored as void and non-est without a direct challenge; (vi) whether factual pleas first raised in the reply affidavit could be examined in writ proceedings; (vii) whether the demand notice was vitiated by mala fides; and (viii) whether a common demand notice for four assessment years issued after the assessments was illegal.

Issue (i): whether the goods sent outside the State were inter-State sales taxable under the Central Sales Tax law or only branch transfers and consignments covered by the statutory declaration requirement.

Analysis: Section 6-A of the Central Sales Tax Act places the burden on the dealer to prove that the movement of goods from one State to another was otherwise than by sale. The prescribed declaration in Form F under Rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957 is the statutory mode of proof. In the absence of such declaration, the movement is deemed to be a sale for the purposes of the Central Sales Tax Act. The record showed separate assessments under the State sales tax law and under the Central sales tax law, and the impugned demand related only to failure to furnish Form F declarations for consignments sent outside the State.

Conclusion: The contention that intra-State sales were wrongly treated as inter-State sales was rejected, and the demand under the Central Sales Tax law was upheld.

Issue (ii): whether the assessment orders were barred by limitation.

Analysis: Under Section 9(2) of the Central Sales Tax Act, the limitation for assessment is governed by the corresponding State sales tax law. For the relevant years, Section 14(1) of the Andhra Pradesh General Sales Tax Act, 1957 applied, and for the later year Section 21(4) of the Andhra Pradesh Value Added Tax Act, 2005 applied. The assessments for the concerned years were made within the respective three-year or four-year periods prescribed by those provisions.

Conclusion: The assessments were held to be within limitation and not time-barred.

Issue (iii): whether limitation had to be tested with reference to the date of service of the assessment orders.

Analysis: The statutory limitation governs the making of the assessment order, not its service. While unexplained delay in communication may in a proper case support an inference that an order was not actually made on the date shown, such a plea must be clearly raised and supported by facts in the writ petition. No such plea was taken in the writ affidavit, and the Court declined to examine the point for the first time on reply.

Conclusion: The argument that limitation should run till service of the assessment order was rejected.

Issue (iv): whether assessment orders passed towards the end of the limitation period were illegal.

Analysis: The statutory provisions only require that the assessment be completed within the prescribed period. There is no legal requirement that it must be made immediately after the assessment year, and the authority is entitled to act at any time within the limitation period. The absence of an earlier assessment, by itself, does not render a timely assessment illegal.

Conclusion: Passing the assessment orders at the fag end of limitation was held not to be illegal.

Issue (v): whether the assessment orders could be ignored as void and non-est without a direct challenge.

Analysis: An order alleged to be void does not become a nullity in the eye of law unless it is successfully challenged in appropriate proceedings. A collateral attack on the demand notice, without questioning the assessment orders themselves, was insufficient. The assessment orders continued to operate until set aside by a competent court.

Conclusion: The assessment orders could not be ignored as void or non-est, and the challenge on that basis failed.

Issue (vi): whether factual pleas first raised in the reply affidavit could be examined in writ proceedings.

Analysis: The alleged non-service of notices and orders, the alleged closure of business, the alleged fire accident, and the alleged absence of authority in the recipient of service were all factual matters. They were raised for the first time in the reply affidavit and were not part of the original writ pleadings. Such factual assertions, which the respondents had no opportunity to meet in the counter-affidavit, were not entertained.

Conclusion: The new factual pleas raised only in the reply affidavit were rejected as not entertainable.

Issue (vii): whether the demand notice was vitiated by mala fides.

Analysis: A plea of mala fides requires specific pleadings and convincing material, and it must be directed against the concerned individual in the proper manner. No such material was furnished, and the allegations were found to be vague and unsupported.

Conclusion: The challenge based on mala fides was rejected.

Issue (viii): whether a common demand notice for four assessment years issued after the assessments was illegal.

Analysis: The relevant enactments prescribe payment and recovery mechanisms after assessment but do not prescribe any limitation for issuance of a demand notice for recovery of assessed tax. Nor do they prohibit a common demand notice covering more than one assessment year. The factual premise that the notice was issued after 11 years was also found to be incorrect on the record.

Conclusion: The common demand notice and its timing were held not to be illegal.

Final Conclusion: The impugned demand notice was sustained because none of the challenges to the underlying assessments or the recovery action succeeded.

Ratio Decidendi: In writ proceedings, a demand notice for recovery of assessed tax will not be quashed on collateral grounds unless the underlying assessment orders are directly challenged and the pleaded factual basis is properly raised and substantiated in the writ petition.

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