CST exemption denied as goods movement to branches constitutes inter-state sale under Section 3(a), not stock transfer

The AP HC dismissed a writ petition challenging CST exemption denial under Section 6A. The petitioner argued goods movement to branches constituted stock transfer, not inter-state sale. The court held that despite dispatch to branches, the transaction was inter-state sale under Section 3(a) CST Act 1956 since goods were tailor-made for specific customers with invoices raised on customers. Branches merely acted as conduits between manufacturing unit and customers. Following Supreme Court precedent in Sahney Steel case, movement of goods between states due to sale assumes inter-state sales character, making CST applicable rather than exemption under stock transfer provisions.

---

---

Issues Involved:
1. Whether the movement of goods is a stock transfer exempted u/s 6A of CST Act, 1956 or an interstate sale taxable u/s 3(a) of CST Act, 1956.
2. Jurisdiction and authority of the 2nd respondent to reassess under Section 9(2) of CST Act, 1956.

Summary of Judgment:

Issue 1: Nature of Goods Movement
The petitioner, a manufacturer of rubber sheets and adhesives with its head office in Chennai and manufacturing unit in Gudur, claimed that the movement of goods to its branches was a stock transfer exempted u/s 6A of CST Act, 1956. The branches procured rate contracts for lagging work, and the goods were used during the execution of these contracts. The petitioner argued that the goods were standard products and not custom-made for specific customers.

The 2nd respondent, however, observed that the goods were manufactured as per customer specifications and dispatched directly to branches with invoices indicating the purchase order number. The goods were not standard but tailor-made, and the movement of goods was occasioned by pre-existing contracts, making it an interstate sale u/s 3(a) of CST Act, 1956. The court agreed with the 2nd respondent, citing the Sahney Steels case, which clarified that movement of goods from one state to another due to a sale contract constitutes interstate trade.

Issue 2: Jurisdiction and Authority
The petitioner contended that the reassessment was without jurisdiction as Section 6A(3) of CST Act, 1956, conferring re-assessment powers, was introduced prospectively in 2010. The 2nd respondent, however, exercised power under Section 9(2) of CST Act, r/w Section 20(2) of APGST Act, not under Section 6A(3). The court upheld the respondent's jurisdiction and dismissed the petitioner's argument.

Conclusion:
The court dismissed the writ petition, affirming that the movement of goods was an interstate sale taxable u/s 3(a) of CST Act, 1956, and the reassessment by the 2nd respondent was within jurisdiction. No costs were awarded, and any pending interlocutory applications were closed.

---