2025 (10) TMI 874 - HC - VAT / Sales Tax

Interstate movement requires actual sale; intra-state stock transfer needs Form F, not Form C or E-1, revision dismissed

M/s Mahalaxmi Mining Pvt. Ltd. Versus The Commissioner Of Commercial Tax U.P. Lucknow

HC held that interstate movement requires an actual sale or purchase; here the transaction was completed within Assam and subsequent transfer to UP was a ... Eligibility for from tax u/s 6(2) of Central Sales Tax Act - subsequent sale of coal - movement of goods from one state to another and preceded by prior interstate sale - form-C, Form XXXVIII, Form E-1 and return in from 24 of May 2015, of CARSA were submitted before assessing officer - first sale from Assam to U.P. - Coal India Ltd. is shown as consigner of Coal - HELD THAT:- Not only the movement of the goods from one State to another State is essential but also the sale and purchase of goods is required. If it is a sale or purchase then such movement of sale or purchase can be affected by transfer of document of title, and if the movement commenced in the same State, it shall not be deemed to be movement of goods from one State to another. The case in hand, the revisionist at Guwahati, Assam has purchased the goods, the sale is complete at Assam itself, the revisionist at UP has been shown as consignee on the tax invoice. The record shows that purchase has been made at Guwahati and the movement commenced showing the revisionist as consignee. The revisionist has also obtained registration at Guwahati. Once the purchases have been made at Guwahati within the State, it cannot be said that there was purchase or sale in the course of interstate trade or commerce. The registered dealer at Guwahati has purchased the goods and thereafter same was sent to the revisionist registered at UP. The same by no stretch of imagination can be said to be sale or purchase but it was stock transfer only and therefore the revisionist ought to have been issued Form F instead of Form C. Once, it is neither sale nor purchase, issuance of Form C, E -I and subsequently Form 31, 38 and Form C of CARSA Coal Pvt. Ltd cannot be accepted. Thus, no interference is called for in the impugned order - reviion dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a subsequent sale effected by transfer of documents of title during movement of coal is exempt from tax under Section 6(2) of the Central Sales Tax Act when Forms C, E-I and other prescribed documents are produced by the dealer alleged to have effectuated the subsequent sale. 2. Whether the transaction in question is a sale or purchase 'in the course of inter-State trade or commerce' within the meaning of Section 3(b) of the Central Sales Tax Act (i.e., effected by transfer of documents of title during movement from one State to another), or whether the facts disclose a stock transfer / intrastate movement requiring treatment other than an interstate sale (and, if so, the legal consequences as to the validity of Forms C, E-I and related declarations). 3. Whether issuance or production of Forms C, E-I, Form 31/38 and related declarations conclusively precludes imposition of tax under the State law (having regard to Section 8(4) and Rule 12 of the Central Sales Tax (Registration & Turnover) Rules, 1957), where the underlying facts indicate no interstate sale as contemplated by Sections 3 and 6 of the Central Sales Tax Act. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Section 6(2) exemption to a subsequent sale during movement where prescribed forms are produced Legal framework: Section 6(2) provides exemption for a subsequent sale effected by transfer of documents of title during movement from one State to another in respect of specified goods, subject to furnishing prescribed certificates/declarations (including Forms C and the certificate under Section 8(4)) within the prescribed time. Section 8(4) conditions applicability of inter-State provisions on filing of a declaration by the purchasing registered dealer. Rule 12 prescribes Forms C and D for the said purposes. Precedent treatment: The revisionist relied on prior decisions (including a Supreme Court and a High Court ruling) to contend that production of the statutory forms forecloses liability. The Court considered those authorities but found them inapplicable on the facts. Interpretation and reasoning: The Court examined the documentary record (tax invoice, railway receipt, Forms C and E-I) and found the initial sale was completed in the selling State (Assam) to a dealer registered in Guwahati, Assam. The movement thereafter was of goods dispatched by that Assam dealer to the revisionist's UP branch. Because the sale to the Assam dealer was complete within the State, there was no 'sale or purchase' in the course of inter-State trade or commerce as envisaged by Section 3(b). The statutory exemption under Section 6(2) presupposes that the movement and the sale/purchase are so connected that the sale in the course of inter-State trade triggers the special regime; where there is no such interstate sale, the exemption cannot be invoked merely by producing forms. Ratio vs. Obiter: Ratio - production of Forms C/E-I does not automatically attract Section 6(2) exemption where the factual matrix establishes that the sale was consummated within the same State and the subsequent movement is a stock transfer; such forms cannot convert an intrastate transaction into an inter-State sale for exemption purposes. Obiter - observations on the sufficiency of particular form entries (e.g., blanks in Forms C) and the impropriety of accepting such documents without substantive details. Conclusion: The exemption under Section 6(2) did not apply on the facts; the assessment and Tribunal decision refusing the exemption required no interference. Issue 2: Characterisation under Section 3(b) - transfer of documents of title during movement versus stock transfer / intrastate movement Legal framework: Section 3 defines a sale/purchase 'in the course of inter-State trade or commerce' where (a) it occasions movement of goods from one State to another or (b) is effected by transfer of documents of title to goods during their movement from one State to another. Explanation 1 treats delivery to a carrier as commencement of movement for clause (b); Explanation 2 excludes movements commencing and terminating within the same State even though passing through other States. Precedent treatment: The Court noted argument and authorities relied upon by the revisionist but held that precedents relied upon did not engage with the same factual pattern (i.e., an initial in-State sale to an Assam purchaser followed by dispatch to UP), and therefore were distinguishable. Interpretation and reasoning: The Court analysed the tax invoice and Forms showing the Assam dealer as the buyer and the revisionist (UP) as consignee. The sale was concluded in Assam to the Assam registered purchaser; the goods were subsequently forwarded to UP by that Assam purchaser. In that factual sequence the movement did not result from an interstate sale by the original seller to a UP purchaser; rather it was a dispatch by an Assam purchaser to another State - a stock transfer / internal movement of the Assam purchaser. Consequently, clause (b) of Section 3 (transfer of documents of title during movement from one State to another) was not engaged in the sense necessary to characterise the initial transaction as an inter-State sale. The Court emphasised that if the movement of goods both commences and terminates in the same State, it cannot be deemed interstate merely because goods pass through other territory; similarly, where the sale itself is completed within the State, a later physical movement by the purchaser does not retrospectively transform the original sale into an interstate sale for taxation/exemption purposes. Ratio vs. Obiter: Ratio - where the sale is completed in the seller's State to a purchaser registered in that State, and the purchaser thereafter dispatches the goods to another State, the original sale is not an interstate sale under Section 3(b); such subsequent dispatch is a stock transfer by the purchaser and cannot be regularised as an interstate sale by transfer of documents during movement. Obiter - discussion of practical indicators (form contents, consignee designation on invoice/RR) that illuminate the true nature of the transaction. Conclusion: The transaction was a stock transfer / intrastate sale at the point of original sale in Assam and not an interstate sale under Section 3(b); therefore the provisions and exemptions predicated on interstate sale/purchase did not apply. Issue 3: Effect of production/issuance of Forms C, E-I and other prescribed declarations when underlying facts show no interstate sale Legal framework: Section 8(4) conditions application of inter-State provisions on furnishing declarations in prescribed form; Rule 12 prescribes Forms C and D for that purpose. Section 6(2) conditions exemption on furnishing of prescribed certificates and declarations. Precedent treatment: Authorities were invoked for the proposition that compliance with forms precludes liability. The Court found that mechanical or formal production of such forms cannot validate an incorrect statutory classification of the underlying transaction. Interpretation and reasoning: The Court observed that the Forms on record were incomplete (details not filled) and that the documentary matrix (tax invoice, RR, registration particulars) established sale completion in Assam. Where the foundational legal requirement (that there be a sale in the course of inter-State trade or commerce) is absent, mere issuance or presentation of Forms C, E-I or subsequent forms by a party does not lawfully convert the transaction into an interstate sale or secure exemption under Section 6(2). The Court held that the prescribed forms operate within the statutory scheme and cannot be used to cover up or legalise a transaction that is, on evidence, an intrastate sale/stock transfer; accordingly, acceptance of such forms as automatic proof of entitlement to exemption was rejected. Ratio vs. Obiter: Ratio - prescribed forms and declarations do not avail a dealer of statutory exemption where the factual nature of the transaction discloses no interstate sale in terms of Sections 3 and 6; compliance with formality cannot override statutory substance. Obiter - remarks on the inadmissibility of accepting blank or substantively incomplete forms as fulfilling statutory requirements. Conclusion: The presence or production of Forms C, E-I and related documents did not preclude tax liability where the transaction was correctly characterised as a stock transfer/intrastate movement; the forms could not be accepted to establish entitlement to Section 6(2) exemption. Final Disposition and Answer to Substantial Questions The Court upheld the Tribunal's conclusion: the transactions were not sales in the course of inter-State trade or commerce as contemplated by Section 3(b); exemption under Section 6(2) was not attracted despite production of Forms C/E-I; therefore the impugned assessment/decision required no interference. The substantial questions of law were answered in favour of the revenue and against the revisionist.