Nil CST on branch transfers allowed with certified Form F; balance taxable turnover payable after verification under Section 6A

HC allowed the writ petition in part, holding that the assessee is entitled to nil CST on duly certified Form F for branch transfers, irrespective of piecemeal production. As the tax authorities did not dispute that the relevant transactions were branch transfers and that Form F was properly issued, the HC directed consideration of all Form F declarations produced before the Tribunal and HC, to the extent verified by the respondent. For transactions not covered by valid or produced Form F, the assessee's claim stands relinquished, and the respondent must ascertain the balance taxable turnover, with corresponding tax to be paid by the assessee within twelve weeks.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the restriction imposed by the Tribunal on consideration of additional Form 'F' beyond those produced before it was legally sustainable.

1.2 Whether Form 'F' produced subsequently, including during remand and writ proceedings, could be considered for grant of benefit of non-taxable branch transfer under the Central Sales Tax regime.

1.3 How the non-verification or expiry of validity of Form 'F' pertaining to a particular State (Rajasthan) should affect the assessee's tax liability and whether waiver in respect thereof could be granted.

1.4 Extent of relief to be granted in exercise of writ jurisdiction, in view of the assessee's undertaking to restrict its claim only to the Form 'F' already produced on record.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Restriction by Tribunal on additional Form 'F' and entitlement to benefit on subsequently produced forms

Legal framework (as discussed)

2.1 The Court proceeded on the settled position that an assessee is eligible for reduced rate of tax under the Central Sales Tax Act, 1956 on production of Form 'C' for inter-State sales and nil rate of tax on production of Form 'F' for branch transfers, and that Form 'F' serves to validate the claim of non-taxable branch transfer.

Interpretation and reasoning

2.2 The Court noted that the relevant assessment year was 2013-14 and the controversy regarding production of Form 'F' had persisted for about 11 years. It recorded that the authorities did not dispute that the underlying transactions were branch transfers and that Form 'F' had been duly certified and issued by the competent authorities.

2.3 The Tribunal, while remanding the case, had confined verification only to Form 'F' of Rs. 1,61,10,688/- already submitted before it as on 19.10.2023, and refused to consider additional Form 'F' obtained thereafter. The Court treated this restriction as unwarranted because it deprived the assessee of the benefit of non-taxable stock transfer despite the fact that the stock transfers and the corresponding statutory forms existed and were capable of verification.

2.4 The Court took note of the petitioner's subsequent production of additional Form 'F' amounting to Rs. 15,08,05,573/-, all already placed on record before the Court, and the categorical undertaking in the additional affidavit that the petitioner would not seek any further claim beyond the aggregate value of Rs. 16,69,16,261/- (i.e. Rs. 1,61,10,688/- + Rs. 15,08,05,573/-).

2.5 Having regard to the long pendency, the undisputed nature of branch transfers, and the verification exercise undertaken by the assessing authority, the Court considered it appropriate, in writ jurisdiction, to permit consideration of all Form 'F' already produced on record rather than confining relief to the forms earlier produced before the Tribunal.

Conclusions

2.6 The Tribunal's effective bar on consideration of additional Form 'F' obtained and produced after its earlier order was not sustained. The writ petition was allowed to the extent of directing consideration of all Form 'F' already produced by the petitioner and verified by the respondent, within the declared monetary limit.

Issue 3: Effect of non-verification/expiry of Form 'F' for Rajasthan and possibility of waiver

Legal framework (as discussed)

2.7 The Court reiterated that Form 'F' is the statutory instrument for claiming nil tax on branch transfer. The verification of the genuineness of such forms by the assessing authority is part of the statutory assessment process.

Interpretation and reasoning

2.8 Based on the respondent's affidavits, the Court recorded that: (i) all Form 'F' had been verified except those relating to the State of Rajasthan; (ii) the Form 'F' for Rajasthan had been issued on 15.10.2013 and was valid for two years; and (iii) due to the expiry of this validity period, the concerned authorities could not verify the Rajasthan form.

2.9 The respondent themselves invited the Court to consider the aspect of non-verification of the Rajasthan Form 'F' owing to expiry of validity and requested that appropriate orders be passed, including grant of waiver in respect of the non-verified form to the tune of Rs. 40,08,250/-.

2.10 The Court accepted the position that except for the Rajasthan component, the Form 'F' had been verified, and that the inability to verify the Rajasthan form stemmed from expiry of its formal validity rather than any dispute about the nature of the underlying transaction.

Conclusions

2.11 The Court proceeded on the basis of the respondent's stand and treated the Rajasthan-related Form 'F' as a matter for waiver to the extent indicated, while otherwise directing consideration of all verified Form 'F'. The respondent was directed to ascertain the remaining transactions and compute tax liability accordingly.

Issue 4: Scope of writ relief in light of the petitioner's undertaking

Interpretation and reasoning

2.12 The Court placed substantial weight on the petitioner's explicit undertaking that it would (i) restrict its claim strictly to Form 'F' aggregating Rs. 16,69,16,261/- already on record, and (ii) not seek any further benefit on the basis of any additional Form 'F' in future.

2.13 This undertaking, coupled with the State's verification exercise and concessions regarding waiver for Rajasthan, enabled the Court to craft a final direction that would bring closure to the prolonged litigation and avoid further rounds of proceedings.

Conclusions

2.14 Exercising powers under Articles 226 and 227, the Court allowed the writ petition to the limited extent of directing the respondent to consider and verify the Form 'F' already produced, give the consequential benefit of nil tax for eligible branch transfers, ascertain any remaining taxable turnover, and ensure that the resulting tax dues are paid by the petitioner within twelve weeks. The petition was disposed of with rule made absolute to this limited extent.

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