Whether CST is applicable in this case?

[Ganeshan Kalyani]

Dear Expert,

I request you to please share your view on the below situations.

‘A’ is a supplier based at Gurgaon, has supplied Finished Goods to ‘B’ located at West Bengal on CST@2%, against Form ‘C’. Now ‘B’ has stock transferred some of the material to its own location in Orissa say ‘C’ against Form ‘F’. Now, due to some issue with the material , ‘C’ has directly returned the material back to ‘A’ the supplier at Gurgaon.

The question is whether ‘C’ is correct by sending the material back to ‘A’ directly. What is the tax implication?

My view:

1) ‘C’ should have sent the material back to ‘B’ so that Form ‘F’ will nullify and ‘B’ will sent the same to ‘A’ so that Form ‘C’ will be nullified.

OR

2) ‘C’ can sent the material directly to ‘A’ but purchase return invoice should be prepared by ‘B’ under instruction to ‘C’ to send the material to ‘A’.

Please discuss.

[Ganeshan Kalyani]

Sir, in addition to two views as submitted in my query, i would like to add one more view / option: 3) the purchase return invoice should be issued by 'B' and ' C' should be instructed vide official letter to move the materials from its locations to ' A' . Thanks

AI Summary

Interstate goods return procedure: buyer must issue a purchase return invoice and formally instruct branch to return goods to supplier. A supplier sold goods interstate under Form C and the buyer stock transferred items to its branch under Form F; the branch directly returned defective goods to the supplier. To preserve tax documentation and effects, either the branch should return goods to the buyer who then returns them to the supplier to nullify the respective forms, or the branch may send goods directly to the supplier provided the buyer issues a purchase return invoice and formally instructs the branch to effect the return.