Validity and determination of sale

[RAJESH MISHRA]

Dear Sirs, Can we make transaction as per the below queries? If yes, kindly specify validity & nature of sale (Central / Local) with notification / rule & section. Query 1: In a transaction there are involve three dealers namely A of Mumbai, B of Delhi & C of Mumbai. Dealer B of Delhi wants to deliver / sale (sale in transit), Dealer C of Mumbai after purchasing goods from A of Mumbai. All three are registered dealer and having local & central registration certificate from their respective state. Is this sale is a valid sale or not? If it is valid sale kindly specify validity & nature of sale (Central / Local) with notification / rule & section. Query 2: Is predetermined sale can be termed as E-1/ E-2, sale? For example, in a transaction there are involve three dealers namely A of Mumbai, B of Delhi & C of U.P. Dealer B of Delhi instructed Dealer A of Mumbai to deliver goods to Dealer C of U.P. directly. Is this predetermined sale can be termed as E-1 sale i.e. sale in transit. Kindly give your valued suggestions with some judgment made earlier in this regard.

[Mukesh Kumar]

You must go through the provisions of Section 3 of Central Sales Tax Act, 1956 first. Because the concept of E1 and E2 sale is associated with the transactions which attracts the provisions of CST and against form C. Section 3 is saying a transaction shall be treated as central sale where such transaction occasions the movement of goods from one State to another. As you have stated that there is no movement of goods from one state to another. The buyer and seller both in Mumbai. Buyer is predetermined. Seller has to dispatch goods to you buyer directly. It is difficult for me to understand the need to E1 or E2 sale. Yes, I agree that there may be some difficulty with reference to availment of tax credit paid by A in the hands of C. In this regard, I would suggest that you should approach a VAT consultant to find the correct procedure to avail the maximum benefit in this regard.

AI Summary

Interstate movement of goods determines central sale classification; predetermined delivery may affect tax credit availment under CST. Whether a transaction is a central sale depends on movement of goods between states under Section 3 of the Central Sales Tax Act; without interstate movement a sale is not a central sale. E 1/E 2 designations relate to CST/form C and apply only where goods actually move across state borders. Predetermined deliveries between parties in the same state therefore do not prima facie qualify as central sales, though complications may arise affecting tax credit availment and procedural compliance.