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TaxTMI 
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2025 (9) TMI 1152
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.... Soumyajit Pani and Shri Aishwary Bajpai, Advocates for the State of Orissa, Ms. Madhumita Bhattacharjee, Advocate for the State of West Bengal, Shri Aravindh S. and Shri Abbas B, Advocate of the Union Territory of Puducherry, Shri Nishe Rajen Shonker, Advocate for the State of Kerala ORDER JUSTICE DILIP GUPTA: Central Sales Tax Appeal No. 13 of 2014 has been filed by M/s. Eternit Everest Ltd. the appellant against the order dated 28.02.2014 passed by the Tamil Nadu Sales Tax Appellate Tribunal the Sales Tax Appellate Tribunal partly allowing T.A. No. 30 of 2011 relating to the assessment year 1994-95. The Assessing Authority, by order dated 12.08.2004, had disallowed the claim of stock transfer made by the appellant and also imposed penalty. It is against this order that the appellant filed an appeal before the Sales Tax Appellate Tribunal. The Sales Tax Appellate Tribunal, while upholding the finding of the Assessing Authority regarding inter-State sale, set aside the levy of penalty. 2. Central Sales Tax Appeal No. 14 of 2014 has also been filed by the appellant to assail the aforesaid order dated 28.02.2014 passed by the Sales Tax Appellate Tribunal partly allowing ....
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....the regular course of business without reference to any specific contract with any buyer. The depots located in these States received the products from the factory and took them into stock. Each depot has a depot manager/ depot keeper. The factory/regional office at Coimbatore provides imprest money to the depot keepers to bear the depot expenses such as rent, electricity and telephone; (iii) The appellant has stockists/dealers in the States. The depots maintain adequate stock of the manufactured goods in their premises. The stockists/dealers in the respective States contact the depots of the appellant over telephone. Delivery is offered by the depots out of the material kept in stock by the depots. The depots do not maintain separate bank accounts in the respective States. The appellant maintains a running account with the stockists. The running account is maintained with the regional office/factory at Coimbatore. The material is delivered from the stock maintained at the depots and running accounts are periodically settled. The payments are received by the regional office/factory from the stockists. The payments received are continuous and are not given with reference to....
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....ssing Authority. Therefore, the finding of the Assessing Authority in the facts and circumstances that is a case of interstate sale and not depot transfer is sustainable. 21. So far as penalty is concerned, the assessment is made on the book turnover as pointed out by the leaned counsel for the appellant. Hence the case of Apollo Saline Pharmaceuticals case in 125 STC 505 is applicable. Since the disputed turnover is reported and appellant claimed exemption, the decision in M/s. Radha Metals case relied by the learned State Representative is not applicable to the facts of the case. In the above circumstances, the levy of penalty is not warranted. Hence, the above appeals are to be partly allowed by deleting the levy of penalty. Thus, the points are answered accordingly." (emphasis supplied) 7. Shri N. Prasad, learned counsel for the appellant assisted by Shri B. Syed Abdul Wakeel and Ms. Deepika Nandakumar made the following submissions: (i) The stock transfers in question fall within the scope of section 6A of the Central Sales Tax Act, 1956 CST Act. The appellant had submitted Form F duly filled up by their depots. The appellant had also filed the....
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....State and the buyer located in the receiving State. The expression "in the course of" postulates an inextricable bond between the contract and the movement; (vi) Even on merits, the Assessing Authority did not correctly appreciate the replies submitted by the appellant for the assessment years. The finding recorded by the Sale Tax Appellate Tribunal that invoices were raised at the factory has no factual basis; (vii) The assessments in question place reliance on two types of slips. The first category are slips which show receipt of payments made by the stockists to the regional office/factory at Podanur. The second category of slips indicate quantities to be delivered to the stockists. Even here, the appellant demonstrated that material has been delivered only from the depots and there is no inter-State movement as a direct incident or cause of any contract of sale. Thus, there is no inextricable link between a contract of sale and inter-State movement. Alternatively, the demand, if at all, can be sustained only to the extent it is attributable to the second category of slips which make a reference to specified quantities; (viii) The place where payments ....
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....Ltd. vs. Commr. of Trade Tax, Lucknow (2018) 18 GSTL 611; (d) Harison & Co. vs. Additional Commissioner of Commercial Taxes, Belgaum (2006) 146 STC 609; (e) A. Dhandapani; (iii) In the instant case, the Assessing Authority did conduct an elaborate inquiry to assess the veracity of the details provided in Form F to ascertain whether the transferee and the transferor were provided by the assessee in Form F. For this purpose, various documents were requisitioned by the Assessing Authority which were not produced by the appellant despite repeated chances given to it; (iv) The bar as laid down in Ashok Leyland is only applicable with respect to reassessment/ reopening of concluded assessment after acceptance of Form F, and is not applicable to assessments in the first instanace; (v) Even otherwise, the intention of the legislature in amending section 6A(2) of the CST Act is to clarify the intention of the legislature that the scope of the inquiry includes going into the question whether the said sales are inter-State sales or not. The Finance Act of 2010 intended to make the position explicit, which otherwise was implied. The said amendment i....
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....ver of Rs. 20,59,79,586/- pertains to inter-State sales and hence the appellant was liable for tax demand of Rs. 3,35,74,672/- with interest; (ix) Even if the orders were originally placed with the depots/agents who forwarded these to the manufacture/central office at Podanur, Coimbatore (Tamil Nadu), the movement of goods commenced basis these order and the goods were delivered directly to the buyers. The same would, therefore, be an inter-State sale; and (x) Even assuming that only some of the slips among the 380 odd slips shows suppression, then too applying the same for the whole turnover during the relevant assessment years to conclude that the same are inter-State sale is permissible and is based on a rational basis in the light of non-production of records by the appellant. 9. Shri Aravindh S. learned counsel appearing for the respondent no. 7 - The Union Territory of Puducherry, however, submitted that the appellant had correctly paid tax under the provisions of the Pondicherry General Sales Tax Tribunal 1967. 10. Ms. Rama Ahluwalia learned counsel appearing for the respondent no. 8 - The State of Maharashtra submitted that the movement of goods from....
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....iry to ascertain the veracity of the particulars contained in Form F, can call for any other information because such enquiry is necessary to make the charging section workable and that the amendment made in section 6A (2) of the CST Act w.e.f. 08.05.2010 only clarifies the intention of the legislature that the scope of the enquiry would include examining whether the sale was an inter-State sale or not. 16. To appreciate the contentions that have been advanced, it would be appropriate to first refer to the relevant provisions of the CST Act. 17. Section 3 of the CST Act deals with principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. The relevant portion of this section is reproduced below: "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase - (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one ....
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....time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall, subject to the provisions of sub-section (3), be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale." (emphasis supplied) 20. Section 6A (1) of the CST Act was amended w.e.f. 11.05.2002. The following words were inserted by Act No. 20 of 2002 w.e.f. 11.05.2002 at the end of sub-section (1): "and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale." 21. Subsequently, sub-section (2) of section 6A was also substituted by Finance Act, 2010 w.e.f. 08.05.2010. Sub-section (2) after substitution reads as follows: "(2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under sub-section (1) are true and that no inter-State sale has been effected, he may, at the time of, or at any time before, the....
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.... The above statements are true to the best of my knowledge and belief. (Signature)" 23. As noted above, the assessment years involved in these two appeals are 1994-1995 and 1995-1996. It would, therefore, be necessary to analyse the aforesaid provisions of the CST Act as they stood prior to the amendment made in sub-section (1) of section 6A w.e.f. 11.05.2002 and substitution carried out in sub-section (2) of section 6A w.e.f. 08.05.2010. 24. Section 3 of the CST Act provides that a sale or purchase of goods shall be deemed the take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. Section 6 of the CST Act provides that every dealer shall be liable to pay tax under the CST Act on all sales of goods effected by him in the course of inter-State trade or commerce. Section 6A of the CST Act deals with burden of proof in case of transfer of goods claimed otherwise then by way of sale. Sub-section (1) of section 6A of the CST Act, as it stood prior to 11.05.2002, provided that where any dealer claims that he is not liable to tax under the CST Act on the ground that the movement of goods ....
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....fer' or not, but the scope of section 6A had subsequently come up for consideration before the Madras High Court on two occasions in the matter of the appellant on 21.08.2017 and in the matter of Hindustan Petroleum Corporation on 07.11.2015 and the Madras High Court held that the scope of enquiry is confined to the truth of the particulars contained in Form F. Thus, these two decisions of the Madras High Court impliedly overrule the observations made by the Central Sales Tax Appellate Authority in Steel Authority of India. Learned counsel also submitted that the justification to examine something beyond what is stated in Form F would clearly be contrary to the provisions of sub-section (1) of section 6A of the CST Act. Learned counsel also emphasized that the provisions of sub-section (2) of section 6A of the CST Act were amended by Finance Act of 2010 w.e.f. 08.05.2010 and it is only after the said amendment that the scope of enquiry has been expended. 27. The contention of the learned counsel for the State of Tamil Nadu is that the judgment of the Supreme Court in Ashok Leyland (2) is applicable only with respect to reassessment/reopening of concluded assessment after accepta....
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....s in other States remits the value of the goods purchased, by means of D.D. Drawn in favour of Coimbatore office and sent directly to Coimbatore. 14. Besides, they have not furnished the following records. (1) Proof for existence of Deports in other States. (2) Proof for despatch of goods (LR, Way Bill etc.) (3) Monthly statement of account of respective depots. (4) Copy of stock book showing the details of opening stock, arrivals, sales and closing stock. (5) Proof for payment of taxes in the respective States, such as assessment order of the appropriate authority. (6) Ledger account of Head office for depots and ledge account of depots for head office. Xxxxxxxxxxx (15) Their place of business was inspected by the officers of the Enforcement Wing on 22.03.96 and they recovered the following records for further verification. (1) File marked (A) with 282 slips containing business transaction. (2) File marked (B) with 379 slips containing business transaction. Verification of these records revealed that remittances were directly received at Coimbatore Office from st....
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....horised Representative had stated it was usual to send their requirements alongwith payments and these requirements would be supplied by the supplied by the respective depots. From this it was evident that the dealers of other state had direct contact with the Coimbatore Office with whom they placed their orders but lift the goods through the depots to which the Coimbatore office was sending the goods and the Coimbatore Office was claiming exemption as stock transfer. Such a transaction could not be treated as stock transfer as the depot were acting only as a conduit pipe. The Coimbatore Office has become the seller and thus other state stockists had become the purchaser and as soon as the payment for the specified goods had been paid, the contract for sales and purchase had taken place unless the payment was returned rejecting the request for the supply of the materials for which orders or the specification were placed with payments. There were instances of Advance payments by stockists even before the despatch of goods. Such of those cases were listed out as below:- FILE MARKED 'B' This file also contains correspondence of the stockists of other states ....
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....were not rejected and sent back to them with instructions to get supply of these goods from the respective depot to which all the materials were dispatched on stock transfer. When this had not been done so, the sales to the stockists in other states made through the other state. Depot were purely direct interstate sales as held in the case of Tcl. Sahney Steel & Press Works Ltd., reported in 60 STC 3G1. In these circumstances, it was proved beyond doubt that the supply of the goods made to all the stockists were in the nature of the interstate sales only but they had camouflaged as stock transfer. Only because of the Depots issued Form-F for the goods received and assessment was made on the Depots by the local authorities, the goods despatched to the depots cannot become eligible for exemption as stock transfer. On which basis the goods were dispatched to the depot was the criterion to decide the fact as to whether it was interstate sale or otherwise. Though the goods were despatched to the branch, the movement of goods from the registered office at Coimbatore had been occasioned by the orders placed by the stockists and hence the movement was incidental to the contract and therefo....
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....rer and the buyer located in a different State and hence it was concluded that there was an inter-State sale as the movement of the goods commenced from the State of Tamil Nadu. 31. The Central Sales Tax Appellate Authority confirmed the aforesaid finding of the assessing officer after consideration of material available on record and concluded that the turnover of Rs. 20,59,79,586/- pertaining to Form F related to inter-State sale and, therefore, the appellant was liable to pay tax of Rs. 3,35,74,672/- with interest. 32. In would now be appropriate to first examine the judgment of the Supreme Court in Ashok Leyland (2). An order of assessment for the year 1987-88 dated 28.8.1991 was passed. The dealer had filed statement of stock transfer of vehicles to their outside State Regional Sales Offices and spares to their warehouses. The statement was verified in detail with reference to Form "F" declaration filed by the dealer and the dispatching documents. The dealer also filed completed assessment orders of their Regional Sales Offices in other States. The claim was examined at length and was found to be in order. Form "F" filed by the dealer was accepted. Thereafter notice was ....
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....tion made in Form F, therefore, is as to whether the branch office acted merely as a conduit or the transaction took place independent to the agreement to sell entered into by and between the buyer and the registered office or the office of the company situated outside the State. The said decision therefore, does not run counter to our reading of the said provision. Furthermore, the question which has been, raised before us had not been raised therein. 111. We, therefore, are of the opinion that the observations made by this Court in Ashok leyland to the effect that an order passed under Sub-Section (2) of Section 6-A can be subject matter of reopening of a proceeding under Section 16 of the State Act was not correct." (emphasis supplied) 33. It is clear from the aforesaid judgment of the Supreme Court in Ashok Leyland (2) that what was basically examined was whether the Assessing Authority could exercise its revisional power after having accepted Form F. The earlier judgment of the Supreme Court in Ashok Leyland (1) was, therefore, found to be not correct. What is also important to notice is that in paragraph 110 of the judgment, the Supreme Court emphasized that th....
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....ticulars contained in the declaration (F forms) are "true". It is not possible or practicable to lay down the exact documents or materials that may be required in all the cases, by the assessing authority, to come to a proper and just finding as required by Section 6A(2) of the Act." (emphasis supplied) 35. It would also be useful to refer to the decision of the Central Sales Tax Appellate Authority in Steel Authority of India. The Appellate Tribunal examined the scope of an enquiry under sub-section (2) of section 6A of the CST Act before the amendment was made on 08.05.2010 and after extensively referring to the judgments of the Supreme Court in Ashok Leyland (1) and Ashok Leyland (2) held that the enquiry conducted by the Assessing Authority to determine whether the goods moved to another State in the guise of 'stock transfer' in order to fulfil a prior contract of sale cannot be ruled out, because such an inquiry is necessary to make the charging provision workable. The Central Sales Tax Appellate Tribunal also referred to paragraph 110 of the judgment of the Supreme Court in Ashok Leyland (2). The relevant paragraphs of the decision of the Central Sales Tax Appellate Aut....
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....r the law enunciated by the Supreme Court in that case, the conclusive presumption comes into play as a result of the finding recorded by the assessing authority that the F forms are true and acceptable. In order to qualify for conclusive presumption, the order need not necessarily incorporate a further and specific observation that the transaction is a genuine stock transfer and not inter-State sale. That does not however mean that an enquiry whether the goods moved to another State in the guise of stock transfers in order to fulfil the prior contracts of sale is ruled out because such enquiry is essential to make the charging provision workable. In fact there are enough indications in 2nd Leyland judgment [2004] 134 STC 473 (SC); [2004] 3 SCC 1 that such enquiry is permissible before an order accepting F forms is passed-for instance, see paras 48 and 110 (paras 37 and 91 in STC) of the judgment. No doubt, these observations in paras 48 and 110 (paras 37 and 91 in STC) cannot be strictly reconciled with the view expressed by the Kerala High Court. In so far as the Kerala High Court said that an enquiry cannot go beyond ascertaining the truth of particulars in F forms, such stateme....
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....the CST Act to call for other information to verify the correctness of the particulars contained in the 'F' form declarations. It is for the dealer to prove that the details provided in form 'F' are correct and true. The Madras High Court in the case of D. Dhandapani v. State Of Tamilnadu, (1995) 96 STC 98, while interpreting the provisions of Section 6-A(2) of the CST Act has observed that even after submission of 'F' forms, the authority can make further enquiry to satisfy himself that particulars contained in the declaration in 'F' form are true and correct. If the dealer fails to satisfy the assessing authority about the genuineness and the correctness of the contents in 'F' form declarations, the transfer of goods can be taken as on account of interstate sales. Sub-section (2) of Section 6-A of the CST Act places a duty on the assessing authority to scrutinise the declarations furnished by the dealer and pass an order accepting the correctness thereof. On such an order being passed, the transfers made by the dealer to the out of State branches or agents will be deemed to have been made otherwise than as sales. The assessing authority has....
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....A of the CST Act, the burden to prove that the transaction is not a sale but stock transfer is on the assessee. Therefore, in our view, the revisional authority was justified in concluding that the order passed by the first appellate authority is erroneous and prejudicial to the interest of the revenue." (emphasis supplied) 39. It is, therefore, clear that the Karnataka High Court also observed that the Assessing Authority has to make an enquiry to find out whether the particulars contained in the declaration furnished by the dealer in Form F are true and for this purpose the Assessing Authority is also authorized to call for other information to verify the correctness of the particulars contained in Form-F declaration. In fact, the Assessing Authority had directed the assessee to produce the books of accounts and other records, if any, to support its claim of branch transfers and to ascertain the genuineness of such 'stock transfers'. The Karnataka High Court also observed that the burden is on the assessee to prove that the transaction is not a sale but a branch transfer and for this purpose though several opportunities were provided to the assessee to discharge this burden....
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....ourt. It needs to be noted that the assessment period involved in Harison & Co., Steel Authority of India and Glaxo Smith were before the 2010 amendment made in section 6A(2) of the CST Act. 43. It is, therefore, not possible to accept the contention of the learned counsel for the appellant that the decision of the Central Sales Tax Appellate Authority in Steel Authority of India stands impliedly overruled by the judgment of the Madras High Court in Eternit Everest Ltd. 44. To reiterate, section 3 of the CST Act provides that a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. The liability to pay tax on inter-State sale is contemplated under section 6 of the CST Act. Section 6A of the CST Act deals with burden of proof in case of transfer of goods claimed otherwise than by way of sale. Prior to its amendment on 11.05.2002, sub-section (1) of section 6A provided that where any dealer claims that he is not liable to pay tax under the CST Act on the ground that the movement of such goods from one State to another was occasioned by reason of tra....
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....estigate and make enquiries whether the declaration in Form F is genuine and true and for this purpose the evidence produced by the dealer is also required to be considered. The Karnataka High Court also observed that the Assessing Authority can call for other information to verify the correctness of the particulars contained in the declaration in Form F and it is for the dealer to prove that the details provided in Form F are correct and true. This is for the reason that the burden is on the dealer to prove that the transaction is not a sale but a branch transfer. It was also observed by the Allahabad High Court in Glaxo Smith Kline Pharmaceuticals that the Assessing Authority would be well within its jurisdiction in requisitioning the relevant account books and other documents relating to the transaction because they would reveal whether there was a prior agreement to sell. 46. It is, therefore, not possible to accept the contention of the learned counsel for the appellant that the Assessing Authority could not have asked for other evidence and reliance could not have been placed by the Assessing Authority on the documents recovered from the business premises of the appellant.....