TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1152
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....myajit 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 T.A. No. 32 ....
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....ithout 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 any specific delivery. The stock is de....
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....g 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 particulars which are relevant for Form F, including stock transfer invoice, lo....
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....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 are collected is not conclusive to decide whether a transaction is an inter-State sale or a local sale; (ix) Where goods continuously move to the depots located i....
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....ing 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 is declaratory and the legislature removed the confusion, if any, by substitution and hence the same would have retrospective effect. In support of this contention reliance has been placed on the judgment of the Supreme Court in CIT vs. Gold Coin Heal....
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....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 Podanur in the State of Tamil Nadu to various depots in other States was by way of branch transfer. Learned counsel also submitted that prior to 08.05.2010, the scope of jurisdiction of the Assessing Authority was limited to examining whether the particulars contained in Form F were true....
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....ture 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 State to another. Explanation xxxxxxxxxxx" 18. Section 6 deals with liability to tax on inter-State sales and the relevant portion is reproduced below: "6. Liability to tax on inter-State sales.- (1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Go....
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..... 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 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." (Substituted portion emphasized) 22. The declaration to be filed under secti....
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....ake 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 from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, the burden of proving that the movement was so occasioned shall be on the dealer and for this purpose he may furnish to the Assessing Authority a declaration in Form F containing the prescribed particulars along with evidence of despatch of such goods. Thus, such burden could be discharged either by production of a declaration in Form F and evidence of dispatch of goods or by adducing evidence witho....
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....itted 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 acceptance of Form F, and not to assessments carried out in the first instance by the Assessing Authority. Learned counsel also submitted that in any case the Supreme Court held that the initial burden of proof is on the dealer to prove that the movement of goods is due to 'stock transfer' and an enquiry can be made after submission of Form F and before passing an assessment order in the first instance by calling for relevant documents or other materials or papers that may be required to be furnished but the Assessing Authority has a wide discretion to decid....
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....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 stockists by means of D.D. Drawn in favour of Coimbatore Officer. File marked 'A' The Authorised Representative has stated that this file containing the covering letters for the demand drafts received from various stockists with copy to the respective Depots/Sales Offices. They used to collect the payments from the stockits in periodical intervals depending upon the outstanding position. These accounts were the running accounts. For new customers/stockists they used to collect the payment in advance by means of demand draft payable at Coimbatore. The Stockists will send the copy of above said covering letter to the respective sales office....
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....n 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 who had sent DDs in favour of the Coimbatore Office and also placed orders with specification of the materials. xxxxxxxxxx. The entire correspondence found in the file marked 'A' and 'B' proved that there was nexus between the Coimbatore Office of the company and the other state buyers. Materials had been supplied and the invoices had been raised at the Coimbatore Office but in the invoices, it had been noted that the goods have been moved from the depots. It was evident that the dealers had shown that the invoices as to have been related to the depots so as to avoid tax at the point of interstate sales. The dealers had stated that the transactions of the other state depots were assessed under the....
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....ocal 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 therefore from the very beginning of the movement of the goods from Coimbatore all the way until delivery to the stockists through the Depots in other states, it had been an interstate movement. Hence the sale transactions through the Depot from Coimbatore in other States were interstate sales under sec. 3(a) of the CST Act 56 as held in the above quoted case law reported in 60 STC 301. The goods were for the supply against the prior indents placed to the Head Office along with payments therefore and therefore the exemption claimed on the value of the goods despatched to the depots as stock transfer was to be disallowed. The value of the goods shown as stock transfer for 1994095 are therefore proposed to be asses....
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....tatement 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 issued to the assessee to show cause why the order should not be revised. The Supreme Court examined its earlier decision in Ashok Leyland Ashok Leyland Ltd. vs. Union of India (1997) 9 SCC 10. This decision shall be referred to as Ashok Leyland (1). It is in this context that the Supreme Court observed that the observations made earlier by the Supreme Court in Ashok Leyland (1) that an order passed under sub-section (2) of section 6A could be reopened was not correct. The observations are: "7. The assessing authority despite the said findings issued notices directing the appellants to show cause as to why the order dated 29.11.1990 should not be revised and the stock of vehicles allegedly transferred to the Regional ....
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....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 the purpose of verification of the declaration made in Form F is to ascertain whether the branch office acted merely as a conduit or the transaction took place independent of the agreement to sell. The Supreme Court referred to the judgment of the Kerala High Court in C.P.K. Trading. 34. It would, therefore, be useful to examine the judgment of the Kerala High Court in C.P.K. Trading. The Kerala High Court observed as follows: "...A plain reading of Section 6A(2) of the Central Sales Tax Act points out that in cases where the dealer exercises the option of furnishing the declaration (F forms), the only further requirement is that the assessing authority should be satisfied, after making such enquiry, as he may deem necessary, that the particulars contained in the declaration furnished by....
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....ate 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 Authority are as follows: "How section 6A(2) was interpreted by Supreme Court in two cases of Ashok Leyland. 39. Sub-section (2) of section 6A is the crucial provision which comes to the aid of the appellant in view of the acceptance of F forms by the original assessing authority. Let us see how it was interpreted by the Supreme Court. In Ashok Leyland Ltd. v. Union of India [1997] 105 STC 152; [1997] 9 SCC 10, a two-Judge bench of the Supreme Court took the view that section 6A(2) does not have the effect of creating a conclusive presumption nor can it be said that the fact deemed is final and conclusive. It was observed that section 6A merely lays down a rule of evidence and the manner in which the burden can be discharged. The mere fact that an order was made accepting the F form does not preclud....
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....ance, 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 statement of law apparently conflicts with the explicit observations of the Supreme Court in paras 48, 110, etc. To this extent, the dicta in C. P. K. Trading Co. [1990] 76 STC 211 (Ker) cannot be given effect to, though the passage as a whole was referred to by the Supreme Court at one stage." (emphasis supplied) 37. There is nothing on the record to show that this decision of the Central Sales Tax Appellate Authority has been set aside. 38. In Harison & Co., the Karnataka High Court also examined the scope of sub-section (1) of section 6A of the CST Act in respect of the assessment period 01.11.1978 to 21.10.1979 and observed: "15. xxxxxxxxxxxx. The filing of form 'F' by a dealer who sent the goods to another State on consignment or stock transfer was optional and he could prove his claim for non-levy of tax under the Act....
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.... 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 the power to make further enquiries to have an independent verification of the particulars furnished by the dealer in the declarations and other documents furnished by the dealer and in the course of enquiry, it is open to the assessing authority to call for any other information from the dealer in order to verify the truth or otherwise of the particulars contained in the declaration in 'F' form and the other information maintained by the dealer in its regular course of business. This appears to be settled legal position in law. Therefore, reference to various decisions of this Court and other Courts may not be necessary. xxxxxxxxxxxxx 17. In pursuance to the remand order passed, 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 a....
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....laim 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, it failed to do so. 40. The Allahabad High Court in Glaxo Smith Kline Pharmaceuticals also held that the submission of Form F by itself does not raise any unrebutable or conclusive presumption regarding the transaction being a 'stock transfer'. The High Court also observed as follows: "10. xxxxxxxxx. The Assessing Authority as is evident from the provision contained in sub-section (2) of Section 6A of the Act, 1956 as existing at that time, was required to satisfy himself as to whether the particulars contained in the declaration furnished by a dealer under sub-section (1) are true. This satisfaction was to be arrived at after making such inquiry as he may deem necessary. Now the inquiry obviously was with regard to the particulars contained in Form-F and the particulars would be regarding the transaction of stock/goods claimed otherwise than by way of s....
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....er 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 transfer of such goods and not by reason of sale, the burden of proving that the movement of these goods was so occasioned shall be on that dealer and for this purpose he may furnish to the Assessing Authority the declaration in Form F, along with the evidence of dispatch of such goods. Under sub-section (2) of section 6A of the CST Act, if the Assessing Authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by the dealer are true, it may make an order to that effect and the movement of goods to which the declaration relates shall then be deemed to have been occasioned otherwise than as a result of sale. It is thus open to a dealer to either prove that the movement of goods was occasioned not by reason of sale or furnish a declaration in Form F. Section 6A deals only with a burden of proof if a dealer ....
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....6. 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. 47. It would now be necessary to examine the submission made by learned counsel for the appellant on the merits of the order passed by the Sales Tax Appellate Tribunal. 48. A categorical finding has been recorded by the Assessing Authority that proof of despatch of goods was not produced by the dealer despite opportunities having been granted. Though it has been contended by the appellant that the relevant material was attached to the reply dated 26.09.2003, but the records show that the ledgers were not attached to the reply. The Assessing Authority was, therefore, justified in requisitioning the relevant accounts books and other documents relating to the transaction as they alone can reveal whether the dealer was justified in contending the that transfer of goods from one State to another was not by way of sale. The appellant, however, did not produce the relevant documents. ....