TaxTMI 
TaxTMI 
2026 (5) TMI 1295
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....of Kerala, Through The Commissioner of Commercial Taxes, Thiruvananthapuram And The State of Madhya Pradesh, Through The Commissioner of Commercial Taxes, Indore And The State of Tamil Nadu, Through The Commissioner of Commercial Taxes, Chennai And The State of West Bengal, Through The Commissioner of Commercial Taxes, Kolkata And The State of Assam, Through Commissioner of Taxes, Guwahati And The State of Bihar, Through Commissioner of Commercial Taxes, Patna And The State of Himachal Pradesh, Through The Commissioner of Sales Tax, Shimla And The State of Jammu Kashmir Through Excise Commissioner J & K, Jammu And The State of Jharkhand Through Secretary-cum-Commissioner of Commercial Taxes, Ranchi And The State of Orissa, Through Commissioner of Commercial Taxes, Cuttack And The State of Punjab, Through The Excise and Taxation Commissioner Punjab, Chandigarh And The State of Rajasthan, Through The Commissioner of Commercial Taxes, Jaipur And The State of Uttarakhand, Through The Commissioner of Trade Taxes, Dehradun And The State of Uttar Pradesh, Through The Commissioner of Trade Taxes, Lucknow And The Union Territory of Chandigarh, Through The Commissioner of Sales Tax/Administr....
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....m-3/10/B-1 dated 07-12-2010." 3. The relief claimed is to treat the movement of goods from the State of Maharashtra to other States as stock transfer. It is reproduced below: "i) the order of MS Tribunal dated 16.12.2014 (Exhibit-A read with Exhibit-A-1) and the order of the Assessing Officer dated 10.02.2011 (Exhibit-B) are bad in law and the same may be quashed and set aside. ii) both the Lower Authorities erred in law and on facts while disallowing the stock transfer of Rs. 105,42,61,155/- duly supported by 'F' Forms produced and available on record and treating the same as a pre-determined inter-State sale and imposing a tax on the same, total amounting to Rs. 10,94,25,133/- under the CST Act. Therefore on facts, the transactions be allowed as OMS Stock Transfers and the tax levied be deleted in the present appeal." 4. CST Appeal No. 13 of 2015 has been filed by the appellant to assail the order dated 15.12.2014 passed by the Maharashtra Sales Tax Tribunal in VAT Appeal No. 423 of 2013 relating to the assessment order dated 29.06.2013 passed by the Deputy Commissioner for the assessment year 2008-09. 5. The operative part of the order is reproduced be....
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....EFORE, THIS AGREEMENT WITNESSETH AS FOLLOWS: ***** 4. Orders and Deliveries. 4.1 HLL shall, before the commencement of each quarter of the financial year, furnish KCLL with a written estimate of the quantities of the Products expected to be (a) purchased, or (b) required for consignment, by HLL during such quarter. HLL and KCLL shall agree on the lead time for receiving said quarterly estimates taking into account KCLL's product planning needs. Such estimate shall only be indicative and not binding. 4.2 At least fifteen (15) days prior to the beginning of each calendar month, HLL will place written purchase orders with KCLL covering HLL's requirements of the Products for purchase and resale as a distributor for that month. ***** 4.5 All purchase orders, and requests for delivery, submitted by HLL to KCLL pursuant to this Agreement shall be subject to acceptance. 5. Prices. 5.1 The sale of Products by KCLL to HLL shall be made at KCLL's list price (the "List Price") as established by KCLL from time to time. The List Price shall include, but not be limited to, (i) manufacturer's excise tax, (ii)....
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....istribution. 16.2 HLL shall use its best efforts to achieve the mutually agreed distribution and sales objectives. ***** 17. Termination. 17.1 Without prejudice to any other rights or remedies, this Agreement may be terminated: 17.1.1 by either party for a material breach of any of the terms of this Agreement by the other party if the breach is not corrected within thirty (30) days after written notice to the breaching party: *****" (emphasis supplied) 9. A Memorandum of Understanding [MOU] was also entered into between the appellant and HLL on 26.07.2000 and the said MOU is reproduced below: "MEMORANDUM OF UNDERSTANDING Under the Shareholder's Agreement ("Agreement") made on 19th January, 1995 by and between Kimberly-Clark Corporation ("K-CC") and Hindustan Lever Limited ("HLL"), K-CC and HLL in accordance with the laws and regulations of India, have established an Indian public limited company under the name and style of Kimberly-Clark Lever Ltd. ("KCLL") Under the agreement, HLL has among other things primary responsibility for the sale and distribution of Diaper and Feminine Protection Products....
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....42,61,155/- was disallowed and held leviable to central sales tax for the reason to the movement of goods from the State of Maharashtra to other States was pursuant to sale or agreement of sale. A demand of Rs. 18,76,84,304/- was, therefore, raised under section 3(a) of the Central Sales Tax Act. 12. For the assessment year 2008-09, the appellant claimed exemption of Rs. 164,81,862/- as stock transfer. The Deputy Commissioner, by order dated 29.06.2013, disallowed claim of Rs. 163,81,75,498/- as Form F was found to be defective. However, Form F in respect of Rs. 99,56,465/- was not found defective but only 3% amounting to Rs. 2,98,694/- was allowed as being sale to Canteen Stores Department [CSD] of Indian Defence Services. Thus, the assessment order demanded Rs. 33,91,456/- towards central sales tax under section 3(a) of the Central Sales Tax Act. 13. Feeling aggrieved, the appellant filed VAT Appeal No. 59 of 2011 in respect of the assessment year 2005-06 and VAT Appeal No. 423 of 2013 in respect of the assessment year 2008-09 before the Maharashtra Sales Tax Tribunal. Both the appeals have been decided by a common order dated 15.12.2014 passed by the Maharashtra Sales Tax ....
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....eir purchase orders placed with the branch office of appellant. So the matter is required to be remanded back to the assessing officer. Because while passing assessment order for the period 2005-2006, the assessing officer allowed raw material transfers to manufacturing unit but rest of the transfers he disallowed fully presuming that entire sale to HLL. Some sale might have been made to canteen stores department and that appropriate rate of tax is required to be levied as per D.D.Q. given by the Commissioner. Coming to assessment order for the year 20082009, it is stated by appellant that there is movement of goods worth Rs. 1,59,16,90,467/- of finished product and raw material worth Rs. 5,64,41,495/- for which all F forms produced however, the assessing officer considered defective F forms of Rs. 163,81,75,498/- and out of valid F forms Rs. 99,56,465/- he allowed 3% i.e. Rs. 2,98,694/- and on Rs. 164,80,24,085/- tax at 12.5% was levied." (emphasis supplied) 14. Shri Naresh Thacker, learned counsel for the appellant assisted by Shri Kumar Visalaksh, Shri Supreme Kothari, Shri Udit Jain and Shri Vibhor Sharma made the following submissions: (i) The Maharasht....
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....epots or from one Satellite Depot to another Satellite Depot have been accepted by tax authorities of the respective States where such Buffer Depots or Satellite Depots are located; (vii) Form-F for assessment period 2008-09 should not be directed to be revised/rectified for minor procedural defects as the impugned order itself records that the appellant was in possession of the lorry receipts, which constitute valid proof of dispatch for the purposes of section 6A of the Central Sales Tax Act. In such circumstances, Form-F could not have been rejected merely on account of minor procedural lapses; (viii) Local tax has been paid on a transaction assuming such transaction as intra-State sales and so if the stock transfer from originating State is held as inter-State sales then such local tax amount should be adjusted with the tax on such inter-State sales and no interest should be levied thereon; and (ix) In the present case, if section 22(1B) of the Central Sales Tax Act is invoked, the obligation to discharge the central sales tax liability lies upon the respondent States and not upon the appellant. Accordingly, where no central sales tax is payable by th....
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....lk Products Ltd. vs. State of Maharashtra and others [CST Appeal No. 50634 of 2024 decided on 28.07.2025] 16. Learned counsel for the other respondent States have supported the stand of the appellant. 17. The submissions advanced by the learned counsel for the appellant, learned counsel for the State of Maharashtra and the learned counsel appearing for other respondent States have been considered. 18. The issue that arises for consideration in these two appeals is whether the movement of goods from the State of Maharashtra to the other States in terms of the Agreement and MOU is inter-State sale within the meaning of section 3(a) of the Central Sales Tax Act or is merely a stock transfer by the appellant to its 3 Buffer Depots and 27 Satellite Depots situated across multiple States. 19. To appreciate this issue it will be necessary to refer to the relevant terms of the Agreement. It provides, amongst others, that Hindustan Lever Limited shall, before the commencement of each quarter of the financial year, furnish to the appellant with a written estimate of the quantities of the products expected to be purchased or required for consignment by Hindustan Level Limited duri....
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....te from its depots for the sale of its products to Hindustan Lever Limited and other customers. This clearly implies that the sale of the products takes place at the depots of the appellant in other States. It is also clear that the Agreement does not stipulate any quantity, product specification or determinative price and is merely a framework arrangement. The purchase orders specifying quantity, product specification and price are placed at the depot level of the appellant in other States from where the goods are supplied. The Agreement only identifies the brand i.e. Kotex and Huggies each comprising multiple products and provides an illustrative pricing mechanism and imposes no obligation or consequence for non placement of order. It is also seen that purchase orders were always placed by Hindustan Lever Limited on concerned Satellite Depots of the appellant pursuant to which the goods were delivered from the Satellite Depots. The goods moved from the manufacturing unit to the Buffer Depots or directly to the Satellite Depots under cover of stock transfer note and lorry receipts. The goods also moved from the Buffer Depots to the Satellite Depots, including Satellite Depots of o....
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....n the goods passes in either State. With a view to find out whether a particular transaction is an inter-State sale or not, it is essential to see whether there was movement of the goods from one State to another as a result of prior contract of sale or purchase. ***** 23. It is an accepted position in law that a mere transfer of goods from a head office to a branch office or an inter-branch transfer of goods, which are broadly brought under the phrase 'Branch transfers' cannot be regarded as sales in the course of inter-State trade, for the simple reason that a head office or branch cannot be treated as having traded with itself or sold articles to itself by means of these stock transfers." (emphasis supplied) 26. What transpires from the aforesaid decision of the Supreme Court in Hyderabad Engineering is that for a sale to be in the course of interstate trade or commerce under section 3(a) of the Central Sales Tax Act, there must be a sale of goods and such sale should occasion the movement of the goods from one State to another. To find out whether a particular transaction is a inter-state sale or not, it is essential to see whether the movement of the go....
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....open purchase orders did not mention the quantity of the goods supplied and it was only to ensure prompt delivery of goods as and when called upon that BASF India transferred the goods and stocks to its depot, the High Court held that the open purchase order would not constitute any contract for sale and that only the purchase orders issued from time to time for supply of goods would constitute a contract between the parties. Thus, the sales effected pursuant to such purchase orders would be an intra-state sale and not inter-state sale. The relevant portions of the judgment of the Karnataka High Court are reproduced below: "3. Brief facts of the case are, petitioner is in the business of manufacture and sale of automotive paints. It is a registered dealer under the provisions of K-VAT Act (Karnataka Value Added Tax Act, 2003 - 'KVAT Act' for short). Its manufacturing unit is situated near Mangaluru in Karnataka. It has warehouses (Branch offices) in Maharashtra, Tamilnadu, Haryana and Uttarakhand. 4. Petitioner manufactures automotive paints for original equipment manufacturers and supplies to Tata Motors, Mahindra and Mahindra, Maruti Udyog Ltd., etc., who procur....
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.... contain the 'quantity' and date of supply. The purchaser/s issue specific purchase order containing the quantity based on the requirement from time to time and the same is supplied from petitioner's depots immediately on just in time model. ***** 28. In order to hold that a transaction falls under Section 3(a) of the CST Act, the sale or purchase must cause movement of goods from one State to another or transfer of title to the goods must take place during their movement from one State to another. 29. In the case on hand, goods have been moved to different State under Form-F. Assessee's specific case is, sale is effected based on the indents received from time to time from the purchasers. ***** 35. Adverting to the facts of this case, the Open Purchase Orders referred to hereinabove, do not mention the quantity of the goods supplied. We may record that in order to avoid inventory, manufacturers have been using the 'JIT' (Just in time) supply model. It was argued on behalf of the assessee that to ensure, prompt delivery of the goods as and when called upon, the assessee transfers the goods and stocks it in its depot. Shri Sridharan also ....
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....tate of Bihar and the State of Jharkhand. The impugned order treated the movement of goods to be arising out of inter-State supply of goods instead of inter-State stock transfer as claimed by Carlsberg India. The relevant portion of order is as follows: "25. The contention of the learned counsel appearing for the appellants is that the movement of the goods from the State of Rajasthan to their depots in the State of Bihar had not occurred under the Master Agreement, incidental or otherwise since the clauses of the Master Agreement do not specify that the liquor manufactured by the appellants in the State of Rajasthan must be supplied to the depots of the Corporation on an interstate basis. The submission of the learned senior counsel for the State of Rajasthan is that the movement of goods from the State of Rajasthan to the State of Bihar or the State of Jharkhand was occasioned by the Master Agreement as can be seen from the clauses of the Master Agreement and the Liquor Policy. According to the learned senior counsel, the OFS only implemented the Master Agreement and the Liquor Policy." 31. After referring to the decision of the Allahabad High Court in Central Distill....
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....agreement to sell. The appellants had merely stock transferred beer from the manufacturing units of the appellants situated in the State of Rajasthan to the depots of the appellants situated in the State of Bihar or the State of Jharkhand. The movement of goods did not occur from the State of Rajasthan to the State of Bihar or the State of Jharkhand pursuant to the Master Agreement or the Liquor Policy. 56. The learned senior counsel for the State of Rajasthan is, therefore, not justified in placing reliance on clause 2 of the Master Agreement and clause 3.1 of the Liquor Policy to contend that the movement of goods was occasioned as a result of the Master Agreement and so would result in an inter-state sale." (emphasis supplied) 32. The aforesaid decisions to support the stand of the appellant that transfer of goods from the State of Maharashtra to the Satellite Depots and Buffer Depots in other States was by way of stock transfer and not by way inter-State sale. 33. Learned counsel for the State of Maharashtra, however, placed reliance on certain decisions. These decisions do not come to the aid of the State of Maharashtra: (i) Hyderabad Engineering: He....
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....2015 (82) VST 242 (SC)]: The Supreme Court held the transaction to be a branch transfer, as the sale was completed at auction prior to movement to another State. This case does not support the case of the State of Maharashtra; (viii) South India Viscose Ltd vs. State of Tamil Nadu [1981 (48) STC 232 (SC)]: Movement was pursuant to allocation cards specifying quantity and purchaser, constituting a contract of sale. The Agreement/MOU in the present appeals contain no allocation, quantity or price, and, therefore, cannot be treated as a contract of sale; and (ix) Indapur Diary and Milk: The Tribunal examined whether the movement of goods from the factory of the appellant at Pune to Haridwar was pursuant to purchase orders placed by Patanjali. The Tribunal held that the goods were manufactured strictly as per specifications of Patanjali and were subject to verification at Haridwar. On appreciation of documents such as purchase orders, invoices, Lorry receipts, stock transfer challans and Form No. 16, it was found that invoices were raised only after receipt of purchase orders and the movement of goods was, accordingly, held to be pursuant to such purchase order. The s....