Custom, Excise & Service Tax Tribunal
Indapur Dairy And Milk Products Ltd vs State Of Maharashtra on 28 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
CENTRAL SALES TAX APPEAL NO. 50634 OF 2024
(Arising order out of dated 14.02.2023 passed by the Maharashtra Sales Tax Tribunal,
Mumbai at Pune in VAT Appeal No. 03/2019, VAT Appeal No. 04/2020 and VAT Appeal
No. 01/2021 Pune Bench)
M/s. Indapur Dairy and ....Appellant
Milk Products Ltd.
Mauje Gokhali, Sonmatha, Tal-Indapur,
Dist: Pune - 413106
VERSUS
1. State of Maharashtra
Through Commissioner of Sales Tax,
5th Floor, Vikrikar Bhawan,
Mazgaon, Mumbai - 400010
2. The Maharashtra Sales Tax Tribunal
7th Floor, Vikrikar Bhawan,
Mazgaon, Mumbai - 400010
3. State of Uttarakhand ....Respondents
Through Commissioner of Commercial Tax, U.K.,
Ring Road, Near Bridge No. 6,
Nathanpur, Dehradun - 248005
WITH
CST/50635/2024 AND CST/50636/2024
APPEARANCE:
Shri Rahul C. Thakar, Advocate for the Appellant
Ms. Rama Ahluwalia, Advocate for the State of Maharashtra
Ms. Anubha Dhulia and Ms. Suveni Bhagat, Advocates for the State of
Uttarakhand
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 11.04.2025
Date of Decision: 28.07.2025
FINAL ORDER NO's. 51075-51077/2025
2
CST/50634/2024 & 2 others
JUSTICE DILIP GUPTA:
M/s. Indapur Dairy and Milk Products Ltd. 1 has sought the quashing
of that part of the common order dated 14.02.2023 passed by the
Maharashtra Sales Tax Tribunal 2 that upholds the orders dated
27.03.2019, 31.03.2020 and 13.03.2021 passed by the Assessing
Authority for the assessment years 2014-15, 2015-16 and 2016-17
disallowing the branch transfer claimed by the appellant. However, the
State Tribunal reduced the penalties imposed upon the appellant under
section 9(2) of the Central Sales Tax Act, 1956 3. Thus, VAT Appeal No. 03
of 2019, VAT Appeal No. 04 of 2020 and VAT Appeal No. 01 of 2021 filed
by the appellant were partly allowed. The appellant has also sought a
relief for setting aside the penalty imposed upon the appellant.
2. The issue that had arisen before the State Tribunal was whether the
movement of goods from the Indapur factory of the appellant at Pune in
the State of Maharashtra to Haridwar in the State of Uttarakhand was to
fulfill the purchase orders of Patanjali and, therefore, not a branch transfer
as claimed by the State of Maharashtra, or it was a transfer of goods to
the Branch of the appellant at Haridwar covered by section 6A of the CST
Act as claimed by the appellant.
3. The appellant is engaged in the manufacture and trading of milk and
milk products under the brand name of "SONAI". The factory is situated at
Indapur in Pune in the State of Maharashtra. The appellant claims that in
order to broaden its client base, it established a Branch Office at Haridwar
in the State of Uttarakhand and the said Branch Office at Haridwar is
registered under the Uttarakhand Value Added Tax Act 4.
1. the appellant
2. the State Tribunal
3. the CST Act
4. the UVAT Act
3
CST/50634/2024 & 2 others
4. The manufacturing and packaging of butter takes place at the
Indapur plant in Pune. According to the appellant, since butter is a
perishable item, it requires transportation in controlled temperature vans
to maintain its quality. For this purpose, the appellant transfers SONAI
butter from the Indapur plant at Pune to its Branch at Haridwar using
refrigerated vans. This transportation process ensures that the butter
remains fresh and preserves its quality during transit.
5. The appellant asserts that the stock transfer of butter to the
Haridwar Branch carried out using Form F is categorized as goods
dispatched to the Branch without being sold. Once the refrigerated vans
arrive at the Haridwar Branch, the butter is received and stored within the
vans, which are parked near the Branch Office. This is done due to
absence of cold storage facility at the Haridwar Branch. The refrigerated
vans are, therefore, used as temporary storage for the butter until the
butter is sold and the stock is cleared from the vans. The appellant
through this arrangement maintains the required temperature control to
ensure quality and freshness of the butter.
6. An investigation by the Sales Tax Department of the State of
Maharashtra was conducted at the factory premises of the appellant at
Pune regarding the levy of central sales tax on transfer of goods from
Indapur to Haridwar. The appellant received a notice from the Assessing
Authority for assessment purposes. The Assessing Authority disallowed
the claim of the appellant of branch transfer of butter from the Indapur
factory to the Haridwar Branch for the period 2014-15, 2015-16 and
2016-17 and categorized the transfer as inter-State sale from the State of
Maharashtra to the State of Uttarakhand under section 3(a) of the CST
Act.
4
CST/50634/2024 & 2 others
7. Feeling aggrieved, the appellant filed three appeals before the State
Tribunal. The State Tribunal disallowed the claim of the appellant of
branch transfer and held that it was an inter-State sale originating from
the State of Maharashtra to the State of Uttarakhand.
8. The relevant portions of the order dated 14.02.2023 passed by the
State Tribunal are reproduced below:
"34. In the backdrop of the above legal
position and in view of the rival submissions
made before us, it is necessary to ascertain
whether there exist contract of sale between
the appellant and the ultimate buyer M/s
Patanjali and as to whether there is interstate
movement of goods pursuant to such contract
of sale or whether such movement from
Indapur Factory of the appellant to its branch
at Haridwar is otherwise than by sale, i.e. by
branch transfer. According to the Appellant's C.A.
butter is sent from Appellants factory at Indapur to
its branch at Haridwar by a refrigerated van which
after reaching the branch office at Haridwar is
parked near the branch office and that, thereafter
the branch office informs the potential buyers about
the availability of butter for sale. The Appellants
main customer in Uttarakhand is M/s. Patanjali
Ayurveda Ltd. which first checks the quality of
the butter and if Patanjali finds butter in good
condition as per there requirement, then and
then only Patanjali purchases butter. As soon
as the customer purchases butter the
refrigerated VAN parked near the branch office
is diverted to the Place of Patanjali for delivery.
In proof of the above arrangement our attention is
invited to Patanjali's letter dt- 9 th October 2022
there by certifying that butter from the appellant is
purchased after testing quality at the gate of
Patanjali's factory and after placing confirmation
order with the branch office of the appellant.
According to the appellant there is no prior contract
of the appellant with Patanjali.
5
CST/50634/2024 & 2 others
35. The sample copies of purchase orders
placed on record by the Department show that
these orders are placed by M/s Patanjali
Ayurved Ltd., Village Padartha, Haridwar,
Uttarakhand on the branch office of the
appellant at Kankhal, Haridwar. The purchase
orders bears purchase order nos, purchase order
date, contact details of the contact person of
Patanjali, vendor information, quantity and unit price
of the material to be supplied, amount payable by
Patanjali, tax component etc. The purchase orders
bear a note -"The material should be as per our
specification. Kindly attach test certificate and P. O.
copy along with material. The purchase orders with
details as to the specifications of the material to be
supplied and as to other terms and conditions for
supply do indicate that there is previous agreement
of the appellant with Patanjali. Details such as
unloading point: Patanjali unit -II and freight: FOR
AT OUR SITE indicate that there is arrangement
agreed for direct delivery to Patanjali from the
appellant's factory. Even as stated by the
appellant the refrigerated van containing
appellant's goods such as butter are never
unloaded at the branch office of the appellant
at Haridwar and they are unloaded at the
premises of the customer. The lorry receipts
also show endorsement of Patanjali for receipt
of goods although consignee name is that of
the branch of the appellant at Haridwar.
36. From the purchase orders, stock
transfer challans, retailer invoices and form no
16, lorry receipts, it is revealed that the branch
office receives the purchase orders on a
specific date, the appellant's factory in
response to purchase orders makes goods
ready for dispatch by preparing stock transfer
challan, retailer invoices and form no 16. It
appears that on the basis of above documents
lorry receipts are prepared and materials are
sent to Uttarakhand. The dates of the above
documents show that these documents are
prepared to fulfil the purchase orders. The
6
CST/50634/2024 & 2 others
retailer invoices prepared by Indapur unit
reveal the purchase order no and purchase
order date based on which the invoices are
prepared. The same invoice number is reflected
in the stock transfer challan, lorry receipt and
form no 16. Therefore there is reason to
believe that the movement of goods from
Indapur factory of the appellant to Haridwar,
Uttarakhand has been for fulfilling purchase
orders of Patanjali who is indisputably a single
buyer from Haridwar, Uttarakhand for the
period under consideration. It is seen from the
documents that the consignments are sent after the
date of particular purchase orders. It can be
therefore gathered that the movement of goods is in
pursuance of specific purchase orders. It is seen
from the documents placed on record that the
Haridwar branch of the appellant receives
purchase orders from Patanjali which are
forwarded to appellant's factory at Indapur and
there after goods are sent to Patanjali,
Haridwar through the branch at Haridwar
which branch only prepares invoices and
accepts payment for the appellant.
37. It is seen from the documents placed
on record that the appellant has transferred
goods such as whole milk powder, dairy
whitener in addition to butter during the period
under consideration. The purchase agreement dt-
01.12.2014 between Patanjali, Haridwar,
Uttarakhand and the appellant is placed on record
which pertains to sale of whole milk powder
specifying in details terms and conditions. Thus it
can be inferred that there is pre determined
arrangement between the appellant and M/s.
Patanjali for supply of goods.
38. The depositions of some employees at
Indapur Factory of the appellant recorded
during investigation, such as depositions of
Shri. Bapu Saheb Vitthal Ukarande and Shri.
Hanumant Bajrang Dhanawade reveal that the
appellant receives purchase orders from buyers
7
CST/50634/2024 & 2 others
in advance through e-mail, letters. It is also
disclosed that the goods are manufactured and
sold on the basis of confirm purchase orders.
The depositions referred above support the
case of the department that movement of
goods is effected pursuant to concrete
purchase orders.
39. So also there are some sample emails
placed on record which show exchange of
correspondence between the appellant at
Indapur and Patanjali Ayurved from which
inference can be drawn that goods are supplied
to the unit of Patanjali from Indapur factory of
the appellant through it's branch at Haridwar
which merely acts as a conduit pipe. The
correspondence between the appellant and
Patanjali Ayurved also support the case of the
department that the movement of goods
constitutes interstate sale. The solitary letter
dated- 09.10.2022 from M/s. Patanjali relied
upon by the appellant to support its case of
branch transfer is not sufficient to negate the
evidence in the form of purchase orders, lorry
receipts, invoices, email correspondence,
depositions of employees which establish the
case of the department that the transactions
constitute interstate sale, which are liable to be
taxed u/s 3 (a) of CST Act. It is seen that
goods are manufactured by the appellant as
per specifications of the buyer, M/s Patanjali
Ayurved and there is movement of goods from
Indapur Factory of the appellant in
Maharashtra to M/s. Patanjali Ayurved,
Haridwar, Uttarakhand.
*****
41. In view of the above discussion we find
that the appellant has failed to discharge its
burden to prove its case of branch transfer. On
the contrary, there is enough material of
undisputed nature placed on record which
clearly establish that there is movement of
8
CST/50634/2024 & 2 others
goods constituting interstate sale within the
meaning of section 3 (a) of the CST Act.
42. We are thus of the opinion that the
assessing authority has dealt with the
controversy as to branch transfer in the right
perspective. Thus, no interference is called for
in the impugned assessment orders, so far as
they relate to levy of tax and interest.
However, so far as levy of penalty under
section 29 (3) of MVAT Act read with section 9
(2) of the CST Act is concerned, as it appears
that the appellant is already saddled with interest
and penalty is also imposed heavily to the extent of
50% of tax levied; we are inclined to reduce the
penalty to the extent of 25% of tax levied.
Therefore, penalty for the assessment year 2014-15,
2015-16 and 2016-17 works out to Rs.
2,65,02,786/-, Rs. 2,76,90,320/-, and 2,89,77,140/-
respectively. Hence, we pass the following order.
ORDER
1. VAT APPEAL No. 03/2019, 04/2020 and 01/2021 are partly allowed.
2. The penalties levied under section 29 (3) of the MVAT Act read with section 9(2) of the CST Act for the assessment year 2014-15, 2015-16, 2016-17 are reduced to Rs.
2,65,02,786/- (Two Crore Sixty Five Lakhs Two Thousand Seven Hundred Eighty Six), Rs. 2,76,90,320/- (Two Crore Seventy Six Lakh Ninety Thousand Three Hundred Twenty) and Rs. 2,89,77,140 (Two Crore Eighty Nine Lakh Seventy Seven Thousand One Hundred Forty) respectively.
3. The impugned orders of assessment so far as pertaining to levy of tax and interest are confirmed.
4. No order as to costs.
5. The appeals are disposed of accordingly."
(emphasis supplied) 9 CST/50634/2024 & 2 others
9. Shri Rahul C. Thakar, learned counsel for the appellant made the following submissions:
(i) The transportation of butter from the factory at Indapur at Pune in the State of Maharashtra to the Haridwar Branch in the State of Uttarakhand was carried out independently, without any pre-existing agreement with Patanjali. Once the butter arrives at the Haridwar Branch, Patanjali conducts its own rigorous laboratory testing. The sale of butter to Patanjali is initiated solely upon the issuance of a confirmed purchase order pursuant to laboratory test report. This purchase order is generated subsequent to the meticulous testing of butter samples taken from the stored stock at the Haridwar Branch;
(ii) Upon the ascertainment of the quality of the butter by Patanjali, the appropriation of the said butter is exclusively carried out within the State of Uttarakhand.
Consequently, in accordance with the provisions of section 4(2)(b) of the CST Act, the State where the appropriation of future goods occurs is entitled to levy tax on such transaction. Hence, the sale of butter in the present case is deemed to have taken place solely within the State of Uttarakhand. Consequently, the relevant provisions of the UVAT Act are applicable to these butter sales and the appellant has fulfilled tax obligation by remitting VAT on these sales transactions in the State of Uttarakhand;
(iii) The findings of the State Tribunal are based on the presumption of existence of an agreement with Patanjali supported by e-mails from Patanjali to the Haridwar Branch. The agreement between the Haridwar Branch and 10 CST/50634/2024 & 2 others Patanjali constitutes an intention to purchase butter, contingent upon the fulfillment of the condition of laboratory testing. It does not qualify as a legally binding contract of sale. Even if it considered as an agreement, such an agreement does not constitute an agreement to sell, as it lacks the essential element of a claim for damages in case of its breach. Consequently, the characterization of the branch transfer as inter-State sales under section 3(a) of the CST Act is erroneous;
(iv) The appellant maintains the right to dispose or divert the goods, and there is no appropriation of goods until the completion of laboratory testing by Patanjali and the placement of a confirmed order with the Haridwar Branch. Until these conditions are met, the goods remain unallocated and are not specifically designated for the intended purpose;
(v) If the transaction is held to be an inter-State sale from the State of Maharashtra, than the appellant should be granted the refund of the amount paid in the destination State under the provisions of the section 22(1B) of the CST Act;
(vi) The State Tribunal reduced the amount of penalty.
However, no penalty is attracted in the facts of the present case;
(vii) A comprehensive show cause notice should have been issued for imposition of penalty. Only a letter has been produced for information of transaction in which there is a mention of proposal to impose penalty under section 29(3) of the MVAT Act. The said proposal to impose penalty was only if the appellant did not produce the 11 CST/50634/2024 & 2 others required documents. Proposal to impose penalty cannot be made by merely referring to section 29(3) of the MVAT Act in a letter asking information without issuing a show cause notice giving reasons for invoking section 29(3) of the MVAT Act. Thus, the imposition of penalty is in complete violation of the principles natural justice; and
(viii) The appellant had disclosed all the transactions and produced Form F in support of its claim of branch transfer. The transaction whether allowed as stock transfer or inter-State sale from State of Maharashtra involves interpretation. There is no deliberates evasion of tax. In fact, the appellant has paid the tax in the destination State on the sale of the same goods, which is more than the amount sought to be demanded from the appellant in the State of Maharashtra. The State Tribunal has not given cogent reasons for imposing penalty under the section 29(3) of the MVAT Act. To support this contention, learned counsel placed reliance on the following judgments:
(a) CIT vs. Reliance Petro Products Pvt.
Ltd. 5; and
(b) Shree Krishna Electricals vs. State of Tamil Nadu 6;
10. Ms. Rama Ahluwalia, learned counsel for the State of Maharashtra supported the order passed by the State Tribunal and made the following submissions:
(i) It is on the basis of the investigation report and documents such as e-mail exchanged between the Head Office of the appellant and the customer, namely,
5. 322 ITR 58 (SC)
6. 23 VST 249 (SC) 12 CST/50634/2024 & 2 others Patanjali and the lorry receipts that the Assessing Officer came to a conclusion that the movement of goods from the State of Maharashtra to the State of Uttarakhand was in pursuance of a contract of sale and the claim of the appellant was not covered by section 6A of the CST Act.
As such, movement of goods constituted an inter-State sale under section 3(a) of the CST Act;
(ii) The State Tribunal held that from the purchase orders, stock transfer challans, retailer invoices, Form No. 16 and the lorry receipts that the Branch Office receives the purchase orders on a specific date. The factory of the appellant, in response to purchase orders, makes goods ready for dispatch by preparing stock transfer challan, retailer invoices and Form No. 16. On the basis of above documents, lorry receipts were prepared and goods were sent to the State of Uttarakhand. The State Tribunal also held that the dates of these documents show that these documents were prepared to fulfill the purchase orders. The retailer invoices prepared by the Indapur factory also reveal the purchase order number and purchase order date based on which the invoices are prepared. The same invoice number is reflected in the stock transfer challan, lorry receipt and Form No. 16. Therefore, the movement of goods from Indapur factory of the appellant in the State of Maharashtra to Haridwar in the State of Uttarakhand fulfils the purchase orders of Patanjali, which is indisputably a single buyer in Haridwar for the period under consideration;
(iii) The State Tribunal also held that consignments are sent after the date of purchase order. The documents on 13 CST/50634/2024 & 2 others record also show that the Haridwar Branch of the appellant receives purchase orders from Patanjali which are forwarded to factory of the appellant at Indapur and thereafter the goods are sent to Patanjali through the Branch at Haridwar, which Branch only prepares invoices and accepts payment for the appellant;
(iv) From the 'Purchase Agreement' dated 01.12.2014 between Patanjali and the appellant, it can be inferred that there is a pre-determined arrangement between the appellant and Patanjali for supply of goods.
(v) The statements of some of the employees of the appellant at Indapur factory recorded during investigation reveal that the appellant receives purchase orders from buyers in advance through e-mail and letters and the goods are manufactured and sold on the basis of purchase orders;
(vi) The goods are manufactured as per the specifications of Patanjali and there is movement from Indapur factory of the appellant in the State of Maharashtra to Patanjali in the State of Uttarakhand;
(vii) The appellant may have submitted declarations in Form F before the Assessing Authority but this is not a conclusive proof of the fact that movement of goods from one State to another is occasioned otherwise than by sale. The Assessing Officer conducted an inquiry under section 6A(2) of the CST Act and came to a conclusion that the contents mentioned in Form F were not correct as the transfer of goods was occasioned by reason of a pre- existing contract;
(viii) There was no proper Branch Office/godown in Haridwar and even the goods were never unloaded at the Branch 14 CST/50634/2024 & 2 others Office since the refrigerated vans from Pune stopped outside the Branch Office. Patanjali officers were then informed and they came to inspect butter to ascertain whether it was as per the specification of the purchase order and on being satisfied, the van was sent to Patanjali godown to be unloaded. This is a clear case of deliberately providing incorrect information and hence covered under section 9(2) of the CST Act and section 29(3) of the MVAT Act;
(ix) The contention of the appellant that no notice was given regarding imposition of penalty is not correct. The Deputy Commissioner, by a letter dated 03.01.2019, gave notice to the appellant regarding imposing penalty; and
(x) The State Tribunal correctly held that the appellant failed to discharge the burden to prove that it was a case of branch transfer. The State Tribunal also held that there was enough material on record to establish that the movement of goods constituted an inter-State sale within the meaning of section 3(a) of the CST Act, and, therefore, consequential interest and penalty to the extent of 25% of tax was levied.
11. Ms. Anubha Dhulia, learned counsel for the State of Uttarakhand assisted by Ms. Suveni Bhagat, made the following submissions:
(i) At the time when the butter is sent from Indapur factory to Haridwar there is no purchase order occasioning the movement of butter from Pune to Haridwar. It is a transfer of stock from Pune to the Haridwar Branch for prospective customers in Haridwar;15
CST/50634/2024 & 2 others
(ii) Since the sale of the butter to Patanjali was an intra-State sale within Uttarakhand, VAT was leviable on it and has been paid;
(iii) The sale and appropriation of the butter has taken place solely in the State of Uttarakhand and, therefore, it is the State of Uttarakhand which had the right to impose tax on the sale transaction;
(iv) No case for transfer of tax to the State of Maharashtra is made out since the transactions in question constitute a stock transfer only; and
(v) In any case, for refund to be granted under section 22(1B) of the CST Act, a detailed examination of the transactions in question will have to be undertaken before any transfer is made. Further, input tax credit has been claimed by Patanjali on all sales declared by Indapur Dairy, Haridwar at the rate of 5%.
12. The submissions advanced by the learned counsel for the appellant, the learned counsel for the State of Maharashtra and the learned counsel for the State of Uttarakhand have been considered.
13. The issue that arises for consideration in these appeals is whether the movement of goods from the Indapur factory of the appellant at Pune in the State of Maharashtra to Haridwar in the State of Uttarakhand is by way of branch transfer as claimed by the appellant or the transfer is as a result of sale that occasioned the movement of goods from the State of Maharashtra to the State of Uttarakhand under section 3(a) of the CST Act as claimed by the State of Maharashtra.
14. It is not in dispute that the goods were supplied by the appellant to Patanjali at Haridwar. The manufacture of butter takes place at the 16 CST/50634/2024 & 2 others Indapur plant at Pune and is transported in refrigerated vans at controlled temperature to Haridwar. According to the appellant, this is by way of stock transfer to the Haridwar Branch using Form F and once Patanjali checks the quality of the butter and finds that it is in good condition as per the requirement, appropriation take place and the refrigerated vans which are parked close to the Branch at Haridwar are diverted to Patanjali for delivery.
15. To appreciate this issue, it would be appropriate to examine sections 3, 6 and 6A of the CST Act and the relevant portions of these sections are 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.
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 Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified:
17
CST/50634/2024 & 2 others Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5, is a sale in the course of export of those goods out of the territory of India.
6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale. - (1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such 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, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods 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.
(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, 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 be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale.
*****"
(emphasis supplied) 18 CST/50634/2024 & 2 others
16. The provisions of sections 3 and 6A of the CST Act were examined at length by the Supreme Court in Hyderabad Engineering Industries vs. State of Andhra Pradesh 7 and the relevant portions of the judgment are reproduced below:
"20. For a sale to be in the course of inter- State trade or commerce under Section 3(a), two conditions must be fulfilled. There must be sale of goods. Such sale should occasion the movement of the goods from one State to another. A sale would be deemed to have occasioned the movement of the goods from one State to another within the meaning of clause (a) of Section 3 of the Act when the movement of those goods is the result of a covenant or incidence of the contract of sale, even though the property in 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.
21. Section 6-A of the Central Act provides that if any dealer claims that he is not liable to pay tax under the Central Act in respect of any goods, on the ground that the movement of such 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 and not by reason of sale, then the burden of proving that the movement of goods was so occasioned shall be on the dealer. It also provides the mode of discharge of that burden of proof.
22. What follows from a conjoint reading of these provisions is that every dealer is liable to pay tax under the Central Act on the sale of goods effected by him in the course of inter- State trade or commerce during the year of
7. (2011) 4 SCC 705 19 CST/50634/2024 & 2 others assessment. Where the department takes advantage of the presumption under Section 3(a) and/or to show that there has been a sale or purchase of goods in the course of inter-State trade or commerce and if the assessee disputes that there has been a sale or purchase of goods in the course of inter-State trade or commerce, then the assessee can rebut the presumption by filing declaration in form 'F' under Section 6A of the Central Act to prove that the movement of goods was occasioned not by reason of sale but otherwise than by way of sale. When the department does not take advantage of the presumption under Section 3(a) of the Central Act, but shows a positive case of inter-State sale in the course of inter-State trade or commerce to make it liable to tax under Section 6, the declaration in Form 'F' under section 6A would be of no avail.
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)
17. What transpires from the aforesaid decision of the Supreme Court in Hyderabad Engineering is that for a sale to be in the course of inter- State trade or commerce under section 3(a), 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 an inter- State sale or not, it is essential to see whether the movement of the goods from one State to another is a result of a prior contract of sale. Under section 6A, if the dealer claims that the movement of such goods 20 CST/50634/2024 & 2 others from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business and not by reason of sale, then the burden of proving that the movement of goods was so occasioned shall be on the dealer. The mode of discharge of this burden of proof has also been provided in the form of a declaration in Form F. Mere transfer of goods from a Head Office to a Branch Office or inter-branch transfer of goods which broadly come under the phrase 'branch transfers' cannot be regarded as sale 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 stock transfers. When the 'sale' causes or has the effect of occasioning the movement of goods from one State to another, irrespective of whether the movement of goods is provided for in the contract of sale or not, or whether the order is placed with any Branch Office or any Head Office which resulted in the movement of goods, if the effect of such a sale is to have the movement of goods from one State to another, an inter-State sale would ensue and would result in exigibility of tax under section 3(a).
18. The State Tribunal has meticulously examined the purchase orders placed by Patanjali on the Branch Office of the appellant at Haridwar and observed that the purchase orders bear numbers, date, details of the contact person at Patanjali, quantity and unit price of the material to be supplied and the amount payable by Patanjali. The State Tribunal also found as a fact that after the Branch Office receives the purchase orders on a specific date, the Indapur factory at Pune, in response to the purchase orders, makes the goods ready for dispatch by preparing stock transfer challans, retailer invoices, Form No. 16 and lorry receipts. The State Tribunal also found from the dates mentioned in these the aforesaid 21 CST/50634/2024 & 2 others documents that these documents were prepared to fulfill the purchase orders. The State Tribunal, therefore, concluded that the Branch of the appellant at Haridwar receives purchase orders from Patanjali which are forwarded to the factory of the appellant at Indapur and, thereafter, the goods are sent by the Indapur factory to Patanjali through the Branch at Haridwar. The State Tribunal, therefore, held that the movement of goods from the Indapur factory of the appellant at Pune in the State of Maharashtra to Haridwar in the State of Uttarakhand is in pursuance of the purchase orders placed by Patanjali, which was the sole buyer during the period under consideration. The State Tribunal, while arriving at the aforesaid finding, also took into consideration the statements made by some of the employees of the appellant at Indapur factory. The statements reveal that the appellant receives purchase orders from Patanjali in advance through e-mails or letters and then the goods are manufactured and sold on the basis of the purchase orders. The State Tribunal also examined the correspondence between the appellant and Patanjali which confirmed this fact. The State Tribunal also found that the goods manufactured by the appellant are as per the specifications of Patanjali. The State Tribunal ultimately found no reason to take a view different from the view that was taken by the Assessing Authority.
19. However, the penalty imposed upon the appellant under section 29(3) of the MVAT Act read with section 9(2) of CST Act was reduced.
20. The main contention of the learned counsel appearing for the appellant is that it is only when the butter arrives at the Haridwar Branch that Patanjali conducts its own laboratory testing and the appropriation of butter is exclusively carried out in the State of Uttarakhand. Thus, in terms of section 4(2)(b) of the CST Act, it is the State of Uttarakhand that 22 CST/50634/2024 & 2 others can levy VAT on such transaction as appropriation of goods occurs in this State.
21. It is, therefore, appropriate to reproduce section 4(2) of the CST Act, which is as follows:
"4. When is a sale or purchase of goods said to take place outside a State ***** (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State-
(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and
(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.
Explanation - Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places."
22. This submission advanced by the learned counsel for the appellant cannot be accepted. As noticed above, the movement of goods from the State of Maharashtra to the State of Uttarakhand was occasioned by the purchase orders placed by Patanjali. Mere checking of the quality of the butter in the refrigerated vans would not mean that butter has been appropriated in the State of Uttarakhand. Every buyer is entitled to check whether the goods that have been supplied are the same that have been ordered and in case they are not, the goods are rejected. 23
CST/50634/2024 & 2 others
23. This is also clear from the Purchase Agreement dated 01.12.2014 executed between Patanjali and the appellant and the relevant portions of the Purchase Agreement are reproduced below:
"PURCHASE AGREEMENT This Agreement made on this 1st December, 2014 at Haridwar, Uttarakhand BETWEEN PATANJALI AYURVED LIMITED (hereinafter referred to as "PATANJALI") ***** AND M/s. Indapur Dairy and Milk Products Ltd. (hereinafter referred to as "Indapur Dairy") AND WHEREAS PATANJALI is a committed organization in the business of procuring, processing manufacturing and marketing of herbal products including medicines, cosmetics and food products, beverages, personal and home care products, extracts and so many similar commodities at Haridwar, India and is willing to trade/market for Whole Milk Powder (WMP).
AND WHEREAS INDAPUR DAIRY is engaged in manufacturing/trading of Whole Milk Powder (WMP) and have agreed to supply the same to PATANJALI as per terms and conditions as mutually may be agreed upon between the two parties as above mentioned.
AND WHEREAS the parties aforementioned are derious of entering into an agreement setting the terms and conditions therein.
NOW IT IS HEREBY MUTUALLY AGREED TO BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:
***** BASIS OF CONTRACT
1. INDAPUR DAIRY will manufacture Whole Milk Powder (WMP) as per Specifications 24 CST/50634/2024 & 2 others and Standards to be fixed by PATANJALI from time to time and PATANJALI will purchase the Whole Milk Powder (WMP) from INDAPUR DAIRY as per its own specification and standards fixed and as per rates as may be mutually decided and agreed to between them.
2. The Quality and Standard of the Whole Milk Powder (WMP) supplied by INDAPUR DAIRY to PATANJALI, shall be subject to checking and verification by Quality Control Department of PATANJALI, at the Final Delivery Point as mentioned in each Purchase Order to be placed/given by PATANJALI to INDAPUR DAIRY.
3. Any variation in Quality / Standard / Specification / deficiency in volume, if any, found by the Quality Control Department of PATANJALI may lead to rejection of the lot by PATANJALI, subject however, to minor deviations, if any, as may be acceptable as per normal business prudence and agreed to in the Purchase Order placed by PATANJALI.
***** DELIVERY, PAYMENT TERMS AND GUARANTEE
6. The Materials shall be delivered by INDAPUR DAIRY at the destination as required by PATANJALI from time to time and the price of the material shall be inclusive of Freight and Taxes.
7. INDAPUR DAIRY will provide Whole Milk Powder in bulk i.e. in 25 Kg. Bags to PATANJALI for further repacking into small packets.
8. The Standard, Specification, Quality, Rate, Pricing, Payment Terms, Delivery Terms and / or other terms shall be mentioned in each Purchase Order as may be mutually decided and finalized by them each time while placing the Purchase Order by 25 CST/50634/2024 & 2 others PATANJALI with INDAPUR DAIRY for the Material.
9. Once the Purchase Order is confirmed, the late delivery of Materials will attract penalty @1% per day on the Ordered Value of Materials to INDAPUR DAIRY.
10. Once rate fixed and Purchase Order confirmed, such rate shall be applicable for a period of 12 months subject, however, to exceptional circumstances in which case the rate may be changed with mutual consent in writing.
11. Payment shall be made by PATANJALI within 30 days after receipt of Material and Invoice, whichever is later.
12. PATANJALI reserves the right to hold any outstanding payment of INDAPUR DAIRY, in case of any disputes that arises as to quality, quantity, timely delivery of materials and / or other matters and in such cases, INDAPUR DAIRY will fully cooperate with PATANJALI till amicable settlement of such disputes.
13. Damaged Bags, Short Quantity and Open Bags shall be at the sole risk and cost of INDAPUR DAIRY and that PATANJALI will adjust the cost of damaged bags, short quantity and / or open bags, if any, against the Bill raised by INDAPUR DAIRY."
(emphasis supplied)
24. A perusal of the said Purchase Agreement clearly shows that Indapur Dairy at Pune will manufacture whole milk powder as per the specifications and standards fixed by Patanjali from time to time. It also provides that the quantity and standard of the whole milk powder supplied by the appellant to Patanjali shall be subject to checking and verification by the quality control department of Patanjali at the final delivery point as mentioned in each purchase order to be placed by Patanjali on the 26 CST/50634/2024 & 2 others appellant. It also provides that any variation in the quality / standard / specifications, may result in rejection of the lot by Patanjali.
25. This fact is also clear from the Certificate dated 09.10.2022 issued by Patanjali which is reproduced below:
"Date: 09th October 2022 TO WHOM SO EVER IT MAY CONCERN This is to certify that Patanjali Ayurved Ltd. used to purchase Butter from Indapur Dairy and Milk Products Limited during the period 01-04-2014 to 31-03-2017. The refrigerated van containing butter used to come to the place of their officer and our person used to collect the samples from the said refrigerated van, test the same in our own laboratory and then only if it met our specification of quality and other parameters we used to accept it and purchase the Butter after the approval from laboratory.
Butter being perishable item, it was necessary to test quality at the gate of our factory and then only accept it. After quality check and confirmation order was placed with Kankhal Branch office of Indapur Dairy and Milk Products Limited.
For Patanjali Ayurved Ltd.
Sd/-
Authorized Signatory"
26. The findings recoded by the State Tribunal are based on the documents on record, namely the purchase orders placed by Patanjali and the stock transfer challan, retailer invoices and the lorry receipts. The State Tribunal, on a consideration of these documents, arrived at a finding that the invoices were prepared by the Indapur Unit at Pune after the purchase orders were placed by Patanjali and in fact the purchase order numbers and the purchase order dates are mentioned in the invoices. The 27 CST/50634/2024 & 2 others same invoice number is also reflected in the stock transfer challan, lorry receipt and Form No. 16.
27. This factual position has not been controverted by the appellant and only reliance has also been placed on section 4(2)(b) of the CST Act to contend that appropriation of goods takes place in the State of Uttarakhand after the testing is carried out by Patanjali.
28. There is, therefore, no manner of doubt that the movement of goods from the Indapur factory of the appellant at Pune in the State of Maharashtra to the State of Uttarakhand was occasioned by the purchase orders placed by Patanjali on the appellant. There is, therefore, no error in the order passed by the State Tribunal that may call for any interference in these appeals.
29. The next issue that arises for consideration is whether penalty could have been imposed upon the appellant.
30. It has been contended by the learned counsel for the appellant that the show cause notice did not call upon the appellant to show cause as to why penalty should not be imposed upon the appellant under section 9(2) of the CST Act read with section 29(3) of the MVAT Act and it is only in the communication dated 03.01.2019 sent by the Deputy Commissioner of Sales Tax to the appellant that it was stated that in case certain documents were not produced to prove the claim of branch transfer to Haridwar, the said branch transfer would be disallowed while passing the assessment order and consequential penalty under section 29(3) of the MVAT Act would be levied.
31. Learned counsel for the State of Maharashtra has placed reliance on the said letter dated 03.01.2019 to contend that penalty was correctly imposed upon the appellant.
28
CST/50634/2024 & 2 others
32. The submission made by the learned counsel by the appellant deserves to be accepted. The relevant portions of the Communication dated 03.01.2019 sent by the Deputy Commissioner of the appellant are reproduced below:
"To, M/s. INDAPUR DAIRY & MILK PRODUCTS PVT. LTD. MAUJE GOKHALI, INDAPUR BARAMATI ROAD, MAUJE GOKHALI, TAL. INDAPUR, Pune - 413103 TIN 27770345378V No. DCST/E-609/LTU-1/PUNE/Assessment 14-15/18- 19/B-318 Pune Date 03.01.2019 Sub: Verification of claim deduction of branch transfer from sales under CST Act 1956.
Ref:- Notice in form 301 & VIB dated 06/12/2018 for the period 2014-15.
Regarding the above subject and with reference to above, you are instructed to clarify the following points and produce the conclusive documentary evidence in support of your clarification on the claim of deduction of branch transfer under CST Act 1956.
1. *****
2. You have effected transfer of goods to M/s. Patanjali Ayurved Ltd. Haridwar, Uttarakhand. Regarding these transaction you are instructed to produce the following documentary evidence in support of your claim of deduction of branch transfer to M/S Patanjali Ayurved Ltd. Haridwar, Uttarakhand.
(a) Information of this branch transfer in the following format -
S. Invoice Buyer/ Amt. of Date of LR Destination Form F No. No. Transferee Invoice Invoice NO & on LR No. (If Date Any)
(b) Details of your VAT TIN, address of POB, Godown, storage facility etc., be produced with evidence. Documents like rent 29 CST/50634/2024 & 2 others agreement or any other document regarding the occupation of premises of POB at Haridwar for the relevant period. Agreement (If any) of you had an authorized agent or consignee from Haridwar for the relevant period.
(c) All invoices, LR's, form F listed on point no @ above.
(d) Copies of mail communications, letters etc. received from M/s Patanjali Ayurved Ltd, Haridwar, Uttarakhand.
(e) Copy of trial balance (reconciled with all POB's) reflecting expenses effected for sale or branch transfer. Copies of ledger of each head of expenses toward branch transfers of each of your branch office.
You are given here an opportunity to produce the documents and prove your claim of branch transfer to Haridwar which amounts to Rs.204,44,36,000/-. In the absence of documents, evidence and relevant record you are instructed to explain as to why this claim of branch transfer of Rs.204, 44, 36,000/- should not be dis-allowed and taxed at the relevant rate while passing an assessment order and as to why the consequential interest u/s 30 (3) and penalty u/s 29 (3) equal to amount of tax so levied should not be levied on it.
You are instructed to attend on dated 10 Jan 2019 at 11.30 am and produced the documents and record as said above, in the case of failure of which it will be presumed that you have nothing to say in the matter and tax, interest and penalty will be levied as said above which may please note."
33. The show cause notice did not call upon the appellant to show cause why penalty should not be imposed. The letter dated 03.01.2019 merely called upon the appellant to produce documents failing which penalty under section 29(3) MVAT Act could be levied.
34. The imposition of penalty upon the appellant, therefore, cannot be sustained and deserves to be set aside.
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35. Learned counsel for the appellant submitted that even if the transaction is held to be an inter-State sale from the State of Maharashtra, than the appellant should be granted refund of the amount paid in the destination State under the provisions of the section 22(1B) of the CST Act.
36. This submission of the learned counsel for the appellant deserves to be accepted.
37. It has been found as a fact that the inter-State sale had taken place in the present case from the State of Maharashtra to the State of Uttarakhand. In view of the provisions of the section 22(1B) of the CST Act, a direction would have to be issued to the State of Uttarakhand for refund of tax collected by the State of Uttarakhand to the State of Maharashtra, where the central sales tax is due on the same transaction. For this purpose, a direction would have to be issued to the concerned authority to ascertain the amount to be transferred by the State of Uttarakhand to the State of Maharashtra. A further direction would have to be issued that if any additional amount is required to be deposited by the appellant towards the payment of central sales tax on the inter-State sale, then the same would be deposited by the appellant.
38. Consequently, Central Sales Tax Appeal No. 50634 of 2024, Central Sales Tax Appeal No. 50635 of 2024 and Central Sales Tax Appeal No. 50636 of 2024 are partly allowed. The order passed by the State Tribunal holding that the movement of goods from the State of Maharashtra to the State of Uttarakhand was occasioned by the purchase orders placed by Patanjali on the appellant is upheld. However, the imposition of penalty upon the appellant is set aside. A direction is issued to the Assessing Authority to ascertain the amount required to be transferred to the State 31 CST/50634/2024 & 2 others of Maharashtra in terms of section 22(1B) of the CST Act so that the State of Uttarakhand can refund it to the State of Maharashtra. If any additional amount is required to be deposited by the appellant towards the payment of central sales tax on the inter-State sale, then the same would be deposited by the appellant.
(Order pronounced on 28.07.2025) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shreya, Jyoti