Custom, Excise & Service Tax Tribunal
M/S. Eternit Everest Limited. Now Known ... vs The Assistant Commissioner on 16 September, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
CENTRAL SALES TAX APPEAL NO. 13 OF 2014
[Arising out of order dated 28.02.2014 in T.A. No. 30/2011 for assessment year 1994-
95 passed by the Tamil Nadu Sales Tax Appellate Tribunal]
M/s. Eternit Everest Ltd. ....Appellant
(Now known as Everest Industries Limited)
A Company registered under
The Companies Act having its Registered Office
at GAT No. 152, Lakmapur Talika Dindori,
Nashik - 422 202 Maharashtra
And
Head Office at GENESIS,
A-32 Mohan Co-Op.
Indl. Estate, Mathura Road,
New Delhi - 110044
Through its Sr. Manager (Finance) & Company Secretary
VERSUS
1. The Assistant Commissioner (CT)(FAC)
Zone-II, C. T. Building,
Dr. Balasundaram Road
Coimbatore - 641018
Tamil Nadu
2. The State of Tamil Nadu,
Represented by the Secretary
CT & R Department
Fort St. George,
Chennai - 600 009
3. The Tamil Nadu Sales Tax Appellate
Tribunal (Main Bench) represented
By its Secretary
New City Civil Court Buildings,
Chennai - 600 104
4. The State of Karnataka,
Represented by the Secretary.
Department of Revenue,
M.S. Building,
Ambedkar Veedhi,
Bangalore - 560001.
5. The State of Andhra Pradesh,
Principal Secretary,
Revenue Department,
Govt. of Andhra Pradesh,
A.P. Secretariat,
Hyderabad- 500022.
6. The Commissioner of Commercial Taxes, Kerala,
Tax Towers, Killipalam, Karamana - PO,
Thiruvananthapuram 695002
7. The Union Territory of Puducherry
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CST/13-14/2014
Rep by its Secretary,
Department of Revenue,
Revenue Complex,
Pudupalayam, Puducherry - 605013
8. The State of Maharashtra
Rep by its Secretary to Government,
Department of Revenue,
3rd Floor, Mittal Court,
Nariman Point, Mumbai- 400021
9. The State of West Bengal,
Rep. by its Secretary to Government,
Department of Finance,
Writers Building,
Kilkatta- 700001
10. The State of Madhya Pradesh,
Secretary Revenue Department,
Govt. of Madhya Pradesh,
Mantralaya Vallabh Bhawan, Bhopal - 462004
11. The State of Punjab,
Rep. by its Secretary,
Revenue Department,
Room No. 7, 3rd. Floor,
Finance Commissioners‟ Secretariat,
Chandigarh 160001
12. The Commissioner of Sales Tax, Gujarat,
Rajya Kar Bhavan,
Ashram Road,
Ahmedabad, 380009
13. The Commissioner of Commercial Taxes,
Banijyakar Bhawan,
Old Secretariat Compound,
Cantonement Road,
Cuttack - 753001
14. The Commissioner of Sales Tax, Delhi ....Respondents
Bikrikar Bhavan, I.T.O, I.P. Estate,
Vyapar Bhawan, Delhi - 110002.
WITH
CENTRAL SALES TAX APPEAL NO. 14 OF 2014
[Arising out of order dated 28.02.2014 in T.A. No. 30/2011 for assessment year 1994-
95 passed by the Tamil Nadu Sales Tax Appellate Tribunal]
M/s. Eternit Everest Ltd. ....Appellant
(Now known as Everest Industries Limited)
A Company registered under
The Companies Act having its Registered Office
at The ACC Ltd., Research & Consultancy Directorate,
CRS Complex, LBS Marg,
Thane (West) - 400 604, Maharashtra
And
Head Office at E-62, Greater Kailash-I,
New Delhi - 110 048.
Through its Vice President & Company Secretary
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CST/13-14/2014
VERSUS
The Assistant Commissioner (CT)(FAC) ...Respondents
Fast Track Assessment Circle-II
Coimbatore - 641 018
AND
13 Others
APPEARANCE:
Shri N. Prasad, Shri B.Syed Abdul Wakeel and Ms. Deepika Nandakumar,
Advocates for the Appellant
Shri C.Kranthi Kumar, Advocate for the State of Tamil Nadu
Ms. Rama Ahluwalia, Advocate for the State of Maharashtra
Ms.Saumya Sinha and Ms. Pritha Srikumar, Advocates for the State of
Karnataka
Shri Soumyajit Pani and Shri Aishwary Bajpai, Advocates for the State of
Orissa
Ms. Madhumita Bhattacharjee, Advocate for the State of West Bengal
Shri Aravindh S. and Shri Abbas B, Advocate of the Union Territory of
Puducherry
Shri Nishe Rajen Shonker, Advocate for the State of Kerala
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 28.03.2025
Date of Decision: 16.09.2025
FINAL ORDER NO‟s. 51293-51294/2025
JUSTICE DILIP GUPTA:
Central Sales Tax Appeal No. 13 of 2014 has been filed by
M/s. Eternit Everest Ltd.1 against the order dated 28.02.2014 passed by
the Tamil Nadu Sales Tax Appellate Tribunal2 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
1. the appellant
2. the Sales Tax Appellate Tribunal
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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 of 2011
relating to assessment year 1995-96. The Assessing Authority, by the
assessment order dated 19.03.2004, 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.
3. The order dated 28.02.2014 passed by the Sales Tax Appellate
Tribunal has been assailed in these two appeals filed by the appellant
against that part of the order that holds that the movement of goods
from the State of Tamil Nadu, where it manufacture asbestos cement
sheets, to its depots in other States is not by way of branch transfer but
by way of inter-State sale.
4. The appellant was served with two notices dated 31.08.1998 and
29.01.1999 in respect of the assessment years 1994-95 and 1995-96.
These two notices were challenged by the appellant before the Supreme
Court in Writ Petitions filed under article 32 of the Constitution. The Writ
Petitions were disposed by the Supreme Court by a common order
dated 19.08.2003 directing the appellant to show cause to the notices.
Thereafter, both the assessments were completed by the Assessing
Authority and the claim of branch transfer made by the appellant from
the State of Tamil Nadu to its depots located in other States was
rejected holding them to inter-State sales. The Sales Tax Appellate
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Tribunal, by the impugned order dated 28.02.2014, has upheld the
order of the Assessing Authority to the extent it holds that it is a case of
inter-State sales and not a branch transfer.
5. The appellant has explained the nature of business conducted by
the appellant in the following manner:-
(i) The appellant has its registered office at Nashik
in the State of Maharashtra and has a factory at
Podanur in the State of Tamil Nadu where it is
involved in the activity of manufacture of
asbestos cement sheets which are roofing
material. The appellant, during the relevant
assessment years, had its depots in the States of
Kerala, Karnataka, Andhra Pradesh, Union
Territory of Puducherry, Maharashtra, Gujarat,
West Bengal and Madhya Pradesh;
(ii) The products were continuously transferred by
the appellant to its depots located in the said
States in the regular course of business without
reference to any specific contract with any buyer.
The depots located in these States received the
products from the factory and took them into
stock. Each depot has a depot manager/ depot
keeper. The factory/regional office at Coimbatore
provides imprest money to the depot keepers to
bear the depot expenses such as rent, electricity
and telephone;
(iii) The appellant has stockists/dealers in the States.
The depots maintain adequate stock of the
manufactured goods in their premises. The
stockists/dealers in the respective States contact
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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 delivered from the depots; and
(iv) The depots effect local sales of the stock and pay
tax to the concerned States. Accordingly, the
appellant was assessed to sales tax by these
States and the appellant has deposited the sales
tax in the States. The State of Tamil Nadu is
demanding central sales tax on the very sale
which has suffered local sales tax in the
concerned respondent States.
6. The relevant portion of the order passed by the Sales Tax
Appellate Tribunal, in so far as it concerns the two appeals, is as
follows:
"20. The appeal No. 30/11 and 32/11 relates to
orders of the Assessing Authority for the
assessment years 1994-95 and 1995-96
respectively. The Assessing Authority disallowed
the claim of exemption of stock transfer by the
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appellant to their depots in other States, on the
basis of records recovered during the course of
inspection by the officers of the Enforcement
Wing. The records contained 282 slips marked as File
„A‟ containing business transactions relating to the
assessment year 1994-95 and 379 slips marked as File
„B‟ containing entries of business transactions relating
to the assessment year 1994-95. It is not in dispute
that the slips revealed the details of Demand Draft for
specific amounts sent by the various stockists
addressed to the Podanur office of the appellant. The
Assessing Authority found that all the invoices
were raised in Coimbatore office only and in those
invoices it had been shown that the goods moved
from the depot to the dealers and it was evident
that the goods for which the stockists had placed
orders along with the Demand Draft had been
moved from Coimbatore to the depot either in
bulk of the goods specified alone for which
amounts had been paid by the stockists. In the
orders of the Assessing Authority the entire slips
with particulars of the transactions had been
considered by the Assessing officer. Therefore, it
is obvious that the movement of the goods from
the appellant factory at Podanur to the depots
situated in the other States was pursuant to the
agreement along with the indents‟ or „firm sale
orders‟. In view of the nature of the transaction and
the recovery of the slips containing the details of the
transactions, these appeals cannot be oquated with the
other appeal where there was no such recovery of
documents for the consideration of the Assessing
Authority. Therefore, the finding of the Assessing
Authority in the facts and circumstances that is a
case of interstate sale and not depot transfer is
sustainable.
21. So far as penalty is concerned, the assessment
is made on the book turnover as pointed out by the
leaned counsel for the appellant. Hence the case of
Apollo Saline Pharmaceuticals case in 125 STC 505 is
applicable. Since the disputed turnover is reported and
appellant claimed exemption, the decision in M/s.
Radha Metals case relied by the learned State
Representative is not applicable to the facts of the case.
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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, 19563.
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, lorry receipts and other
particulars including quantity/weight, value of goods
and date on which delivery was taken by the branch.
Once the Form F is filed, the Assessing Authority is
duty bound to make an enquiry under section 6A(2).
Such enquiry is confined to the truth of the
particulars contained in the Form. In support of this
contention, learned counsel placed reliance on the
following decisions:
(a) C.P.K Trading Company vs. Additional
Sales Tax Officer, III Circle,
Mattancherry and Another4;
(b) A. Dhandapani vs. State of Tamil Nadu
and Another5;
(c) Ashok Leyland Ltd. vs. State of Tamil
Nadu and Another6;
3. CST Act
4. 1990 (76) STC 211 (Ker.)
5. (1995) 96 STC 98
6. (2004) 3 SCC 1
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(d) M/s. Eternit Everest Limited vs. The
State of Tamil Nadu & others7;
(e) M/s. Hindustan Petroleum Corporation
Limited vs. The Deputy Commissioner
(CT)- IT (FAC)8;
(ii) The decisions of the Central Sales Tax Appellate
Authority in Steel Authority of India Limited vs.
Secretary, Finance Department, Govt. of
Karnataka and Others9 is not applicable as it did
not deal with the scope of the unamended section 6A
of the CST Act;
(iii) Under section 6A(1) at the relevant time, provision
of Form F was only one mode of proof of
demonstrating movement to branch;
(iv) The provisions of section 6A of the CST Act were
amended by the Finance Act of 2010 with effect from
08.05.2010. The scope of enquiry was expanded only
with effect from 08.05.2010. The text of section 6A
(1) of the CST Act as it stood at the relevant time,
only required the assessee to establish that goods
had moved to the Agent or his own place of
business. Form F became mandatory only from
11.05.2002 on account of Finance Act, 2002 but the
assessment years involved in these two appeals are
1994-1995 and 1995-1996;
(v) The movement of goods from the factory at Podanur
in the State of Tamil Nadu to the other States is
sought to be treated as sales under section 3(a) of
the CST Act. For the sale to be covered by section
7. W.P. No. 4876 of 2015 decided on 21.08.2017
8. W.P. Nos. 39501 to 39505 of 2015 decided 07.11.2016
9. MANU/ST/0002/2007 decided on 24.10.2007
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3(a) of the CST Act, the movement must be pursuant
to or as an incident of a contract of sale between a
seller located in the dispatching State and the buyer
located in the receiving State. The expression "in the
course of" postulates an inextricable bond between
the contract and the movement;
(vi) Even on merits, the Assessing Authority did not
correctly appreciate the replies submitted by the
appellant for the assessment years. The finding
recorded by the Sale Tax Appellate Tribunal that
invoices were raised at the factory has no factual
basis;
(vii) The assessments in question place reliance on two
types of slips. The first category are slips which show
receipt of payments made by the stockists to the
regional office/factory at Podanur. The second
category of slips indicate quantities to be delivered to
the stockists. Even here, the appellant demonstrated
that material has been delivered only from the
depots and there is no inter-State movement as a
direct incident or cause of any contract of sale. Thus,
there is no inextricable link between a contract of
sale and inter-State movement. Alternatively, the
demand, if at all, can be sustained only to the extent
it is attributable to the second category of slips which
make a reference to specified quantities;
(viii) The place where payments are collected is not
conclusive to decide whether a transaction is an
inter-State sale or a local sale;
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(ix) Where goods continuously move to the depots
located in other States, the relevant test to
determine if the movement is by way of stock
transfer or an inter-State sale is to ask where the
appropriation of the goods took place. If it can be
demonstrated that the appropriation of the goods to
the contract took place at the depots, the movement
cannot be treated as one which took place in the
course of inter-State sale falling under section 3(a)
of the CST Act; and
(x) The mere fact that there are different grades of the
product does not render the goods non-standard
goods made to specifications of the buyer. The same
model of the asbestos sheet has been sold in
different States to different buyers who are stockists.
8. Shri C. Kranthi Kumar learned counsel for the State of Tamil Nadu
assisted by Shri Sabarish Subramanian made the following submissions:
(i) During the period of assessment years of 1994-95
and 1995-96 section 6A(1) of the CST Act, as it then
existed, laid down that the burden of proof in case of
transfer of goods claimed „otherwise than by way of
sale/branch transfers‟ shall be on the dealer and
such burden can be discharged either (i) by the
production of declaration in form „F‟ and evidence for
the despatch of goods or (ii) by adducing evidence
without the production of declaration in Form F;
(ii) Section 6A(2) of the CST Act, as it then existed, laid
down that the Assessing Authority can make an
inquiry as it may deem necessary to ascertain the
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veracity of the particulars furnished in Form F and
can accept or reject Form F based on the outcome of
such inquiry. The Assessing Authority, while making
the inquiry to ascertain the veracity of the particulars
contained in the declaration in Form F, can call for
any other information. An inquiry whether the goods
moved to another State in the guise of stock transfer
in order to fulfil the prior contract of sale is within
the permissible ambit of an inquiry under section
6A(2) of the CST Act even before the 2010
amendment because such enquiry is essential to
make the charging provision workable. In this
connection, reliance has been placed on:
(a) Ashok Leyland;
(b) Steel Authority of India;
(c) Glaxo Smith Kline Pharmaceuticals
Ltd. vs. Commr. of Trade Tax,
Lucknow10;
(d) Harison & Co. vs. Additional
Commissioner of Commercial Taxes,
Belgaum11;
(e) A. Dhandapani;
(iii) In the instant case, the Assessing Authority did
conduct an elaborate inquiry to assess the veracity of
the details provided in Form F to ascertain whether
the transferee and the transferor were provided by
the assessee in Form F. For this purpose, various
documents were requisitioned by the Assessing
Authority which were not produced by the appellant
despite repeated chances given to it;
10. (2018) 18 GSTL 611
11. (2006) 146 STC 609
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(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 Health
Food (P) Ltd.12;
(vi) There is a categorical finding by the Assessing
Authority that the proof of dispatch of goods was not
produced by the appellant/dealer which was
mandatory as per section 6A (1) of the CST Act. The
Supreme Court had directed the appellant to produce
the relevant material, as requisitioned, before the
respondent authorities, but the appellant merely
claimed that it had attached the relevant material
namely the „Original Stock Ledgers of depots at
various States pertaining to assessment year 1994-
95 and 1995-96 in the reply dated 26.09.2003,
12. (2008) 9 SCC 622
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whereas a perusal of the annexures attached to the
said reply would show that the ledgers were not
attached to the reply as claimed;
(vii) The Assessing Authority, therefore, relied upon the
reports and documents recovered when the place of
business of appellant/dealers were inspected by the
officers of the enforcement wing on 22.03.1996.
During the inspection, files containing slips
numbering 282 pertaining to the assessment year
1994-95 and slips numbering 379 pertaining to the
assessment year 1995-96 evidencing monetary
transactions qua progressive sales orders and the
indents directly between the manufacturer and the
ultimate consumers/buyers and delivery receipts by
buyers were recovered. Further, it found that all the
invoices were raised in Coimbatore office only and in
these invoices it has been shown that the goods
moved from the depot to the dealers. It was,
therefore, evident that the goods, for which the
stockists had placed orders along with the Demand
Draft, had moved from Coimbatore to the depots in
other States and then to the ultimate consumer or
directly to the ultimate consumer. The slips also
reveal the details of the Demand Drafts for specific
amount of advance payments made by the ultimate
consumers addressed to the Podanur (Tamil Nadu)
office of the appellant;
(viii) The findings of fact recorded by the Assessing
Authority were confirmed by the Sales Tax Appellate
Tribunal after elaborate consideration of the available
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materials and a conclusion was drawn that Form F
pertaining to the turnover of Rs. 20,59,79,586/-
pertains to inter-State sales and hence the appellant
was liable for tax demand of Rs. 3,35,74,672/- with
interest;
(ix) Even if the orders were originally placed with the
depots/agents who forwarded these to the
manufacture/central office at Podanur, Coimbatore
(Tamil Nadu), the movement of goods commenced
basis these order and the goods were delivered
directly to the buyers. The same would, therefore, be
an inter-State sale; and
(x) Even assuming that only some of the slips among
the 380 odd slips shows suppression, then too
applying the same for the whole turnover during the
relevant assessment years to conclude that the same
are inter-State sale is permissible and is based on a
rational basis in the light of non-production of
records by the appellant.
9. Shri Aravindh S. learned counsel appearing for the respondent no.
7 - The Union Territory of Puducherry, however, submitted that the
appellant had correctly paid tax under the provisions of the Pondicherry
General Sales Tax Tribunal 1967.
10. Ms. Rama Ahluwalia learned counsel appearing for the respondent
no. 8 - The State of Maharashtra submitted that the movement of
goods from 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
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contained in Form F were true or not and it is only after the amendment
made in 2010 that the scope of inquiry was expanded. Learned counsel
also submitted that as the sales were affected out of the stocks
maintained at the depots at the Nasik depot, they were liable to local
sales tax of the State of Maharashtra.
11. Ms. Madhumita Bhattacharjee learned counsel appearing for the
State of West Bengal submitted the appellant correctly paid tax in the
State of West Bengal and hence the State of Tamil Nadu is not entitled
to any refund.
12. Ms. Kirti Mishra learned counsel appearing for the State of Odisha
submitted that the State of Odisha has wrongly being arrayed as a
respondent. Leaned counsel also submitted that the depot of the
appellant in the State of Odisha is not even registered under the CST
Act. This position has, however, been controverted by the learned
counsel for the appellant and it has been stated that the appellant was
registered under the provisions of the CST Act in the State of Odisha.
Learned counsel also pointed out that the correct value of stock transfer
is Rs. 2,20,620.10/- and the stock transfers are covered by Form F.
13. The submissions advanced by the learned counsel for the
appellant, the learned counsel appearing for the State of Tamil Nadu
and the learned counsel appearing for the other States have been
considered.
14. The assessment years under consideration in these two appeals
are 1994-95 and 1995-1996. In the present case, as noticed above, the
Assessing Authority had disallowed the claim of „stock transfer‟ by the
appellant to the depots in other States on the basis of records recovered
during the course of inspection by the officers of the Enforcement wing.
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15. The contention of the learned counsel for the appellant is that the
appellant had provided the particulars in Form F and, therefore, the
enquiry conducted by the Assessing Authority should have been
confined to determining the truth of the particulars contained in Form F.
The contention of the learned counsel appearing for the State of Tamil
Nadu is that the Assessing Authority, while making enquiry to ascertain
the veracity of the particulars contained in Form F, can call for any other
information because such enquiry is necessary to make the charging
section workable and that the amendment made in section 6A (2) of the
CST Act w.e.f. 08.05.2010 only clarifies the intention of the legislature
that the scope of the enquiry would include examining whether the sale
was an inter-State sale or not.
16. To appreciate the contentions that have been advanced, it would
be appropriate to first refer to the relevant provisions of the CST Act.
17. Section 3 of the CST Act deals with principles for determining
when a sale or purchase of goods takes place in the course of inter-
State trade or commerce. The relevant portion of this section is
reproduced below:
"3. When is a sale or purchase of goods said to
take place in the course of inter-State trade or
commerce.- A sale or purchase of goods shall be
deemed to take place in the course of inter-State trade
or commerce if the sale or purchase -
(a) occasions the movement of goods from one
State to another; or
(b) is effected by a transfer of documents of title to
the goods during their movement from one State to
another.
Explanation xxxxxxxxxxx"
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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 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.
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.
Provided that xxxxxxxxxx"
19. Section 6A deals with burden of proof in case of transfer of goods
claimed otherwise than by way of sale. The relevant portion of this
section, as stood prior to 11.05.2002, is reproduced below:
"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
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particulars in the prescribed form obtained from
the prescribed authority, along with the evidence
of dispatch of such goods.
(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, subject to the provisions of sub-
section (3), be deemed for the purpose of this Act
to have been occasioned otherwise than as a
result of sale."
(emphasis supplied)
20. Section 6A (1) of the CST Act was amended w.e.f. 11.05.2002.
The following words were inserted by Act No. 20 of 2002 w.e.f.
11.05.2002 at the end of sub-section (1):
"and if the dealer fails to furnish such declaration, then,
the movement of such goods shall be deemed for all
purposes of this Act to have been occasioned as a
result of sale."
21. Subsequently, sub-section (2) of section 6A was also substituted
by Finance Act, 2010 w.e.f. 08.05.2010. Sub-section (2) after
substitution reads as follows:
"(2) If the assessing authority is satisfied after
making such inquiry as he may deem necessary that
the particulars contained in the declaration furnished by
a dealer under sub-section (1) are true and that no
inter-State sale has been effected, he may, at the
time of, or at any time before, the 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
20
CST/13-14/2014
have been occasioned otherwise than as a result of
sale."
(Substituted portion emphasized)
22. The declaration to be filed under section 6A (1) of the CST Act is
prescribed by rule 12(5) of the Central Sales Tax (Registration and
Turnover) Rules, 1957. It is known as F form. This Form has to be
obtained by the transferee in the State in which the goods to which the
F form relates are delivered. In the case of transfer to a branch of a
company, the officer in-charge of the branch will sign the said Form.
The person signing it has to mention his status in relation to the
transferor. The Form is in triplicate. The contents of Form F are as
follows:
"FORM OF DECLARATION TO BE ISSUED BY THE
TRANSFEREE
[See rule 12(5)]
Serial No. ......................
Name of the issuing State .......................
Office of issue ..........................
Date of issue .............................
Name and address of the person to whom issued
along with his Registration Certificate No. ....................
Date from which registration is valid. ................................
Seal of Issuing Authority
To
.............................. (Transferor)
Registration Certificate No. of the Transferor
...................
Certified that the goods transferred to me/us as per details below have been received and duly accounted for:-
Description of the goods sent ................... Quantity or weight ............................ Value of the goods ............................ Number and date of invoice or challan or any other document under which goods were sent.21
CST/13-14/2014 Name of Railway, Steamer or Ferry Station or Air Port or Post Office or Road Transport Company's office from where the goods were despatched........................ No. and date of Railway Receipt or Postal Receipt or Goods Receipt with trip sheet of lorry or any other documents indicating the means of transport...........
Date on which delivery was taken by the
transferee...........
The above statements are true to the best of my knowledge and belief.
(Signature)"
23. As noted above, the assessment years involved in these two appeals are 1994-1995 and 1995-1996. It would, therefore, be necessary to analyse the aforesaid provisions of the CST Act as they stood prior to the amendment made in sub-section (1) of section 6A w.e.f. 11.05.2002 and substitution carried out in sub-section (2) of section 6A w.e.f. 08.05.2010.
24. Section 3 of the CST Act provides that a sale or purchase of goods shall be deemed the take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. Section 6 of the CST Act provides that every dealer shall be liable to pay tax under the CST Act on all sales of goods effected by him in the course of inter-State trade or commerce. Section 6A of the CST Act deals with burden of proof in case of transfer of goods claimed otherwise then by way of sale. Sub-section (1) of section 6A of the CST Act, as it stood prior to 11.05.2002, provided that where any dealer claims that he is not liable to tax under the CST Act on the ground that the movement of goods 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 22 CST/13-14/2014 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 without the production of declaration in Form F. Sub-section (2) of section 6A of the CST Act, as it existed prior to 08.05.2010, provided that if the Assessing Authority was satisfied after making such enquiry as he deemed necessary to ascertain the veracity to the particulars furnished in Form F make an order to that effect and thereupon, the movement of goods shall be deemed to have been occasioned otherwise then as a result of sale.
25. It needs to be noted that in the present appeals the Assessing Authority conducted an elaborate enquiry to assess the veracity of the details provided in Form F. For this purpose, various documents were requisitioned from the appellant but they were not produced.
26. The contention of the learned counsel for the appellant is that when the appellant had filled the particulars in Form F including „stock transfer‟ invoice, lorry receipts, value of goods and the date on which delivery was taken by the branch, the enquiry contemplated under sub-
section (2) of section 6A of the CST Act should be confined to the truth of the particulars contained in Form F. To support this connection, learned counsel placed reliance upon the judgment of the Supreme Court in Ashok Leyland (2) and the judgments of the Madras High Court in A. Dhandapani and of the Kerala High Court in C.P.K Trading. Learned counsel for the appellant also submitted that the decision of the Central Sales Tax Appellate Authority in Steel Authority of India that was delivered on 24.10.2007 would not come to the aid of the State of Tamil Nadu for the reason that though this Tribunal did 23 CST/13-14/2014 hold that the scope of enquiry should not be confined strictly to the contents of Form F and could go beyond the contents of Form F and will also involve determination as to whether the goods moved to the other States in the guise of „stock transfer‟ or not, but the scope of section 6A had subsequently come up for consideration before the Madras High Court on two occasions in the matter of the appellant on 21.08.2017 and in the matter of Hindustan Petroleum Corporation on 07.11.2015 and the Madras High Court held that the scope of enquiry is confined to the truth of the particulars contained in Form F. Thus, these two decisions of the Madras High Court impliedly overrule the observations made by the Central Sales Tax Appellate Authority in Steel Authority of India. Learned counsel also submitted that the justification to examine something beyond what is stated in Form F would clearly be contrary to the provisions of sub-section (1) of section 6A of the CST Act. Learned counsel also emphasized that the provisions of sub-section (2) of section 6A of the CST Act were amended by Finance Act of 2010 w.e.f. 08.05.2010 and it is only after the said amendment that the scope of enquiry has been expended.
27. The contention of the learned counsel for the State of Tamil Nadu is that the judgment of the Supreme Court in Ashok Leyland (2) is applicable only with respect to reassessment/reopening of concluded assessment after 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 24 CST/13-14/2014 required to be furnished but the Assessing Authority has a wide discretion to decide what is relevant according to the facts of each case.
Learned counsel also placed reliance upon the judgments of the Karnataka High Court in Harison & Co., and of the Allahabad High Court in Glaxo Smith Kline Pharmaceuticals and of the Madras High Court in A. Dhandapani. Learned counsel also placed reliance upon the decision of the Central Sales Tax Appellate Authority in Steel Authority of India.
28. To examine the contentions that have been raised by the learned counsel for the appellant and the learned counsel appearing for the State of Tamil Nadu, it would be appropriate to first examine what documents were examined by the Assessing Authority and the Central Sales Tax Appellate Authority for arriving at a conclusion that the transfer of goods from the State of Maharashtra to other States was as a result of inter-State sales.
29. The Assessing Authority had summoned the records from the appellant for ascertaining whether inter-State sale had taken place. It is noted by the Assessing Authority in the order that the appellant had filed Form F with particulars of despatches and arrivals at the destination, but verification of this record revealed certain omissions. The place of business of the appellant was inspected on 22.03.1996 and records were recovered. These are contained in files marked „A‟ and „B‟ and the finding of inter-State sale has been recorded after verification of these records. The relevant portion of the order passed by the Assessing Authority is reproduced below:
"13. xxxxxxxxx. No. and date of goods receipt or lorry receipt or any other document indicating the means of transport have not been furnished in the „F‟ forms filed. The entries contained in the 25 CST/13-14/2014 annexures to the Form F declarations filed have not been authenticated by the Signatory of the Form „F‟. The ultimate buyers in other States remits the value of the goods purchased, by means of D.D. Drawn in favour of Coimbatore office and sent directly to Coimbatore.
14. Besides, they have not furnished the following records.
(1) Proof for existence of Deports in other States.
(2) Proof for despatch of goods (LR, Way Bill etc.) (3) Monthly statement of account of respective depots.
(4) Copy of stock book showing the details of opening stock, arrivals, sales and closing stock.
(5) Proof for payment of taxes in the respective States, such as assessment order of the appropriate authority.
(6) Ledger account of Head office for depots and ledge account of depots for head office.
xxxxxxxxxxx (15) Their place of business was inspected by the officers of the Enforcement Wing on 22.03.96 and they recovered the following records for further verification.
(1) File marked (A) with 282 slips
containing business transaction.
(2) File marked (B) with 379 slips
containing business transaction.
Verification of these records revealed that
remittances were directly received at Coimbatore Office from 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 26 CST/13-14/2014 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 officer of the Depot concerned. The sales officer will confirm the receipt of demand draft from the statement sent from the Coimbatore Office on daily basis and supply the material accordingly. This procedure was due to non- availability of banking accounts at the respective place of Depots except Madras and Bangalore. They used to prepare the computerised receipt for all the payments received. The details of i) Receipt No. & Date ii) Customer Code, iii) Bank details etc. would be noted in the covering letter for the demand draft for their future reference. For example, in slip No. 1, R/53203/27.06.94 was the receipt No. and date, 205190107 was the State Bank of India, Main Branch account code where the demand draft was deposited. These details were invariably noted in all the covering letters. In the following cases, demand drafts drawn in favour of Coimbatore Office had been directly sent to Coimbatore Office.
xxxxxxxxxx The fact that the running accounts of the stockists in other states were only not maintained at Podanur Office but orders for the supply of goods to the stockists were also placed to the Coimbatore Officer alongwith payments was brought to light in the following letters which were available in the file marked „A‟. In the cases mentioned, for example, the dealers of the other states had sent the demand draft and also placed orders for the supply of the materials with specifications in the letters:-
xxxxxxxxxxx There were further more examples of such letter in the file marked „A‟. All these showed that the stockists appointed by Tvl Eternit Everest Ltd., Placed orders alongwith DD for the goods with specification of the material. For all these the Authorised Representative 27 CST/13-14/2014 had stated it was usual to send their requirements alongwith payments and these requirements would be supplied by the supplied by the respective depots. From this it was evident that the dealers of other state had direct contact with the Coimbatore Office with whom they placed their orders but lift the goods through the depots to which the Coimbatore office was sending the goods and the Coimbatore Office was claiming exemption as stock transfer. Such a transaction could not be treated as stock transfer as the depot were acting only as a conduit pipe. The Coimbatore Office has become the seller and thus other state stockists had become the purchaser and as soon as the payment for the specified goods had been paid, the contract for sales and purchase had taken place unless the payment was returned rejecting the request for the supply of the materials for which orders or the specification were placed with payments.
There were instances of Advance payments by stockists even before the despatch of goods. Such of those cases were listed out as below:-
FILE MARKED „B‟ This file also contains correspondence of the stockists of other states 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 local Act of the other State and the depots had also sent Form F in proof of the receipt of the goods in the depots and on the basis of these records, 28 CST/13-14/2014 they had claimed exemption on the stock transfer. But their Form 13 register does not show that all the relevant particulars required in all the columns of this register had been furnished and hence it could not be verified that the Coimbatore Office has moved stock to the Depots in routine course.... Further, the sales depots were not acting independently. They were not collecting the sales proceeds and transferring these sales proceeds by means of DDs after deducting depot expenditure etc. or the sales proceeds were not deposited in the bank account at the place of depots. The depots did not have Bank account at all at their places in the name of the Company. All the invoices were raised in the Coimbatore Office only and in these invoices it had been shown that the goods were moved from the depot to the dealers. It was therefore evident that the goods for which the stockists had placed orders with specification along with DDs had been moved from Coimbatore to the depot either in bulk, including the materials for which orders had been placed by the stockists to the goods specified alone had been moved and afterwards moving to the dealers. As held in 67 STC 1 there had been movement of goods consequent on receipt of own orders from the buyers of other state and it did not matter where the property in goods passed in order to determine the nature of transaction. When orders were palced by the other state stockists with specification along with the payment, sale was concluded, unless these orders and payments were not rejected and sent back to them with instructions to get supply of these goods from the respective depot to which all the materials were dispatched on stock transfer. When this had not been done so, the sales to the stockists in other states made through the other state. Depot were purely direct interstate sales as held in the case of Tcl. Sahney Steel & Press Works Ltd., reported in 60 STC 3G1. In these circumstances, it was proved beyond doubt that the supply of the goods made to all the stockists were in the nature of the interstate sales only but they had camouflaged as stock transfer. Only because of the Depots issued Form- F for the goods received and assessment was 29 CST/13-14/2014 made on the Depots by the local authorities, the goods despatched to the depots cannot become eligible for exemption as stock transfer. On which basis the goods were dispatched to the depot was the criterion to decide the fact as to whether it was interstate sale or otherwise. Though the goods were despatched to the branch, the movement of goods from the registered office at Coimbatore had been occasioned by the orders placed by the stockists and hence the movement was incidental to the contract and 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 assessed under CST Act 56 disallowing the exemption claimed.
In view of these facts, the returns filed and the account maintained for the year 1994-95 under CST Act 56 are proposed to be rejected as incorrect and incomplete."
(emphasis supplied)
30. It would, therefore, be seen that the Assessing Authority relied upon the reports and documents recovered when the place of business of appellant was inspected by the officers of the Enforcement Wing on 22.03.1996. During the inspection, files containing slips numbering 282 pertaining to the assessment year 1994-95 and slips numbering 379 pertaining to the assessment year 1995-96 evidencing monetary transactions relating to progressive sales orders and the indents directly 30 CST/13-14/2014 between the manufacturer and the ultimate consumers/buyers and delivery receipts by buyers were recovered. Further, it found that all the invoices were raised in Coimbatore office only and in these invoices it has been shown that the goods moved from the depot to the dealers. It was, therefore, evident that the goods for which the stockists had placed orders along with the Demand Draft, had moved from Coimbatore to the depots in other States and then to the ultimate consumer or directly to the ultimate consumer. The slips also revealed the details of the Demand Drafts for specific amount of advance payments made by the ultimate consumers addressed to the Podanur (Tamil Nadu) Office of the appellant. It is in these circumstances and based on the aforementioned material that the Assessing Authority came to a conclusion that asbestos sheets were directly delivered basis the pre-existing contract of sale between the manufacturer and the buyer located in a different State and hence it was concluded that there was an inter-State sale as the movement of the goods commenced from the State of Tamil Nadu.
31. The Central Sales Tax Appellate Authority confirmed the aforesaid finding of the assessing officer after consideration of material available on record and concluded that the turnover of Rs. 20,59,79,586/- pertaining to Form F related to inter-State sale and, therefore, the appellant was liable to pay tax of Rs. 3,35,74,672/- with interest.
32. In would now be appropriate to first examine the judgment of the Supreme Court in Ashok Leyland (2). An order of assessment for the year 1987-88 dated 28.8.1991 was passed. The dealer had filed statement of stock transfer of vehicles to their outside State Regional Sales Offices and spares to their warehouses. The statement was verified in detail with reference to Form "F" declaration filed by the 31 CST/13-14/2014 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 India13. 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 Sales Offices so far as the same related to the State Transport Undertakings are concerned should not be taxed as inter-State sales taxable in Tamil Nadu.
xxxxxxxxxxxx
45. When the dealer furnishes the original of Form F to its assessing authority, an enquiry is required to be held. Such enquiry is held by the assessing authority himself. He may pass an order on such declaration before the assessment or along with the assessment. Once an order in terms of Sub-Section 2 of Section 6A of Central Act is passed, the transactions involved therein would go out of the purview of the Central Act. In other words, in relation to such transactions, a finding is arrived at that they are not subjected to the provisions of the Central Sales Tax. It is not in dispute thereunder no appeal is provided thereagainst.
48. On an analysis of the aforementioned provisions, therefore, the following propositions of law emerge:
13. (1997) 9 SCC 10 32 CST/13-14/2014
(i) The initial burden of proof is on the dealer to show that the movement has occasioned by reason of transfer of such goods which is otherwise than by reason of sale. The assessee may file a declaration. On a declaration so filed an inquiry is to be made by the assessing authority for the purpose of passing an order on arriving at a satisfaction that movement of goods has occasioned otherwise than as a result of sale.
(ii) Whenever such an order is passed, a legal fiction is created.
xxxxxxxxxx
64. Thus from the above, we can conclude that the order of an authority u/s 6A is conclusive for all practical purposes.
110. The purpose of verification of the declaration made in Form F, therefore, is as to whether the branch office acted merely as a conduit or the transaction took place independent to the agreement to sell entered into by and between the buyer and the registered office or the office of the company situated outside the State. The said decision therefore, does not run counter to our reading of the said provision. Furthermore, the question which has been, raised before us had not been raised therein.
111. We, therefore, are of the opinion that the observations made by this Court in Ashok leyland to the effect that an order passed under Sub-Section (2) of Section 6-A can be subject matter of reopening of a proceeding under Section 16 of the State Act was not correct."
(emphasis supplied)
33. It is clear from the aforesaid judgment of the Supreme Court in Ashok Leyland (2) that what was basically examined was whether the Assessing Authority could exercise its revisional power after having accepted Form F. The earlier judgment of the Supreme Court in Ashok Leyland (1) was, therefore, found to be not correct. What is also 33 CST/13-14/2014 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 the dealer are "true". The scope or frontiers of enquiry, by the assessing authority u/s 6A(2) of the Central Sales Tax Act is limited to this extent, namely, to verify whether the particulars contained in the declaration (F forms) furnished by the dealer are "true". It means, the assessing authority can conduct an enquiry to find out whether the particulars in the declaration furnished are correct, or dependable, or in accord with facts or accurate or genuine. That alone is the scope of the enquiry contemplated by Section 6A(2) of the Act. On the conclusion of such an enquiry, he should record a definite finding, one way or the other. As to what should be the nature of the enquiry, that can be conducted by the assessing authority u/s 6A(2) of the Act, is certainly for him to decide. It is his duty to verify and satisfy himself that the particulars contained in the declaration furnished by the dealer are "true". As a quasi-judicial authority, the assessing authority should act fairly, and reasonably in the matter. During the course of the enquiry, u/s 6A(2) of the Act, it is open to him to require the dealer to produce relevant documents or other papers or materials 34 CST/13-14/2014 which are germane or relevant, to find whether the particulars contained in the declaration (F forms) are "true". It is not possible to specify the documents or other materials or papers that may be required, to be furnished in all situations and in all cases. It depends upon the facts and circumstances of each case. The power vested in the officer is a wide discretionary power, to find, whether the particulars contained in the declaration (F forms) are "true". It is not possible or practicable to lay down the exact documents or materials that may be required in all the cases, by the assessing authority, to come to a proper and just finding as required by Section 6A(2) of the Act."
(emphasis supplied)
35. It would also be useful to refer to the decision of the Central Sales Tax Appellate Authority in Steel Authority of India. The Appellate Tribunal examined the scope of an enquiry under sub-section (2) of section 6A of the CST Act before the amendment was made on 08.05.2010 and after extensively referring to the judgments of the Supreme Court in Ashok Leyland (1) and Ashok Leyland (2) held that the enquiry conducted by the Assessing Authority to determine whether the goods moved to another State in the guise of „stock transfer‟ in order to fulfil a prior contract of sale cannot be ruled out, because such an inquiry is necessary to make the charging provision workable. The Central Sales Tax Appellate Tribunal also referred to paragraph 110 of the judgment of the Supreme Court in Ashok Leyland (2). The relevant paragraphs of the decision of the Central Sales Tax Appellate 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 35 CST/13-14/2014 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 preclude the exercise of power of revision or reassessment under the provisions of State Sales Tax Act read with section 9(2) of the CST Act. It was pointed out that section 6A cannot be elevated to a higher status than the rest of the provisions.
40. The above view taken in Ashok Leyland Ltd. v. Union of India [1997] 105 STC 152 (SC); [1997] 9 SCC 10 did not meet the approval of a three-Judge bench in Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 STC 473; [2004] 3 SCC 1 (hereinafter referred to as "2nd Leyland case"). In that case, the learned judges expressed the opinion that "the observations made by this court in Leyland [1997] 105 STC 152 (SC); [1997] 9 SCC 10 to the effect that an order passed under sub-section (2) of section 6A can be the subject-matter of reopening of a proceeding under section 16 of the State Act were not correct" (vide para 92 in STC; para 111 in SCC). Earlier, in paragraph 104 (para 85 in STC), it was observed "that the provisions of section 6A having been provided by way of exclusionary clause subject to the satisfaction of the conditions precedent contained therein", "the same stand(s) at an elevated stage over charging section 6 of the Act".
(emphasis supplied)
36. Thereafter, the Appellate Tribunal examined the judgment of the Supreme Court in Ashok Leyland (2), which also considered the judgment of the Kerala High Court in C.P.K Trading, and observed: 36
CST/13-14/2014
53. On a careful reading of various passages in the 2nd Leyland case [2004] 134 STC 473 (SC) [2004] 3 SCC 1, we are inclined to think that as per the law enunciated by the Supreme Court in that case, the conclusive presumption comes into play as a result of the finding recorded by the assessing authority that the F forms are true and acceptable. In order to qualify for conclusive presumption, the order need not necessarily incorporate a further and specific observation that the transaction is a genuine stock transfer and not inter-State sale. That does not however mean that an enquiry whether the goods moved to another State in the guise of stock transfers in order to fulfil the prior contracts of sale is ruled out because such enquiry is essential to make the charging provision workable. In fact there are enough indications in 2nd Leyland judgment [2004] 134 STC 473 (SC); [2004] 3 SCC 1 that such enquiry is permissible before an order accepting F forms is passed-for instance, see paras 48 and 110 (paras 37 and 91 in STC) of the judgment. No doubt, these observations in paras 48 and 110 (paras 37 and 91 in STC) cannot be strictly reconciled with the view expressed by the Kerala High Court. In so far as the Kerala High Court said that an enquiry cannot go beyond ascertaining the truth of particulars in F forms, such 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. 37
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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 by producing alternative evidence such as correspondence, delivery challans, etc. Submission of "F" form declarations is not conclusive evidence that the movement of goods is a branch transfer/stock transfer and not a sale. The sales tax authorities can investigate and make enquiries whether the declaration is genuine and true and reject the 'F' forms, if the transaction is found to be not genuine. Section 6- A of the CST Act lays down a particular mode of proof and it is implied that the production of such proof will dispense with the necessity of adducing any other or further evidence and will suffice for the grant of the benefit. But Section 6-A(2) of the CST Act goes a little further and provides for the possibility of an enquiry being conducted by the assessing authority. It is open to the assessing authority to make further enquiry to satisfy himself that the particulars contained in form 'F' declarations are true. It is only then that the assessing authority is enjoined to pass an order in the matter. An order passed under Section 6-A(2) of the CST Act is nothing but a step in aid or process, which leads only to the ultimate computation of assessment of tax liability. In other words, Section 6-A(2) of the CST Act authorises the assessing Officer to make enquiry that particulars contained in the declaration furnished by the dealer are true and for this purpose, other evidence produced by the dealer is also requires to be considered. The assessing authority is also authorised under Section 6-A(2) of the CST Act to call for other information to verify the correctness of the particulars contained in the 'F' form declarations. It is for the dealer to prove that the details 38 CST/13-14/2014 provided in form 'F' are correct and true. The Madras High Court in the case of D. Dhandapani v. State Of Tamilnadu, (1995) 96 STC 98, while interpreting the provisions of Section 6-A(2) of the CST Act has observed that even after submission of 'F' forms, the authority can make further enquiry to satisfy himself that particulars contained in the declaration in 'F' form are true and correct. If the dealer fails to satisfy the assessing authority about the genuineness and the correctness of the contents in 'F' form declarations, the transfer of goods can be taken as on account of interstate sales. Sub-section (2) of Section 6-A of the CST Act places a duty on the assessing authority to scrutinise the declarations furnished by the dealer and pass an order accepting the correctness thereof. On such an order being passed, the transfers made by the dealer to the out of State branches or agents will be deemed to have been made otherwise than as sales. The assessing authority has 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.
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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 and to ascertain the genuineness of such stock transfers. Inspite of issuing several notices, the assessee had failed to produce any documentary evidence to show that there has been branch transfer of goods and no interstate sales were 39 CST/13-14/2014 effected during the assessment period in question. As we have already noticed, the burden is on the assessee to prove that the transaction is not a sale but a branch transfer or a consignment sale, but though several opportunities were provided to the assessee to discharge its burden as prescribed under Section 6-A of the CST Act, it has failed to do so, and therefore, the assessing authority had no other option but to reject the form 'F' declarations filed by the assessee. The first appellate authority for allowing the appeal filed by the assessee against the fresh order of assessment made by the assessment authority points out that the assessing authority has not proved single instance of prior contract for movement of goods to the assessee's branch office at Ponda - Goa, forgetting for a moment, that though sufficient opportunity was provided by the assessing authority to produce books of accounts and other evidence to verify the genuineness of the contents of the 'F' form declaration. The first appellate authority without keeping this aspect of the matter in view, has shifted the burden on the assessing authority to prove that the transaction is a interstate sales and not stock transfer as claimed by the assessee, without realizing that under Section 6-A of the CST Act, the burden to prove that the transaction is not a sale but stock transfer is on the assessee. Therefore, in our view, the revisional authority was justified in concluding that the order passed by the first appellate authority is erroneous and prejudicial to the interest of the revenue."
(emphasis supplied)
39. It is, therefore, clear that the Karnataka High Court also observed that the Assessing Authority has to make an enquiry to find out whether the particulars contained in the declaration furnished by the dealer in Form F are true and for this purpose the Assessing Authority is also authorized to call for other information to verify the correctness of the particulars contained in Form-F declaration. In fact, the Assessing Authority had directed the assessee to produce the books of accounts 40 CST/13-14/2014 and other records, if any, to support its claim of branch transfers and to ascertain the genuineness of such „stock transfers‟. The Karnataka High Court also observed that the burden is on the assessee to prove that the transaction is not a sale but a branch transfer and for this purpose though several opportunities were provided to the assessee to discharge this burden, 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 sale. In this context of verification of the particulars for the purposes of arriving at a satisfaction in terms of sub-section (2) of Section 6A, the Assessing Authority was well within his jurisdiction to requisition the relevant account books and other documents relating to the transaction as they would reveal whether there was a prior agreement to sale etc. but the Revisionist did not produce the account books and other records relevant to the matter. On account of non-production of such records it was not possible for the Assessing Authority to satisfy himself as to the genuineness of the particulars mentioned in Form-F."
(emphasis supplied) 41 CST/13-14/2014
41. It is, therefore, clear from the aforesaid discussion that mere furnishing of a declaration in Form F is not sufficient to arrive at a conclusion that the transfer of goods from one State to another is a „stock transfer‟ or the movement of goods from one State to another has been occasioned by a prior sale.
42. Learned counsel for the appellant, however, placed reliance upon a judgment dated 21.08.2017 of the Madras High Court in the case of the appellant in Eternit Everest Ltd. This judgment of the Madras High Court does not consider the judgment of the Supreme Court in Ashok Leyland (2) or the decision of the Central Sales Tax Appellate Authority in Steel Authority of India or the judgment of the Karnataka High Court in Harison & Co. The Allahabad High Court in Glaxo Smith had also taken a view contrary to the judgment of the Madras High Court. It needs to be noted that the assessment period involved in Harison & Co., Steel Authority of India and Glaxo Smith were before the 2010 amendment made in section 6A(2) of the CST Act.
43. It is, therefore, not possible to accept the contention of the learned counsel for the appellant that the decision of the Central Sales Tax Appellate Authority in Steel Authority of India stands impliedly overruled by the judgment of the Madras High Court in Eternit Everest Ltd.
44. To reiterate, section 3 of the CST Act provides that a sale or purchase of goods shall be deemed to take place in the course of inter- State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. The liability to pay tax on inter-State sale is contemplated under section 6 of the CST Act. Section 6A of the CST Act deals with burden of proof in case of transfer of goods claimed otherwise than by way of sale. Prior to its amendment 42 CST/13-14/2014 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 claims that the transfer of goods is otherwise than by way of sale. The Supreme Court in Ashok Leyland (2) emphasised that the initial burden of proof is on the dealer to show that the movement of transfer of goods is not by reason of sale and for this purpose the dealer may file a declaration, whereafter an inquiry has to be made by the Assessing Authority for the purpose of passing an order. The Supreme Court also emphasised that the purpose of verification of the declaration made in Form F is to determine whether the branch office acted merely as a conduit or the transaction took place independent to the agreement to sell entered into by and between the buyer and the dealer.
45. It is on a consideration of the judgment of the Supreme Court in Ashok Leyland (2), and particularly to paragraphs 48 and 110, that 43 CST/13-14/2014 the Central Sales Tax Appellate Authority in its decision rendered in Steel Authority of India held that it is open to the Assessing Authority to conduct an enquiry to determine whether the goods moved to another State in the guise of stock transfer in order to fulfil a prior contract of sale, because such enquiry is essential to make the charging section i.e. section 6 of the CST Act, workable. The Central Sales Tax Appellate Authority also limited the scope of the judgment the Kerala High Court in C.P.K Trading on the basis of the judgment of the Supreme Court in Ashok Leyland (2). The Karnataka High Court in Harison & Co. also observed that the sales tax authorities can investigate and make enquiries whether the declaration in Form F is genuine and true and for this purpose the evidence produced by the dealer is also required to be considered. The Karnataka High Court also observed that the Assessing Authority can call for other information to verify the correctness of the particulars contained in the declaration in Form F and it is for the dealer to prove that the details provided in Form F are correct and true. This is for the reason that the burden is on the dealer to prove that the transaction is not a sale but a branch transfer. It was also observed by the Allahabad High Court in Glaxo Smith Kline Pharmaceuticals that the Assessing Authority would be well within its jurisdiction in requisitioning the relevant account books and other documents relating to the transaction because they would reveal whether there was a prior agreement to sell.
46. It is, therefore, not possible to accept the contention of the learned counsel for the appellant that the Assessing Authority could not have asked for other evidence and reliance could not have been placed by the Assessing Authority on the documents recovered from the business premises of the appellant.
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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. The Assessing Authority was, therefore, justified in placing reliance upon the reports and documents recovered from the business premises of the appellant when it was inspected by the officers on 22.03.1996. From a detailed analysis of these documents, the Assessing Authority concluded that the asbestos sheets were directly delivered to the other States, basis the pre-existing contract of sale between the appellant and the buyers in different States. This finding of the Assessing Authority was examined at length by the Sales Tax Appellate Tribunal and after an elaborate consideration, a conclusion was drawn that Form F relating to turnover of Rs. 20,59,79,586/- pertained to inter-State sales. These documents have also been examined at length and we are satisfied that there is no error in the findings recorded by the Sales Tax Appellate Tribunal that the transfer of goods from one State to another State was occasioned by a prior contract of sale.
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49. The contention of the appellant relating in connection with the appropriation of stocks in the stock depots cannot be accepted as the appellant did not produce the records of opening stock, arrivals, sales at the alleged depots and also did not produce proof of existence of depots in other States when requisitioned by the Assessing Authority. In the present case, the goods moved from the manufacturing unit at Podanur in the State of Tamil Nadu to stockists/ultimate buyers in various States pursuant to prior existing contracts of sale as is evident from the files marked A & B and both the Sales Tax Appellate Tribunal and the Assessing Authority came to the same finding.
50. This apart, even if the orders were originally placed with the so called depots/agents who forwarded these to the manufacturer/central office at Podanur, Coimbatore, based upon which the movement of goods commenced and the goods was delivered directly to the buyers, the authorities of the State of Tamil Nadu would be competent to collect tax in the light of S-9(1) of the Central Sales Tax Act.
51. All that is necessary is that there should be a conceivable link between the movement of the goods and the contract, and if in the course of inter-State movement, the goods move to reach the buyer in satisfaction of the contract and such a nexus is otherwise inexplicable, as in the instant case, then the sale or purchase of the specific or ascertained goods should to be deemed to have taken place in the course of inter-State trade or commerce. As such, a sale or purchase occasioned the movement of the goods from one State to another. The presence of an intermediary who initiated the contract is of no relevance.
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52. This is what follows from the judgment of the Supreme Court in Sahney Steel and Press Works Ltd. vs. CTO14. The branch offices of the company located in other States, after procuring orders for the supply of goods with definite specifications and drawings advised the registered office at Hyderabad to manufacture and supply the goods in accordance therewith. Upon receipt, the goods were collected by the branch offices and despatched to various customers according to the orders received earlier. The sales involved were, therefore, held to be inter-State sales.
53. Thus, for all the reasons stated above, there is no infirmity in the order dated 28.02.2014 passed by the Sales Tax Appellate Tribunal relating to the assessment years 1994-1995 and 1995-1996 denying the claim of stock transfer made by the appellant. Central Sales Tax Appeal No. 13 of 2014 and Central Sales Tax Appeal No. 14 of 2014 are, accordingly, dismissed.
(Order pronounced on 16.09.2025) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Jyoti
14. (1985) 4 SCC 173