2010 (3) TMI 1017 - AAAR - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of sales under the Time Bound Supply Scheme (TBS Scheme) - whether they are inter-State sales or stock transfers.
2. Compliance with Section 6A of the Central Sales Tax Act regarding the burden of proof for stock transfers.
3. Adequacy of documentation and evidence presented by the appellant.
4. Proper interpretation and application of Section 3(a) of the Central Sales Tax Act.

Detailed Analysis:

1. Nature of Sales under the TBS Scheme:
The appellant, a Government of India undertaking, operates a steel plant in Rourkela and dispatches iron and steel products to various branches across the country. The dispute centers on sales made to status A customers under the TBS Scheme, 1989. The appellant claims these dispatches were stock transfers, not inter-State sales, and thus paid local sales tax to respective states. The assessing authority, however, treated these transactions as inter-State sales liable to tax under Section 3(a) of the Central Sales Tax Act, leading to raised demands.

2. Compliance with Section 6A of the Central Sales Tax Act:
Section 6A places the burden of proof on the dealer to show that the movement of goods was due to stock transfers and not sales. The appellant filed F declaration forms to claim exclusion from turnover under the Central Sales Tax Act. The assessing authority disallowed these claims, asserting the transactions were inter-State sales. The Tribunal agreed but provided incidental reliefs, directing the assessing officer to allow the appellant to file C forms and verify discrepancies in taxable turnover figures.

3. Adequacy of Documentation and Evidence:
The Tribunal noted the appellant's failure to produce all relevant documents, analyzing only those related to Mechanical Wire Industries, Calcutta. It concluded that the sales were inter-State based on an agreement to sell formed by the issuance of an offer letter, subsequent manufacturing, and dispatch of goods. The Tribunal's findings were criticized for lacking detailed analysis and being based on assumptions rather than concrete evidence. The appellant argued that the initial burden of proof was discharged by filing F forms and that no contract of sale preceded the inter-State movement of goods. The documents indicated that offer letters were issued after goods were dispatched, negating the claim of an inextricable link between the contract of sale and movement of goods.

4. Proper Interpretation and Application of Section 3(a) of the Central Sales Tax Act:
Section 3(a) deems a sale to be inter-State if it occasions the movement of goods from one state to another. The Tribunal's conclusion that the sales under the TBS Scheme were inter-State was based on the assumption that the offer letter constituted an agreement to sell, triggering the movement of goods. However, the analysis of the transaction with Mechanical Wire Industries showed that the offer and sale occurred after the goods had already been dispatched, contradicting the Tribunal's findings. The Tribunal failed to analyze other transactions or provide a comprehensive consideration of relevant material, leading to the remand of the case for fresh disposal.

Conclusion:
The appeals were allowed, and the matters were remanded to the Orissa Sales Tax Tribunal for fresh disposal in light of the observations made. The Tribunal is directed to pass fresh orders within six months, ensuring a detailed examination of the relevant material and transactions to determine whether the sales under the TBS Scheme were inter-State or stock transfers.