2010 (3) TMI 1019 - AAAR - VAT and Sales Tax

Summary

Issues involved:

1. Legality of the revision proceedings initiated under section 62(3) of the M.P. Act.
2. Determination of whether the coal movement from Madhya Pradesh to Uttar Pradesh constituted an inter-State sale or a stock transfer.
3. Burden of proof under section 6A of the CST Act regarding the transfer of goods otherwise than by way of sale.

Issue-wise detailed analysis:

1. Legality of the revision proceedings initiated under section 62(3) of the M.P. Act:

The revision proceedings were initiated by the Additional Commissioner of Commercial Taxes, Gwalior, based on the report of the Deputy Commissioner of Satna. The proceedings were initiated under section 62(3) of the M.P. Act, which allows for revision if the order passed by the subordinate authority is erroneous and prejudicial to the interests of the Revenue. The earlier assessment orders accepting the F forms and the claim of stock transfer under the CST Act were set aside, and the matter was remanded for fresh orders after site inspection and verification. The Appellate Board confirmed this order, stating that the proceedings were lawful and constitutional, and no additional tax had been imposed yet, thus dismissing the appeals.

2. Determination of whether the coal movement from Madhya Pradesh to Uttar Pradesh constituted an inter-State sale or a stock transfer:

The key question was whether the movement of coal from Madhya Pradesh to Uttar Pradesh was an inter-State sale under section 3(a) of the CST Act, which defines an inter-State sale as one that occasions the movement of goods from one State to another. The Supreme Court has clarified that for a sale to be considered inter-State, the movement of goods must be the result of a covenant or incident of the contract of sale. In this case, the coal was mined in Madhya Pradesh, transferred to a stockyard in Uttar Pradesh, mixed with coal from U.P., and then processed before being dispatched to power houses. The revisional authority did not provide concrete findings to show that the movement was pursuant to antecedent contracts of sale, making the revision order unjustified.

3. Burden of proof under section 6A of the CST Act regarding the transfer of goods otherwise than by way of sale:

Section 6A of the CST Act places the burden of proof on the dealer to show that the movement of goods was due to a stock transfer and not a sale. The dealer can discharge this burden by furnishing F forms. In this case, the appellant had submitted F forms, and the initial burden was discharged. However, the revisional authority did not provide sufficient basis to rebut the presumption arising from the F forms. The revision was based on the possibility of gathering more material through further inquiry, which is not a valid ground for revision. The facts indicated that the coal moved from Madhya Pradesh to Uttar Pradesh did not retain its identity and was not linked to specific contracts of sale at the time of movement, thus not constituting an inter-State sale.

Conclusion:

The orders of revision as confirmed by the Appellate Board were deemed illegal and unsustainable. The appeals were allowed, highlighting that the revision proceedings lacked concrete findings and were based on mere possibilities rather than definitive material.