2013 (8) TMI 861 - HC - VAT and Sales Tax

Exemption of payment of Central cess tax - assessee filed its return on turnover claiming exemption in respect of the manufactured goods on job-work basis - Deputy Commissioner of Commercial Taxes (Transition) passed an order under section 12C of the KST Act in terms of the notification dated March 31, 2006 determining the tax liability under the Central Sales Tax Act, 1956 on the ground that the assessee has effected the stock transfer of medicine without F declaration form - Whether the revisional authority was justified in setting aside the order of the appellate authority holding that the transaction in question is a stock transfer - Held that - The material on record discloses that, while filing the returns, by mistake the transaction in question was shown as stock transfer. It is on that basis, the assessing authority levied the tax, as admittedly form F had not been filed. However, throughout the case of the assessee is it is a case of jobwork and not a case of stock transfer. The appellate authority did accept the case of the assessee and set aside the order of assessment. The revisional authority has set aside the said order without proper foundation. In fact, he proceeds on the assumption that it is a case of stock transfer. Admittedly form F is not filed and therefore, the appellate authority was in error in setting aside the order of the assessing authority. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Assessment of Central cess tax on stock transfer of medicine without a form. Dispute over whether the transaction is a stock transfer or job-work.

Analysis:
The appellant, engaged in manufacturing medicinal products on job-work basis, filed for exemption from Central cess tax on stock transfer of medicine without a form. The assessing authority imposed the tax, citing lack of F declaration form for stock transfer. The appellate authority ruled in favor of the appellant, stating it was a job-work scenario, not a stock transfer under the CST Act. However, the Additional Commissioner overturned this decision, prompting the present appeal.

The appellant argued that the transaction did not involve stock transfer requiring form F, emphasizing the job-work nature of the agreement with the other party. The Government Advocate supported the original order.

The key issue was whether the revisional authority was justified in setting aside the appellate authority's decision regarding the nature of the transaction. The records indicated a mistake in categorizing the transaction as stock transfer, leading to tax imposition due to the absence of form F. Despite the lack of form F, the appellant consistently maintained it was a job-work arrangement, not stock transfer. The revisional authority erred in assuming it was a stock transfer without proper basis, leading to the decision to remand the matter for reassessment.

Upon review, it was found that the authorities did not adequately consider whether the transaction constituted a stock transfer or job-work. The agreement between the parties highlighted the manufacturing nature of the appellant's business without specifying consideration for services rendered. Insufficient evidence existed regarding payments. The Court concluded that a thorough evaluation of the nature of the transaction was necessary to apply the law correctly. Therefore, all previous orders were set aside, and the matter was remanded to the assessing authority for a comprehensive review, allowing both parties an opportunity to present evidence and arguments.