2014 (5) TMI 647 - HC - VAT and Sales Tax

Exemption u/s 6(2) of the CST Act Mode of proof Proof by endorsing the document in the title Held that - The burden of proving second inter-State sale rests on the assessee Relying upon The Deputy Commissioner of Commercial Taxes, Madurai Division, Madurai 1967 (7) TMI 107 - MADRAS HIGH COURT Court held that - Making endorsement in the document of title is not the only mode to prove a second inter-State sale There may be other modes by which the claim can be substantiated - However, when the assessee claims exemption based on the endorsement made in the documents of title or chooses any other mode, it must discharge its burden to the satisfaction of the AO that, there was a second inter-State sale that the assessee had not taken delivery of the goods to break the link in the chain of movement. The assessee admittedly attempted to prove its claim by endorsing the document in the title - However, a reading of the endorsement on the back of the goods consignment notes show the instruction only - Beyond the words thus recorded therein giving direction for delivery, absolutely there was no material to point out the time on which such an endorsement was made to claim second inter-State sale - Thus in the absence of any material to substantiate this fact, it is difficult for anyone to come to the definite conclusion on the basis of the instructions noted that the endorsement was in fact made by the assessee company at Coimbatore before delivery - In the absence of any material to substantiate its claim that the endorsement made thus in fact satisfied the requirements for showing that the assessee had not taken delivery and that the assessee had effected inter-State sale without breaking the movement to claim the benefit of Section 6(2) and in the absence of satisfactory proof thus let in, there is no hesitation in confirming the order of the JC confirming the assessment. No physical delivery - Endorsement in Form XX - Held that - As the assessee had not substantiated the in-transit sale by choosing one or other mode, it goes without saying that the burden not discharged to the satisfaction of the authority that there was, in fact, second inter State sale, the claim of the assessee that mere endorsement of giving delivery instruction could not be taken as a substantial evidence of in-transit sale - Thus, the Tax Case dismissed Decided against assessee.

Summary

Issues:
1. Interpretation of Section 6(2) of the Central Sales Tax Act, 1956.
2. Validity of the claim of a second inter-State sale by the assessee.
3. Burden of proof on the assessee to establish a second inter-State sale.
4. Rejection of the assessee's claim by the Assessing Officer and the Joint Commissioner.

Interpretation of Section 6(2) of the Central Sales Tax Act, 1956:
The case involved an appeal against the order of the Joint Commissioner regarding the assessment year 1991-92. The assessee claimed that the sale of chemicals was a second inter-State sale under Section 6(2) of the CST Act. The Assessing Officer rejected this claim, assessing the sale under the Tamil Nadu General Sales Tax Act at 8%. The Appellate Assistant Commissioner, however, allowed the appeal, stating that the transfer to the purchaser at Trichy was made through endorsement on the delivery notes. The First Appellate Authority highlighted that the goods delivery note clearly indicated the endorsement, supporting the assessee's position.

Validity of the claim of a second inter-State sale by the assessee:
The Revenue contested the claim, arguing that the assessee took notional delivery, and the subsequent sale occurred after the termination of movement, making the assessee ineligible for exemption under Section 6(2) of the CST Act. The assessee countered this by stating that the goods were carried in the same vehicle, indicating no termination of movement or delivery to the assessee. The Joint Commissioner upheld the Revenue's position, emphasizing that the assessee used delivery notes for transferring the consignment to Trichy, leading to the restoration of the assessment.

Burden of proof on the assessee to establish a second inter-State sale:
The law requires the assessee to prove a second inter-State sale, with the burden resting on them. The endorsement in the document of title is not the sole method to prove such a sale. The assessee attempted to substantiate their claim through endorsements on the consignment notes. However, the Court found that the endorsements lacked specificity regarding the timing, making it challenging to conclude that the assessee did not take possession of the goods before the alleged sale.

Rejection of the assessee's claim by the Assessing Officer and the Joint Commissioner:
The Court confirmed the Joint Commissioner's order, noting that the assessee failed to provide sufficient evidence to support their claim of a second inter-State sale. The Court highlighted the lack of material to demonstrate that the endorsement indicated a sale without the assessee taking possession of the goods. Consequently, the Tax Case was dismissed, emphasizing the failure to discharge the burden of proving a second inter-State sale to the satisfaction of the authority.

This detailed analysis of the judgment addresses the key issues raised in the case, focusing on the interpretation of relevant legal provisions, the validity of the assessee's claim, the burden of proof, and the rejection of the claim by the assessing authorities.