2014 (12) TMI 44 - HC - VAT and Sales Tax

Denial of supply of form F - stock transfer to consignment agent - department claim the same as Sale liable to CST - declaration as envisaged in section 6A(1) of the Central Sales Tax Act, 1956 - It is apparent that full payment of the product value as advance was required to be made by the writ petitioner to the principal along with a blank form F against the indent. It is stated in no uncertain terms that the goods would only be despatched by the transport preferable to the principal, after receipt of the full payment in advance. - Held that - whatever the suspicion that may invade the mind of the Revenue-appellants that would not give them any authority to refuse issuance of form F for making the declaration within the prescribed time to the appropriate authority in the State where the transactions claimed to be the inter-State transfer have originated from. In view of S.K.F. Ball Bearing 1960 (8) TMI 3 - SUPREME Court as well as State of Orissa v. K.B. Saha and Sons Industries Pvt. Ltd. as reported in 2007 (4) TMI 362 - SUPREME COURT OF INDIA , where the apex court enunciated the law regarding inter-State sale by way of the covenant, we are of the opinion that the covenant under reference in the writ petition does not accommodate any provision for inter-State sale and as such prima facie it cannot be held simply for making the payment of full value in advance that an inter-State sale has commenced before the movement of the goods/products from the State of Assam to the State of Tripura. If it appears to the Revenue in the State of Tripura that it is a foul mechanism designed by the principal and the writ petitioner to evade tax in any manner, they are not under any disability to make reference to the assessing authority as defined under section 6A(2) of the CST Act, 1956 for making necessary inquiry and to take final view on the nature of transaction. But, at no event the Revenue-appellants are authorised by law to refuse form F to the writ petitioner.

Issues involved:

1. Denial of Form F for inter-State transfer of taxable goods.
2. Legality of the decision based on the registration status under the CST Act, 1956 and TVAT Act, 2004.
3. Interpretation of Section 6A of the CST Act, 1956 regarding the nature of inter-State transactions.
4. The burden of proof and the role of Form F in inter-State transfers.
5. The role of the covenant between the petitioner and the principal in determining the nature of the transaction.
6. The authority of the Revenue to refuse Form F.

Issue-wise detailed analysis:

1. Denial of Form F for inter-State transfer of taxable goods:
The writ petitioner was denied Form F, which is required for making declarations in respect of inter-State transfers of taxable goods. The denial was based on the assertion that the petitioner or her principal had not obtained a certificate of registration under Section 7(2) of the CST Act, 1956, and Rule 4(2) of the CST Rules, 1957. The petitioner challenged this denial, arguing that no inter-State sale had occurred preceding the movement of the goods.

2. Legality of the decision based on the registration status under the CST Act, 1956 and TVAT Act, 2004:
The Revenue's communication dated November 27, 2010, stated that the writ petitioner was not entitled to Form F because the petitioner or her principal had not obtained the necessary registration. The petitioner argued that the denial was illegal, as the principal was a registered dealer under the CST Act, 1956, in the State of Assam, though this status was not disputed by the Revenue.

3. Interpretation of Section 6A of the CST Act, 1956 regarding the nature of inter-State transactions:
The core issue was whether the transaction was an inter-State transfer of stock or an inter-State sale. The Revenue argued that the transaction was an inter-State sale, citing the covenant between the petitioner and the principal, which required full payment in advance and the provision of a blank Form F. The petitioner contended that the transaction was a stock transfer, not a sale, as the goods were transferred to the agent (petitioner) for sale on behalf of the principal.

4. The burden of proof and the role of Form F in inter-State transfers:
Section 6A(1) of the CST Act, 1956, places the burden of proof on the dealer to show that the movement of goods was occasioned by a transfer to another place of business or to an agent/principal, and not by sale. The dealer must furnish a declaration in Form F along with evidence of dispatch. If the dealer fails to provide this declaration, the movement of goods is deemed to be a sale.

5. The role of the covenant between the petitioner and the principal in determining the nature of the transaction:
The covenant between the petitioner and the principal outlined the terms of the consignment, including full payment in advance and the provision of Form F. The Revenue viewed this arrangement as a mechanism to evade taxes. However, the court found that the covenant did not indicate an inter-State sale, as the petitioner acted as an agent, selling the goods on behalf of the principal and remitting local taxes.

6. The authority of the Revenue to refuse Form F:
The court held that the Revenue did not have the authority to refuse Form F to the petitioner. The refusal was based on suspicion rather than concrete evidence. The court emphasized that any doubts about the nature of the transaction should be resolved through an inquiry by the assessing authority under Section 6A(2) of the CST Act, 1956. The court directed the Revenue to issue Form F to the petitioner, allowing the petitioner to make the necessary declarations.

Conclusion:
The court dismissed the appeal, finding no merit in the Revenue's arguments. It upheld the single judge's decision, directing the Revenue to issue Form F to the petitioner. The court emphasized that the Revenue's suspicions about the transaction did not justify the refusal to issue Form F and that any inquiries should be conducted by the assessing authority as per the CST Act, 1956.

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