2016 (2) TMI 543 - HC - VAT and Sales Tax

Levy of sales tax / VAT / CST - Stock transfer - Form-F - Interstate movement of final goods returned by a job workers to his customer, after job work - Scope of Section 6A of Central Sales Tax Act, 1956 - Maharashtra Value Added Tax Act, 2002 (for short the MVAT Act ) - Constitutional validity of Trade Circular No. 2T of 2010 dated 11.01.2010 and circular no. 16T of 2007 dated 20.2.2007 - Jurisdiction to issue Trad circular. Held that - furnishing and scrutiny/verification of the declaration in that form is a requirement in law and if that is fulfilled, the burden on the dealer is taken to be discharged. If that declaration is not furnished, then, the consequences follow. The goods might have been despatched for job work and not as and by way of sale, but that is the plea or case of the dealer. If that is the case and the burden is on him to prove it, then, he has to obtain the declaration. If the declaration is not being issued by some States in the form prescribed, namely form F and the dealer made all the efforts to obtain it but failure to produce it is not his fault, then, he may, as the Hon ble Supreme Court of India clarifies, request the Assessing Officer to take that circumstance into consideration. If that request is made, the Assessing Officer can, depending upon the facts and circumstances of a particular case, pass such orders as are permissible in law. Therefore, we do not agree that the circular of 2010 misinterprets the order of the Hon ble Supreme Court of India. Mr. Sridharan, as is complained by Mr. Sonpal, canvased very detailed submissions and often repeated them so as to bring home the point. We are conscious of the fact that the amendment was brought into the CST Act by insertion of section 6A. That is with a specific object and purpose. That is to emphasise that the Central Sales Tax is not leviable in respect of the transactions of transfer of goods from head office to branch or vice versa, as these transactions do not amount to sale, but the legislature was mindful of the fact that a blanket understanding of this type encourages evasion of taxes. Rather, that facilitates it. Therefore, by an amendment, it stepped in and placed burden on the dealers to prove transfer of goods in such cases is not by way of sale. Declaration referred to in sub-section (1) of section 6A of the CST Act shall be in form F and the proviso thereto clarifies that a single declaration of the nature mentioned in the proviso may suffice. There is no serious legal infirmity or error of law apparent on the face of the record, leave alone perversity in the impugned interim orders, we have no alternative but to dismiss the Writ Petition. It is accordingly dismissed. Rule is discharged. - Decided against the assessee.

Summary

Issues Involved:
1. Validity of Trade Circular No. 2T of 2010.
2. Applicability of Section 6A of the CST Act to interstate movement of goods returned after job work.
3. Legality of assessment orders and Tribunal's order.
4. Requirement of furnishing 'F' forms for interstate job work transactions.

Detailed Analysis:

1. Validity of Trade Circular No. 2T of 2010:
The petitioner challenged the validity of Trade Circular No. 2T of 2010, arguing that it is ultra vires Section 6A of the CST Act and should be set aside. The court examined the circular and previous related circulars (16T of 2007 and 5T of 2009) and concluded that the 2010 circular correctly interpreted the legal requirements. The court emphasized that a circular cannot displace a legal provision and that the interpretation of Section 6A is the duty of the court. The court found no inconsistency between the circulars and upheld the validity of Trade Circular No. 2T of 2010.

2. Applicability of Section 6A of the CST Act to Interstate Movement of Goods Returned After Job Work:
The petitioner argued that Section 6A does not apply to the interstate movement of goods returned after job work, claiming it only applies to transactions between agents and principals. The court referred to the judgment of the Supreme Court in Ashok Leyland Ltd. v. State of Tamil Nadu and the Allahabad High Court's decision in Ambika Steels Ltd. v. State of U.P. The court held that Section 6A applies to all interstate transfers not by way of sale, including job work transactions. The burden of proof lies on the dealer to show that the movement of goods was not by reason of sale, which can be discharged by furnishing 'F' forms.

3. Legality of Assessment Orders and Tribunal's Order:
The petitioner challenged the assessment order dated 14.08.2014 and the Tribunal's order dated 17.07.2015. The court noted that the assessment order was based on the petitioner's failure to produce 'F' forms, leading to the presumption of an interstate sale. The court upheld the assessment order, stating that the burden of proof was on the petitioner to demonstrate that the movement of goods was not by way of sale. The Tribunal's order, which required the petitioner to deposit a part payment, was also upheld as it was in accordance with the legal requirements.

4. Requirement of Furnishing 'F' Forms for Interstate Job Work Transactions:
The petitioner contended that 'F' forms are not required for interstate job work transactions. The court referred to Section 6A and Rule 12(5) of the CST (Registration and Turnover) Rules, 1957, which mandate the furnishing of 'F' forms for all interstate transfers not by way of sale. The court clarified that the failure to furnish 'F' forms would lead to the presumption of an interstate sale. The court also noted that if a state does not issue 'F' forms, the dealer can bring this to the attention of the assessing officer, who can then consider the circumstances and pass appropriate orders.

Conclusion:
The court dismissed the writ petitions, upholding the validity of Trade Circular No. 2T of 2010, the applicability of Section 6A to interstate job work transactions, and the legality of the assessment and Tribunal's orders. The court emphasized the mandatory requirement of furnishing 'F' forms for interstate transfers not by way of sale and provided guidance for cases where 'F' forms are not issued by certain states. The court directed the first appellate authority to decide the appeals by 30th May 2016.