2020 (1) TMI 939 - HC - VAT and Sales Tax

Central sales tax / CST - branch transfers or inter-state sales? - HELD THAT - The findings of facts, even though giving rise to the mixed question of facts and law as to inter-state sales or branch transfers, but such question of law does not arise in the facts of the present case. The correct findings of fact has been arrived at by the learned Tribunal based on the relevant documents and evidence, which they have analyzed in detail and came to the conclusion that branch transfers cannot be subjected to tax treating those transfers as inter-state sales as per the relevant provisions of the Central Sales Tax Act 1956. Petition dismissed - decided against Revenue.

Summary

Issues involved:
1. Interpretation of branch transfers under the Central Sales Tax Act.
2. Determination of taxable turnover and exemption claims.
3. Imposition of penalty based on turnover disclosure.

Analysis:
1. The judgment concerns Writ Petitions filed by the Revenue challenging a Tribunal's order regarding branch transfers under the Central Sales Tax Act. The Tribunal found that the Assessee did not make inter-state sales based on detailed fact-finding exercises. The Tribunal's order highlighted various aspects such as expenses covered by the principal office, dispatch of products to branches without specific sales contracts, transport arrangements, and property ownership until final sale by depots. The Supreme Court decisions cited emphasized the absence of property transfer in branch transfers and the importance of agreements in determining obligations. The judgment also referenced previous Madras High Court decisions to support the findings on integral sales transactions and establishment of branches. The judgment distinguished between direct sales and stock transfers to branches based on factual verification.

2. The judgment addressed the determination of taxable turnover and exemption claims. It discussed specific amounts disallowed for exemption based on records for different years. The Tribunal found some claims in order and allowable, while penalties imposed by the Assessing Authority were challenged. Citing relevant case law, the judgment emphasized the importance of a bonafide belief in disclosing turnover to avoid penalties. It also highlighted the distinction between best judgment assessments and penalty imposition, leading to the setting aside of penalties and remanding for correct penalty fixation. The judgment concluded that where turnovers were duly accounted for and disclosed, penalties could not be justified.

3. The judgment concluded that the findings of fact by the Tribunal were correct, emphasizing that branch transfers should not be treated as inter-state sales for tax purposes under the Central Sales Tax Act. It dismissed the Writ Petitions filed by the Revenue, indicating no merit in their claims. The judgment ended by dismissing the petitions without costs, affirming the Tribunal's order on the interpretation of branch transfers and taxable turnover under the Central Sales Tax Act.