2023 (9) TMI 1367 - HC - VAT and Sales Tax

Validity of assessment order - disallowance of claim of exemption made by the petitioner under Section 6(2) of the Central Sales Tax Act. 1956 - denial on the ground that the sale in question to the ultimate buyer was not taken place during the inter-State movement of the goods in question and according to the Assessing Officer sale by the petitioner to its ultimate buyer took place prior to the purchase by it from its seller - HELD THAT - On a plain reading of Section 3 along with explanation (i) and (ii) and Section 6(2) of the Central Sales Tax Act along with the aforesaid Trade circular it clearly appears that the commencement of movement of the goods is effected in case of movement from one State to another State from the time of delivery of such consignment to the transporter and is terminated at the time when delivery is taken from such transporter and also is effected by transfer of documents of title of such consignment to a subsequent buyer during the movement from one State to another State. The main grounds of refusal to grant exemption to the petitioner, under Section 6(3) of the Central Sales Tax Act, 1956, by all the Authorities below are that the transfer of title/sale by the petitioner to the ultimate buyer was effected before the commencement of movement and not during the movement of the goods in question which finding on considering the facts and circumstances of the case and provisions of law, is perverse and misinterpretation of relevant provisions of the Act and the notification in question. The respondents could not show any piece of evidence to establish that the subsequent sale to the ultimate buyer effected prior to the commencement of movement of goods in question as defined under Section 6(2) read with explanation 2 and 3 under Section 3 of the Central Sales Tax Act as well as the aforesaid notification dated 4th October, 2010. The impugned order of all the impugned Authorities are not sustainable in law - Petition disposed off.

Summary

Issues involved:
The issues involved in this case are the challenge to the assessment order disallowing exemption under Section 6(2) of the Central Sales Tax Act, 1956, and the subsequent confirmation of this order by the Appellate and Revisional Authorities.

Assessment Order Disallowing Exemption:
The petitioner claimed exemption under Section 6(2) of the Central Sales Tax Act on the subsequent sale of consignment during inter-State movement, which was denied by the Assessing Authority. The denial was based on the grounds that the sale to the ultimate buyer did not occur during the inter-State movement of the goods, as the sale by the petitioner took place before its purchase from the seller. The Assessing Authority emphasized the requirement of transfer of documents of title to the goods during movement for exemption under the Act.

Appellate Authority's Decision:
The Appellate Authority upheld the Assessing Authority's decision, stating that the title must be transferred during the movement of goods for exemption. It provided examples of cases where the title had been transferred to the ultimate consignee before the movement of goods started, emphasizing the importance of endorsement with a date to prove the transfer during movement. The Appellate Authority dismissed the appeal and required the dealer to pay interest as per the Act.

Revisional Authority's Confirmation:
The Revisional Authority affirmed the Appellate Authority's decision, emphasizing the requirement for the dealer to declare the name of the ultimate purchaser for endorsement on the consignment note. It concluded that the consignment notes were not endorsed during the movement, hence disallowing the claim of subsequent sale under Section 6(2) of the CST Act 1956.

Legal Interpretation and Decision:
The High Court analyzed the relevant provisions of the Central Sales Tax Act, along with a Trade circular, to determine the commencement of movement of goods and the transfer of title during inter-State sales. It found that the Assessing Authority's decision was based on a misinterpretation of the law, as the evidence showed the transfer of goods to the transporter before the endorsement to the ultimate buyer. The Court quashed the orders of all three Authorities, ruling in favor of the petitioner's claim of exemption under Section 6(2) of the Act.

Conclusion:
The High Court, after considering the facts, legal provisions, and submissions of the parties, concluded that the impugned orders disallowing exemption were not sustainable in law. Therefore, the Court quashed the orders, allowing the petitioner to claim the exemption under Section 6(2) of the Central Sales Tax Act, 1956. The writ petition was disposed of with this observation and direction.