After receipt of PO by branch from customer can I transfered the goods from factory for further sale or not? - Reg, VAT + CST

[Rajavarapu Nageswar Rao]

Dear Sir,

a) We have much more impressed / interested to read on your articles on sales tax / vat matters in various states.

b) My Name is R Nageswar Rao working in HBL as a Senior Manager - Indirect taxes.

c) We request your good selves small opinion requires on the following:

   1) One of our customer were issued PO in the name of branch address in the Month of April 2012     in  bulk quantity.          

2) Respective branch not having the stocks and send an indent to factory for manufacturing  purpose  from one of our  factory.
   3) The factory produced the goods and dispatched on stock transfer basis to respective branch on    piece-mill / partial shipments  in May 2012 for further sale to customer.
   4) After receipt the goods the branch prepares tax invoice and delivered goods to the customer  destination  and  charged VAT rate.
   5) As per Section  6A of CST act the branch provides F forms and same F forms we have submitted to the  unit commercial tax authorities at the time of annual assessments.

Please let us know the above transactions is branch sale or not as per  Section 6A of CST or not?  Please provide if any case law on the above issue, it is great  help to us.

Best Regards,
R Nageswar Rao,
Senior Manager - Indirect Taxes.

Posts / Replies

[Pradeep Khatri]

Dear Mr. Rao,

We have meticulously gone through your query and found that this transaction can't be treated as Stock Transfer since goods are being transfer to buyer who has raised the PO to your branch and in turn branch had raised the POs to your factory.

It would be treated as pre conceived sales.  It would be termed a CST sale as the buyers are pre determined.

Following is the relevant judgment for your kind information.

M/S. Hyderabad Engineering ... vs State Of A.P. (2011 (3) TMI 1427 - SUPREME COURT OF INDIA ) on 4 March, 2011

Author: H Dattu

Bench: D.K. Jain, H.L. Dattu

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3781 OF 2003

M/s Hyderabad Engineering Industries ................... Appellant Versus

State of Andhra Pradesh .................Respondent