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TMI Blog2025 (2) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... r purchase takes place in the course of inter-State trade or commerce. This entry was inserted by Constitution (Sixth Amendment) Act, 1956. The Central Sales Tax Act, 1956 was, accordingly, enacted. Section 6 of the CST Act is contained in Chapter III and deals with "inter-State sales tax". Sub-section (1) of section 6, in particular, deals with "liability to tax on inter-State sales". It provides that subject to the provisions contained in the Act, every dealer shall be liable to pay tax on all sales effected by him in the course of inter-State trade or commerce during any year. The contention of the appellant is that the transfer of promotional products are not capable of being sold and, in fact, have not been sold and, therefore, such a transfer would not amount to "sale" as defined in section 2 of the CST Act. Elaborating this submission, learned counsel pointed out that the taxable event for levy of central sales tax under the charging provisions of section 6 of the CST Act is that a "sale" has been effected by a dealer in the course of inter-State trade and as the jurisdictional condition constituting a "sale" is not fulfilled, central sales tax cannot be demanded from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. For transfers to medical representatives, where obtaining Form-F is impractical, the assessing authority is to consider the specific circumstances and make a determination based on the merits of each case.
There is no infirmity in the order passed by the State Tribunal that may call for any interference in these appeals. The appeals are, accordingly, dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the promotional products are incapable of being sold and are, in fact, not sold. Consequently, no consideration is received by the appellant for such products. The conditions of the charging section 6 of the Central Sales Tax Act, 1956 [the CST Act] are, therefore, not fulfilled and consequently the provisions of section 6A of the CST Act will not apply. Thus, central sales tax cannot be levied on the transfer of such promotional products. 6. The contention of the department is that the transfer of promotional products from the warehouse of the appellant in the State of Maharashtra to the depots of the appellant in other States and to the medical representative in the other States have to be made against the receipt of Form-F to merit the application of section 6A of the CST Act, failing which the condition set out in section 6A of the CST Act is not fulfilled by the appellant. The appellant would, therefore, have to pay central sales tax. 7. The submissions made by the learned counsel of the appellant have been recorded by the State Tribunal in paragraph 6 of the order and they are: "6. We have consciously heard rival submissions. There are two aspects. One is regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing declarations in Form "F". Otherwise it is deemed interstate sales. If the burden is not discharged appellant is liable to pay tax as per the provisions u/s. 6. The matter is squarely covered by the judgment of Apex Court in case of Ambica Steels Ltd. (cited supra). The question of deeming fiction created by provisions in Section 6A is for the purpose of plugging wrong claims. It does not impose tax in respect of transfer of goods from H.O. to branch office or vice-versa, as these transactions do not amount to sale, but the legislature was mindful of the fact of blanket understanding of this type encourages evasion of tax, rather than facilitate it. Therefore, burden is put on the shoulder of the claimant. The appellant claims that, goods are moved from the State of Maharashtra to its depots and employees in other states. All depots are registered under the C.S.T. Act. It is up to the dealer within the meaning of this provision to convince the assessing authority that, he has discharged the burden that there is transfer of goods not by way of sale. In the circumstances, we do not think that, there is any difficulty for the dealer to discharge the burden by obtaining F forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded back to the file of assessing authority to the extent of fresh verification of transfer of promotional items. He shall accept declarations in Form "F" if the appellant is able to produce. He shall verify transfer of promotional items claimed as transfer to medical representative in the state where depots or branches of the appellant are not situated and allow the same. He is directed to impose penalty equal to 20% of tax payable on transfer of promotional items being deemed interstate sales if any, as a result of assessment. Rest of the appeal orders are upheld. Accordingly, appeals are disposed off." (emphasis supplied) 12. Shri Sanjeev Sachdev learned counsel for the appellant assisted by Shri Rohan Shah and Ms. Diksha Ranjan, Ms. Surabhi Prabhudesai, made the following submissions: (i) The levy of central sales tax under the CST Act is legislatively formulated in terms of the powers vested with the Union of India under article 264 of the Constitution read with the Seventh Schedule. Article 246 grants to the Parliament the exclusive power to make laws with respect to matters enumerated in List I of the Seventh Schedule. Entry 92A of List I empowers the Centre to legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons by other collateral evidence to establish that the transfer was otherwise than by way of sale when Form-F is not produced, has been omitted by amendment in section 6A by Finance Act, 20 of 2000 w.e.f. 11.05.2002. The burden of proof is on the dealer claiming that the movement of goods from one State to another is otherwise than by way of sale, which burden has to be discharged by filing Form-F. The words of section 6A of the CST Act are very explicit and unambiguous; (ii) In terms of the amended provision, if the dealer fails and/or neglects to file such a declaration, the transaction would be deemed to be an inter-State sale; (iii) In this connection reliance has been placed upon the decision of the Allahabad High Court in Ambica Steels Limited vs. State of U.P. and others [2007 SCC Online All 2392] and the decision of the Supreme Court in Ashok Leyland; (iv) In the present case, goods have been moved from the State of Maharashtra to the depots of the appellant and medical representatives of the appellant in other States. The appellant has to provide Form-F to the assessing authority, and failure to do so, will make the deeming provision operational; (v) Even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of goods claimed otherwise than by way of sale. - (1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale. (2) If the assessing authority is satisfied after making suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of promotional products in the following manner: (i) The promotional products are procured by the appellant centrally in the State of Maharashtra from suppliers located within and outside the State of Maharashtra; (ii) The promotional products are centrally stocked at the warehouse of the appellant in the State of Maharashtra, from where they are sent to the depots of the appellant in other States and to the medical representatives of the appellant located across the country, for free distribution; (iii) The items are sent to other States under the cover of documents which clearly specify that the promotional products are "for free distribution to medical profession of no commercial value". The documents are: (a) A "transfer note" is prepared for each consignment of promotional products sent to other States. It specifies details of the total quantity of material sent and the cost of the material. The value of the promotional products are mentioned for the purposes of internal control and accounting; and (b) Cycle Reports (called 'sample invoices') which provide a break-up of the items in the consignment for each medical representative in the receiving State. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed authority, along with the evidence of dispatch of such goods. (2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under Sub-section (1) are true, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall be deemed for the purposes of this Act to have been occasioned otherwise than as a result of sale. Explanation.-In this section, "assessing authority", in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act." 23. In view of amendment made in sub-section (1) of section 6A of the CST Act w.e.f. 11.05.2002, the filing of Form-F no longer remains optional. 24. If the contention of a dealer is that transfer of goods took place otherwise than by of sale, then the burden of proving that movement of the goods was so occasioned would be on the dealer, and for this purpose he has to submit to the assessing authority a declaration duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity may, for sufficient cause, permit a declaration within the meaning of sub-section (1) of section 6A. Along with the declaration, the evidence of despatch of goods has to be furnished. If the dealer fails to furnish that declaration, then, the movement of goods shall be deemed for all purposes of the CST Act to have been occasioned as a result of sale. *****" (emphasis supplied) 26. In Ashok Leyland, the Supreme Court also examined the provisions of the amended section 6A of the CST Act and held that whereas prior to the amendment in sub-section (1) of section 6A, a dealer had an option of filing a declaration in Form-F but after the amendment w.e.f. 11.05.2002 a dealer does not have any option and if the dealer fails to file such a declaration, the transaction would be deemed to be an inter-State sale. The Supreme Court emphasised on the use of the expression "deemed" and held that if this is interpreted differently, an incongruity would ensue. The relevant portions of the judgment of the Supreme Court are reproduced below: "Interpretation of section 6-A of the Central Act 72. A statute, as is well-known, must be interpreted having regard to the text and context there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he particulars furnished are found to be correct by the assessing authority, the result thereof which is evidenced by the expression 'thereupon' shall in view of the legal fiction created would be a transaction otherwise than as a result of an inter-State sale. Furthermore, once such a legal fiction is drawn, the same would continue to have its effect not only while making an order of assessment in terms of the State Act but also for the purpose of invoking the power of reopening of assessment contained in Section 9(2) of the Central Act as well as Section 16 of the State Act. (See Indian Handicrafts Emporium and Ors. v. Union of India (2003) 7 SCC 586 and Ameer Trading Corpn. Ltd. v. Shapoorji Data Processing Ltd. (2004) 1 SCC 702)." (emphasis supplied) 27. It is, therefore, clear from the aforesaid decisions that if a dealer intends to take up a case that transfer of goods was otherwise then by way of sale, he has to submit a declaration in Form-F, otherwise the deeming fiction contained in sub-section (1) of section 6A will come into play and the movement of goods shall be deemed for all purposes of the CST Act to have been occasioned by reason of sale in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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