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Johnson Matthey Chemicals India Pvt. Ltd. Versus The State of Maharashtra, The Commissioner of Sales Tax, The Joint Commissioner Sales Tax, The Deputy Commissioner of 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 declara .....

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ely 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 Su .....

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t 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 m .....

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akash Shah, Mr. Rahul Thakar, Mr. Puneeth Ganapathy, Mr. Jas Sanghavi and Mr. Aniket Ghosh i/b. M/s. PDS Legal For the Respondent : Mr. V. A. Sonpal JUDGMENT ( Per S. C. Dharmadhikari, J. ) 1) Rule in both Petitions. Respondents waive service. By consent, Rule is made returnable forthwith. 2) By these Writ Petitions, under Article 226 of the Constitution of India, the Petitioner seeks the following reliefs (WP/7400/2015):- (a) that this Hon'ble Court be pleased to declare that the impugned T .....

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ned by a job workers to his customer, after job work. (d) In the alternative and without prejudice to prayer (c) above, this Hon'ble Court be pleased to declare that Section 6A is ineffective, incomplete and inoperative is of no avail. (e) that this Hon'ble Court be pleased to issue a writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India, calling for the records pertaining to the Petitioner's case .....

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to withdraw and/or cancel impugned order dated 17.07.2015 passed by the Tribunal in appeal No. 447/2015 and impugned Assessment Order dated 14.08.2014; and (ii) to refrain from taking any steps or proceedings in pursuance of and/or in furtherance of and/or in implementation of the (i) impugned Trade Circular No. 2T of 2010 dated 11.01.2010 (ii) Impugned order dated 17.07.2015 passed by the Tribunal in Appeal No. 447/2015 and (iii) impugned Assessment Order dated 14.08.2014. 3) The Petitioner bef .....

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s stated that this is predominantly a process resulting in the production of recharged catalyst from spent catalyst. It is stated that the Petition relates to job work transactions. The Petitioner receives a specified quantity of spent catalyst from its customers from within as well as outside the state of Maharashtra. The Petitioner undertakes job work of converting the spent catalyst received from the customers into support catalyst and sends back the recharged support catalyst to such custome .....

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kes job work transactions and for which excise duty is not required to be paid. 6) The entire details from para 9.1, therefore, are unnecessary for our purpose. 7) It is claimed that the Petitioner received notices from the Deputy Commissioner of Sales Tax under the provisions of MVAT Act and the Central Sales Tax Act, 1956 (for short the CST Act ). Annexure 'J' is a copy of one such notice. 8) The Petitioner, during the course of assessment, appeared before the Deputy Commissioner and s .....

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of Sales Tax. An order on the stay application therein imposing a condition of part payment of ₹ 7,96,00,000/- under the CST Act and ₹ 35,00,000/- under the MVAT Act was passed dated 24th March, 2015. The Petitioner preferred an Appeal against this order of the Joint Commissioner of Sales Tax dated 24th March, 2015 before the Tribunal and the Tribunal dismissed the VAT Appeal No. 447 of 2015 under the CST Act and ordered deposit of ₹ 7,96,00,000/-. The Appeal under the MVAT Ac .....

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e, such movement of the catalyst back to the customers in other States will be deemed to be inter-State sales liable to be taxed in the State of Maharashtra as per section 6 of the CST Act, 1956. 11(b) The Deputy Commissioner has consequently levied tax on notional value of the precious metal recovered from the spent catalyst apart from the job work charges received by the Petitioners. 11(c) As a result, while the Petitioner has an income with respect to job work charges, of approximately ₹ .....

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sessment order, the Deputy Commissioner also takes an alternate ground that transaction amounts to outright sale. 11(f) Therefore, the Petitioner is challenging the legality and validity of the Circular No. 2T of 2010 dated 11.1.2010. 11(g) The statement of object and reasons to the CST (Amendment) Act, 1972 reads as under:- ..... Central Sales Tax is not leviable in respect of transactions of transfer of goods from a head office (or a principal) to branch (or an agent) or vice-versa as these tr .....

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ollows: S. 6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale:- 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 .....

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#39;F'. 11(j) The said 'F' form would be obtained by the transferee from his sales tax authorities and forwarded to the transferor/dealer in the dispatching state. Transferor would furnish it to his tax authorities in despatching State. This would be proof that goods had been actually received by the transferee. 11(k) It is clear from the emphasised portions above that section 6A contemplates only three transferees, viz. (i) transfers made to one's own place of business (branch t .....

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ion 6-A shall be in Form F. Provided that a single declaration may cover transfer of goods, by a dealer, to any other place of his business or to his agent or principal, as the case may be, effected during a period of one calendar month: 11(n) As is clear from the provision above, even the Rule prescribing 'F' form under the CST Rules, 1957 does not contemplate 'F' form between two independent principals. 11(o) Similarly, Rule 4 of the CST (Bombay Rules), 1957, framed by the Stat .....

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ad issued Trade Circular No. 16T of 2007 dated 20th February, 2007. By the said trade circular, the position about non requirement of 'F' forms in relation to job work transaction was clarified. It was also specifically mentioned in the circular that there is no applicability of section 6A of the CST Act, 1956 in the case of job work transactions executed on principal to principal basis. 11(r) This earlier trade circular 16T of 2007 dated 20th February, 2007 was re-affirmed by the Respon .....

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ent and principal to principal basis was not raised before the High Court. 3. In the trade circular dated 20th February, 2007, a view has been taken that when goods are sent to another state for job work, the transaction will normally be on a principal to principal basis. It is further stated in the circular that section 6A will have no applicability as regards the transactions where the goods are sent on a principal to principal basis. …....... There is, however, no change in the views o .....

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para 3 of the order of Supreme Court and penultimate para of said order dated 31st March, 2009 of the Supreme Court dated 31st March, 2009 itself recognises that view taken by the Sales Tax authorities in U. P. is not the view taken by Sales Tax authorities of other States about applicability of section 6A(1) for a job work transaction. 11(u) Therefore, there was no reason for the Respondents to have changed their well-founded views as mentioned in the earlier trade circulars 16T of 2007 dated 2 .....

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er-state sale has been effected, 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, subject to the provisions of sub-section (3), be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale (Emphasis Supplied) 11(w) Therefore, as clearly provided in section 6A(2), the assessing authority is requir .....

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are only provided in section 3. Therefore, under section 6A(2) the assessing officer would have to establish the requirements of section 3 i.e. (i) a transaction of sale has taken place and (ii) the sale occasioned a movement of the goods sold inter-state. While section 6A(1) may aid in proving the latter, it will not dispense with primary requirement that a completed sale has indeed taken place. 11(y) If section 6A is interpreted in such a manner so as to conclude that the mere non production .....

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o be a sale, but only aids in characterising an already concluded sale as an inter-state sale. 11(aa) Accordingly, section 6A is applicable only for an established sale effected by a dealer from wherever effected. It can never apply to goods returned after job work which never involves a sale. 11(ab) Therefore, section 6A was only meant to counteract avoidance of tax and not to authorise the imposition of a new levy on transactions involving no sale whatsoever. Clearly, section 6A was never inte .....

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sale. In that regard, reliance is placed upon several judgments. It has been contended that movement when is covenant or incident of the contract of sale, the movement will be considered as linked to the sale. For such a transaction, section 6 will apply to levy tax on the same. Section 6A(1) is only aid in establishing connection between movement and sale. If there is no sale at all, such a link need not be inquired into. The words where a dealer claims that he is not liable to pay tax under t .....

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learly presumes the existence of connection between interstate movement and eventual sale by a dealer. Accordingly, when no sale by a dealer ever takes place in a transaction, such transactions clearly do not fall within the scope of section 6A. It was also submitted that two other sections 18A and section 22(1B) of the CST Act would throw light on this aspect and therefore ought to be noticed. There is elaboration of this argument. 12) Hence, the entire foundation of the submissions is that sec .....

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Hulaschand vs. State of Orissa, (1976) 2 SCC 44. (iii) Consolidated Coffee Ltd. and Anr. vs. Coffee Board, Bangalore, (1980) 3 SCC 358. (iv) Tata Iron and Steel Co. Limited, Bombay vs. S. R. Sarkar and Ors., AIR 1961 SC 65. (v) The State of Bihar and Anr. vs. Tata Engineering and Locomotive Co. Ltd., 1970(3) SCC 697. (vi) C. I. T., Bangalore vs. B. C. Srinivasa Setty, (1981) 2 SCC 460. (vii) Tata Sky Limited vs. State of Madhya Pradesh and Ors., (2013) 4 SCC 656. (viii) Govind Saran Ganga Saran .....

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e State of Orissa, XVI STC 364. (xv) Sentinel Rolling Shutters and engineering Company Pvt. Ltd. vs. The Commissioner of Sales Tax, (1978) 4 SCC 260. (xvi)Union of India vs. The Central India Machinery Manufacturing Company Ltd. and Ors., (1977) 2 SCC 847. (xvii) The South India Metal Works and Rolling Mills vs. The State of Madras, (1960) 11 STC 507 (Mad). (xviii) Vishweshwardass Gokuldass vs. The Government of Madras, (1962) 13 STC 113 (Mad). (xix)Motibhai Fulabhai Patel and Co. vs. R. Prasad, .....

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ampur Sugar Mills Ltd. vs. Commissioner of Trade Tax, U. P., (2006) 5 SCC 624. (xxv) Sree Akilandeswari Mills (P) Ltd. vs. Commercial Tax Officer, (2004) 138 STC 397 (TNTST). (xxvi) State of Tamil Nadu vs. T. M. T. Drill (Private) Ltd., (1991) 82 STC 59 (Mad). (xxvii) Cheerans Auto Agencies vs. State of Kerala, (2011) 38 VST 488 (Ker). (xxviii) C. Mohammedali vs. State of Kerala, (2010) 31 VST 427 (Ker). (xxix) Sale Tax Commissioner, U. P. vs. Ram Kumar Agarwal, (1967) 19 STC 400. (xxx) M. Jaihi .....

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aven Grain Storage Ltd., (1994) CLC 328, House of Lords. (xxxvi) Ariyaputhira Padayachi vs. Muthukumaraswamy Padayachi (1914) 37 ILR Mad. 423. (xxxvii) Commissioner of Central Excise and Customs, Kerala vs. Larsen and Toubro Ltd., 2015 (39) STR 913 (SC). (xxxviii) The Additional Commissioner of Sales Tax vs. M/s. Kirloskar Copeland Ltd., Sales Tax Application No. 10 of 2012 (Bombay High Court), dated 8th May, 2014. 15) On the other hand, Mr. Sonpal, learned Counsel appearing on behalf of the Res .....

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. 17) Mr. Sonpal also relies upon the circulars and to submit that the understanding of the officer would not be decisive and conclusive. Further, the circular now impugned does not run counter to the legal position as enunciated. The enunciation of the legal position is that the CST Act contains in Chapter III provisions under the head Inter-State Sales Tax . Section 6 sets out the liability to tax on the inter-state sale and by section 6A, on whom the burden of proof would fall in case of tran .....

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o discharge the burden, he must produce the material and which material can be accepted only after an inquiry and satisfaction is reached with regard to the truth and genuineness of the contents thereof. Read thus, the section presents no difficulty. Read thus, it is not absence of or non issuance of form by any State or practice adopted by that State which is conclusive. Nothing can be derived from judgment in the case of Ambika Steels Limited vs. State of U. P. and Ors. reported in (2009) 24 V .....

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or contrary to what is submitted above. The provision has not been diluted nor the presumption or rule of evidence enacted is commented upon or otherwise. 18) For the above reasons, he would submit that the Petitions deserve to be dismissed. 19) For properly appreciating the rival contentions, at the cost of repetition, we must notice the essential facts. The Petitioner does not dispute that it is manufacturer and job worker both. It is engaged in the business of converting spent catalyst into .....

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reprocessed and recharged and such transactions have been termed as job work/labour undertaken by the Petitioner. The Petitioner claims to have charged their customers only for this job work. In the assessment order, the Assessing Officer has held that the remarkable aspect of the entire process is that there is no one to one co-relation between the spent catalyst received and the fresh catalyst supplied to the customers. The Petitioner levy charges on the basis of weight of fresh catalyst supp .....

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deration of the same is received in the form of processing charges plus spent catalyst which contain 97 to 98 per cent precious metal. That is how the Assessing Officer added the price of spent catalyst and processing charges received by the Petitioner to determine the sale price. 21) We are not required to refer to the Assessing Officer s order in further details, as, admittedly, appeal against the same is pending. The matter has been brought at the stage of interim relief/stay of recovery of t .....

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ut after the approval from the customers, the entire material received from the customers is processed for recovery of the precious metal and the same is further used in order to bringing into existence fresh Nickel/Palladium, which are fully charged or activated. 22) The Petitioner is finding fault with the approach of the Assessing Officer in not applying section 6A to this whole transaction, simply because the Petitioner failed to produce F forms from outside Maharashtra customers in support .....

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rom India, to provide for the levy, collection and distribution of taxes on sale of goods in the course of inter-state trade or commerce and to declare certain goods to be of special importance in interstate trade or commerce and specify that restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject. 24) Therefore, it is an enactment formulating principles for determining when a sale or purchase of goods takes plac .....

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e under this Act and then comes section 2(g), which defines the term sale . Section 2(g) and 2(h) read as under:- 2(g) sale , with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,- (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of prop .....

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n; (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods; 2(h) sale price means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash .....

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shall be determined in the prescribed manner by making such deduction from the total consideration for the works contract as may be prescribed and such price shall be deemed to be the sale price for the purpose of this clause. 25) Therefore, a perusal of the two definitions would reveal as to how unless the context otherwise requires, sale with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for .....

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goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged. 26) Chapter II contains sections to enable formulation of principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a state or in the course of import or export. 27) Section 3 is the first section falling in this Chapter and reads as under:- 3. When is a s .....

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ovement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2. - Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. 28) A perusal thereof woul .....

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other or that is effected by a transfer of documents of title to the goods. There are two explanations and explanation 1 deals with delivery of goods to a carrier or other bailee for transmission. That is to provide for commencement of the movement of goods. Then, by Explanation 2, it is clarified that merely because in the course of movement in the same State, the goods pass through the territory of any other State, then, that shall not be deemed to be a movement of goods from one State to anot .....

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hen the sale is determined in accordance with sub-section (2) of section 4. Subsection (2) comes in for the purposes of indicating that in the case of specific or ascertained goods at the time the contract of sale is made and in the case of unascertained or future goods at the time of their appropriation to the contract of sale by the seller or by the buyer, then, the goods are deemed to be sold inside a State. 31) Similarly, by section 5, when a sale or purchase of goods is said to take place i .....

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uch notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified: Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5 is a sale in the course of export of those goods out of the territory of India. (1A) A dealer shall be liable to pay ta .....

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ne State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting .....

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tion 8: Provided further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if, - (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent. or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub-sectio .....

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consular or diplomatic agent of - (i) any foreign diplomatic mission or consulate in India; or (ii) the United Nations or any other similar international body, entitled to privileges under any convention or agreement to which India is a party or under any law for the time being in force, if such official, personnel, consular or diplomatic agent, as the case may be, has purchased such goods for himself or for the purposes of such mission, consulate, United Nations or other body. (4) The provisio .....

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ay 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 .....

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sioned as a result of sale. (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 and that no inter- State sale has been effected, 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, subject t .....

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e. 33) A perusal of sections 6 and 6A would indicate that by section 6, the liability to tax on inter-State sales is set out and by the amendment made to section 6 by introduction of sub-section (1A), it is apparent that a dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State .....

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) of section 8. Thus, the exemption is in specified case and that is why sub-section (2) contains a non obstante clause. However, there is a proviso and which requires furnishing of a certificate to the prescribed authority. The first proviso to sub-section (2) sets out this requirement and by second proviso, other requirement and to furnish a declaration referred to in clause (b) of the first proviso is dispensed with on the condition specified in the second proviso. Then, by sub-section (3), c .....

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se of transfer of goods claimed otherwise than by way of sale. Split up for understanding the section applies in case there is a claim that there is no sale. In that case and on such claim, the burden of proof is on the dealer making such claim as this claim would relieve him from the liability to pay tax under the CST Act. That liability is in respect of any goods sold within the meaning of preceding sections. The dealer would have to establish and prove the ground raised, namely, that the good .....

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ction 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. By sub-section (2) and despite the declaration being furnished, the Assessing Officer can make such inquiry as he may deem necessary with regard to the particulars contained in the declaration furnished. That inquiry is about the truth o .....

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is subject to sub-section (3) of section 6A. 35) Mr. Sridharan has relied upon on the 4 trade circulars in challenging the circular dated 11th January, 2010. Firstly, we will reproduce the circular under challenge, which reads as under:- Office of the Commissioner of Sales Tax, 829, 8th Floor, Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 TRADE CIRCULAR To …................. …................. No. VAT/MMB/1008/15/Adm-6/B (Trade Cir. No. - 2 of 2010) Mumbai, Dt. 11/01/2010 Sub: Tax Tr .....

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is to the place of business of the dealer himself in another state or to his agent or his principal in another state. It was viewed that section 6A does not deal with transactions which are on a principal to principal basis. Hence, the non-sale transactions like job work which are transactions from principal to principal basis were viewed to be out of purview of section 6A of CST Act, 1956 and not requiring F Forms. 2. Thereafter, the Allahabad High Court delivered a Judgment dated 17th August .....

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n elaborated in Trade Circular 5T of 2009 dated 29th January 2009. 3. The decision of Allahabad High Court in M/s. Ambica Steel Ltd. was challenged before the Hon'ble Supreme Court. In the brief order passed by the Hon'ble Supreme Court (24 VST 356) in this case, it is stated that the dealer agreed to produce the required declarations. Hon'ble Supreme Court has not done away with the need of mandatory F Forms applicable to such transactions as job work which was outcome of the Allaha .....

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ith this view. 5. This Circular cannot be made use of for legal interpretation of the provisions of law, as it is clarificatory in nature. If any member of the trade has any doubt, he may refer the matter to this office for further clarification. 6. You are requested to bring the contents of this circular to the notice of all the members of your Association. Yours faithfully, (Sanjay Bhatia) Commissioner of Sales Tax, Maharashtra State, Mumbai. 36) A perusal of this Circular indicates that the r .....

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ld be necessarily held in the State of Maharashtra that the movement of goods is occasioned by sale. In that event, the burden on the dealer in terms of section 6A of the CST Act can never be taken to be discharged. That would be a travesty of justice. If it is not possible for the dealer to obtain the declaration in that form from another State for, that State may not follow this practice or refuses to do so for reasons beyond the control of the dealer, then, he would have to bear the liability .....

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20.02.07 Sub: Tax Treatment of Goods sent to other States. Gentlemen/Sir/Madam, Queries have been received by this office regarding the tax treatment of Goods sent to other States. A dealer may send his goods to another State for various reasons. The goods may be sent for minor job work, extensive job work or for conversion or for manufacture. Apart from this, a dealer may send the goods to another State for sale or for otherwise disposal in that State. Queries have been received regarding the t .....

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serting a new section, namely, Section 6A. This section was further amended in 2002 by Finance Act, 2002. Section 6A of the CST Act deals with those contingencies where a dealer has sent any goods from one state to another, not by way of sale, to the places of his business or to his agent or to his principal. 3. (1) Section 6A of the Central Sales Tax Act, 1956 provides that where the dealer claims that he is not liable to pay tax in respect of the goods sent as aforesaid to another State to his .....

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s other than those enumerated in that section. The word 'Agent' as used in this section means the Agent as defined in Section 182 of the Indian Contract Act. That Section reads as follows: 182. Agent and principal defined: An Agent is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such work is done or who is so represented is called the principal . (2) Normally, persons acting as brokers, factors, auctioneers, commis .....

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erent from an agent or a servant. An agent, in the matter of agency, is bound to act subject to the direction and control of the principal. But an independent operator merely undertakes to perform certain specified work or produce a certain specified result. The manner and means of performance and production are at the discretion of the operator except in so far as they are specified by the contract. 4. Therefore, when a dealer sends any goods to another person located in a different State for j .....

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ion in Form 'F' from the person to whom the goods have been dispatched. Similarly, the amendment to Section 6A in 2002, which provides that where the dealer fails to produce the declaration in Form 'F', the movement of goods shall be deemed to have been occasioned as a result of sale is not applicable to 'principal to principal' transaction. 5. Section 6A, as of course its amendment in 2002, will apply, as stated above, only when the goods are sent by a dealer to another .....

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et-off. Sub-rule (3) of this rule deals with the case where the claimant dealer dispatches any taxable goods outside the State, not by reason of sale, to his own place of business or of his agent or where the claimant dealer is an agent, to the place of business of his principal. If the goods are so dispatched, then in the contingencies described in the said sub-rule, the set-off available to the dealer is to be reduced as provided therein. 7. It may be noted that phraseology used in sub-rule (3 .....

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a 'principal to principal' basis. Subject to the other provisions of that sub-rule, the reduction in set-off will apply only when the goods are sent to another State, not by reason of sale, to the dealer's own place of business, or to his agent or where the dealer is an agent, to the place of his principal. 8. There would be contingencies where a dealer located in Maharashtra receives goods, not by way of purchase, from another State. The clarifications given in this circular would .....

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Mumbai. ========== o x x o ========== 829, 8th Floor, Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 TRADE CIRCULAR To …................. …................. No. VAT/MMB/1008/15/ADM-6 Trade Cir. 5T of 2009 Mumbai Dt: 29.01.2009 Sub: Tax Treatment of Goods sent to other States. Ref: 1. Trade Circular 16T of 2007 dated 20th February 2007. Gentlemen/Sir/Madam, This office had issued a Trade Circular dated the 20th February, 2007. A view had been taken in that Trade Circular that Section 6 .....

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nds, bars and flats. The converted material was to be sent back to the petitioner in Uttar Pradesh. The Petitioner Company also received iron scrap from various firms outside the State of Uttar Pradesh for the purpose of converting the same into iron and steel billets and ingots with a direction to return the converted goods to those firms. The issue before the Court was whether the petitioner is required to submit the declaration in Form F in respect of the transactions of job work performed by .....

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or job work or for manufacturing etc., the transaction will normally be on a principal to principal basis with an independent operator and not on a principal to agent basis. It is, further stated in the circular that Section 6A will have no applicability as regards the transactions where the goods are sent on a principal to principal basis. It is possible that in view of the judgment of the Uttar Pradesh High Court, dealers situated in other States may require a declaration in Form F from Mahara .....

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e Sales Tax Department as expressed in the said trade circular. The Trade Circular will continue to apply for the contingencies laid down in the circular except for the change indicated above. 4. This circular cannot be made use of for legal interpretation of provisions of law, as it is clarificatory in nature. If any member of the trade has any doubt, he may refer the matter to this office for further clarification. 5. You are requested to bring the contents of this circular to the notice of al .....

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t find any support therein for the arguments canvassed by Mr.Sridharan. He would read some paras of the earlier Circular to mean that when a dealer sends any goods to another for manufacturing etc., the transaction will normally be on a principal to principal basis with an independent operator and not on a principal to agent basis. Section 6A will have no applicability as regards a transaction when goods are sent to principal to principal basis. In that event, there is no requirement of obtainin .....

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the prior circulars lay down any absolute principles and as pressed into service by Mr. Sridharan. These circulars and all clauses and paras thereof would have to be read together and harmoniously. They would indicate that the trade has to be guided. True it is that in the circular of 29th January, 2009 in para 2, the judgment of the Allahabad High Court has been referred. Despite that judgment, the Department is reiterating the position as emerging from Trade Circular dated 20th February, 2007. .....

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. The Revenue, namely, the Departments in Maharashtra, therefore, decided to issue a declaration in form 'F' as per normal procedure to dealers in Maharashtra. 40) We do not see how a later circular of 2010 runs counter to the two circulars issued earlier or that their withdrawal by the ultimate circular of 2010 would adversely affect every dealer in Maharashtra. Mr. Sridharan is also not right in urging that the judgment of the Allahabad High Court has been interfered with by the Hon .....

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d by the Commissioner of Trade Tax, Uttar Pradesh, Lucknow, wherein it has been mentioned that under section 6A of the CST Act, form 'F' is required to be filed in respect of all transfer of goods which are otherwise than by way of sale and also applies to all goods sent or received for job work or goods returned. 43) The Petitioner therein was engaged in the business of manufacture and sale of iron billets and ingots. It was also engaged in the activity of sale of iron and steel rounds, .....

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to iron and steel billets and ingots with a direction to return the converted goods to these firms. We are not concerned here with the credit and particularly the Cenvat Credit under the Cenvat Credit Rules, 2002 and under the Central Excise Act, 1944. In the case before the Allahabad High Court, however, the dealer, while claiming that he had not sent the goods as and by way of sale, but by wayof job work, filed a monthly return under both, the Trade Tax Act and the CST Act. However, he did not .....

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ular referred above. It is in this context that the challenge was raised and the Allahabad High Court considered it. After referring to the rival contentions, the Division Bench presided over by Hon'le Mr. Justice R. K. Agrawal (as his Lordship then was) held as under:- We have given our anxious consideration to the various pleas raised by the learned Counsel for the parties. We find that, under Sub-clause (ii) of Clause (g) of section 2 of the Central Act, a transfer of property in goods wh .....

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ral Act came up for consideration in the case of Ashok Leyland Ltd. v. State of Tamil Nadu (2004) 134 STC 473 (SC); (2004) 23 PHT 81 (SC). Dealing with sections 6 and 6A of the Central Act, the apex court, in paragraph 33 of the Report, had held as follows: "….. Section 6 of the Act provides for liability to tax on inter-State sales in terms whereof every dealer is liable to pay tax thereunder on sales effected by him in the course of inter-State trade or commerce subject to the exce .....

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, on the other hand, which is a procedural provision starts with the words 'subject to the other provisions of this Act and the Rules made thereunder'. Section 6-A provides for exception as regard the burden of proof in the event a claim is made that transfer of goods had taken place otherwise than by way of sale. Indisputably, the burden would be on the dealer to show that the movement of goods was occasioned not by reason of any transaction involving sale of goods but by reason of tran .....

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ch declaration, the dealer is required to furnish the evidence of such dispatch of goods by reason of Act 20 of 2002. In the event, if it fails to furnish such declaration, by reason of legal fiction, such movement of goods would be deemed for all purposes of the said Act to have been occasioned as a result of sale. Such declaration indisputably is to be filed in form F. The said form is to be filled in triplicate. The prescribed authority of the transferee State supplies the said form. The orig .....

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casioned otherwise than as a result of sale The apex court has, therefore, clearly laid down that, under section 6A of the Central Act, the burden would be on the dealer to show that movement of the goods had been occasioned not by reason of any transaction involving sale of goods but by reason of transfer of such goods to any other place of business or to the agent or principal, as the case may be, for which the dealer is required to furnish prescribed declaration form in the absence of which t .....

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tered into between the parties and would be the subject-matter of examination by the assessing authority. Even otherwise, under section 2(g)(ii) of the Central Act, transfer of goods used in execution of works contract is treated to be a sale: if the petitioner claims that it is not liable to tax on the transfer of goods from U. P. to ex-U. P., then it would have to discharge the burden placed upon it under section 6A by filing declaration form F: It would be immaterial whether the person to who .....

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wever, observe that as the petitioners have claimed that they are not liable to furnish declaration form F in respect of the transaction in question and we have come to the conclusion that they are, in fact, liable. We direct the respective assessing authorities to accept the declaration form F of each of the petitioners if they file it within a period of three months from today and to grant exemption in accordance with law. 44) This judgment was challenged by the dealer Ambica Steels Limited be .....

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thority concerned within ten weeks from today. On expiry of the period of ten weeks the assessing officer will take up reassessment proceedings which will be completed within a period of three months, thereafter. At this stage, it may be mentioned that on the scope and applicability of section 6A of the Central Sales Tax Act, 1956, there exists difference of opinion between the various sales tax collectors in the country and therefore since the appellant is now ready to file form F, we are direc .....

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ks after the completion of reassessment proceedings, subject to adjustment, if any, in the duty assessed. We are informed that certain State(s) within whose jurisdiction the transferee is located is/are not issuing F forms. In such an eventuality it would be open to the assessing officer to complete reassessment proceedings on its own merits after examining the transaction between the parties, keeping in mind the circumstance that the assessee is not in a position to obtain the F form, for no fa .....

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;. The time, in addition to the one granted by the Allahabad High Court came to be thus granted, as is clear from the first paragraph of the order of the Hon'ble Supreme Court of India. The re-assessment proceedings were deferred for a period of 10 weeks so as to enable the dealer to furnish the declaration in form 'F'. All that the Hon'ble Supreme Court of India recorded was divergence of views between several states insofar as issuance of form 'F'. The Hon'ble Supre .....

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s between the parties and keeping in mind the circumstance that the Assessee is not in a position to obtain form 'F' for no fault of his. 46) We do not think that there is any ambiguity in the legal position. Further, we do not see anything ambiguous or vague in the circular issued by the State of Maharashtra after this judgment in the case of Ambica Steels Limited (supra) by both, the Allahabad High Court and the Hon'ble Supreme Court of India. We are of the firm view that furnishin .....

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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 .....

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en, that approach of a particular State should be brought to the notice of the Assessing Officer in the dealer's State. That the Assessing Officer should be convinced that the dealer made all efforts, but for no fault of his, he could not obtain the 'F' form. Thereupon and pursuant to the liberty given by the Hon'ble Supreme Court of India and the dealer raising the plea, the Assessing Officer, while taking note of it, would consider the peculiar facts and circumstances and may p .....

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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 .....

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e as to how the section poses any difficulty or is in any way invalid or illegal. Advisedly, neither the provision is challenged nor the competence of the Parliament to bring in the section by way of amendment. Once the ambit and scope of the legal provision has been duly explained by the Hon'ble Supreme Court of India in the case of Ashok Leyland Ltd. vs. State of Tamil Nadu reported in (2004) 134 STC 473 (SC) and that judgment has been applied and followed by the Allahabad High Court in it .....

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ons at page 11 para 26.1 onwards would support our conclusion for, despite furnishing of the declaration in that form, a clear satisfaction has to be recorded by the Assessing Officer. That satisfaction can be recorded on such inquiry, as he is empowered to make within the meaning of sub-section (2) of section 6A of the CST Act. Therefore, there would be an opportunity to the dealer and within the meaning of this provision to convince the Assessing Officer that he has discharged the burden and t .....

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ns and supporting the oral arguments about the position prior to amendment by the Finance Act, 2002 and post such amendment of section 6A of the CST Act need not be dealt with seriatim, then, we need not go to other sections, particularly section 9(1) and equally section 9(2) of the CST Act. We also need not go to section 8 in further details. For, that deals with rates of tax on sales in the course of inter- State trade or commerce. However, sub-section (4) of section 8 once again reiterates th .....

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ve that the view taken by the Assessing Officer is incorrect and not sustainable in law. 52) We are also, therefore, of the opinion that in the light of the view that we have taken, the judgments relied upon by Mr. Sridharan, particularly on the point that only complete sales are exigible to Sales Tax and no tax is leviable where machinery provision is absent and need to be considered in further details. These principles are well settled. There is no need, therefore, to refer to every judgment c .....

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y the reliance on paras 20 and 22 thereof need not be considered for the simple reason that it dealt with the scheme of taxing statutes. If there is no machinery provision, then, in their absence, the law is held to be vague and it would be arbitrariness to assess tax. However, these principles and in absence of a machinery provision would apply from statute to statute. For that, facts have to be noted and peculiarities of the transaction involved. We do not see as to how any assistance can be d .....

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