n January 7, 2004, by the
judgement delivered in Ashok Leyland Ltd. v. State of Tamil Nadu &
Another, a 3 Judges’ Bench of the Supreme Court has overruled its
earlier judgement delivered on February 20, 1997 by a 2 Judges’ Bench
in Ashok Leyland v. Union of India (1997 105 STC 152). Issue in these
cases was about inter-pretation of S. 6A of the Central Sales Tax Act, 1956,
which has been as under.
"S. 6A — Burden of proof,
etc. in case of transfer 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
oc-casioned by reason of transfer of such goods by him to any other
place of his business or 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 the authority may, for suf-ficient cause, permit, a declara-tion, 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 such inquiry as he may
deem necessary that the particulars contained in the declaration furnished by a
dealer U/ss.(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."
Above provision has to be read
with sub-rule (5) of Rule 12 of the Central Sales Tax (Registra-tion and
Turnover) Rules, 1957
providing for issue of declaration in Form F against despatches of
goods to another State which sub-Rule has been as under.
"Rule 12(5) — The
declaration referred to in Ss.(1) of S. 6A shall be in Form F.
"Provided that a single
declara-tion 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.
further . . . . . . . (Not reproduced)
also . . . . . . . . . (Not
Declaration in Form F has to be
issued by the recipient of the goods to whom the goods would have been
transferred by the dealer, recipient being called as transferee of goods. Such
recipient should have been the principal officer of the place of business of the
dealer who would have transferred the goods or agent of such dealer or the
principal where the dealer transfer-ring the goods would have been the agent of
the recipient. However, Form F has provided for signing of the declaration by
any other person on behalf of the recipient. Signatory has to declare his status
in relation to the transferor or the transferee.
Judgement dated 20-2-1997 :
The Bench, in its present
judgement (delivered on January 7, 2004) has vide para 9 referred to the earlier
judgement dated February 20, 1997 as under :
(a) S. 6A does not create
conclusive presumption as contended on behalf of the assessee.
(b) An order of assessing
authority accepting Form F, whether passed during the assessment or at any
point earlier thereto, forms part and parcel of the order of assessment.
(c) Its amenability to the
power of reopening and revision depends upon the provisions of the concerned
sales tax enactments by virtue of the operation of S. 9(2) of the Central Act.
(d) It is not possible to
accept that an order u/s.6A(2) has an independent existence.
(e) An order refusing to
accept Form F may or may not be appealable independently depending upon the
provisions of the State sales tax enactments, but it is certainly capable of
being questioned if an appeal is preferred against the order of assessment.
(f) If order accepting Form F
is sought to be reopened, it can be done as part of reopening of assessment or
may be done independently, which would depend upon the language of the
relevant provisions of the concerned State Acts.
(g) It is permissible to
reopen an assessment accepting Form F as true, even though such a reassessment
necessarily leads to revision/modification of the assessment order.
(h) If the reopening is
confined to the order accepting Form F as true, the enquiry shall be confined
to the matters relevant thereto. In that case, it was noticed that the
assessments were sought to be reopened only in respect of the turnover
relating to sales of vehicles to State Transport Undertakings and not turnover
relating to persons other than State Transport Undertakings.
(i) In the facts of the case,
the question as to whether the power had been exercised validly or not did not
call for consideration. If the assessing authority decided against the
appellants, it would be open to the assessee to file appeal(s) directly before
the Tribunal (in order to shorten the litigation and in the interest of
justice). If and when the Tribunal decides against the appellants, it shall be
open to the appellants to approach the Supreme Court.
So far, provisions of S. 6A and
Rule 12(5) were understood as above.
Ss.(1) of S. 6A was amended by
Central Sales Tax (Amendment) Act, 2001 in force since 11-5-2002, whereby at the
end of Ss.(1) the following was added, namely :
‘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.’
Such amended sub-section is reproduced at the beginning.
The above underlined provision
is the subject of interpretation by the 3 Judges’ Bench of the
Supreme Court vide its judgement delivered on January 7,
Court’s observations :
In para 40, the Court has
observed as under :
"40. Prior to amendment
of S. 6A of the Central Act, filing of Form F was optional. The
dealer was, thus, entitled either to file such form or not
to file the same. Only because such form is not filed, the same would not mean
that the dealer was prohibited from raising a plea that no stock of transfer
from his Head Office to Regional Offices or Regional Sales
Offices has taken place. It was entitled to plead that by reason of such
transactions which are intra-organisation, sale was not occasioned by
movement of goods. The question which was required to be posed and
answered by the assessing authority was, thus, required to be confined only to
the fact as to whether any sale has occasioned by movement of goods or not. In
other words, an exception had been made to the concept of inter-State sale
invoking the provisions of the Central Act would be when such movement of
goods was by way of transfer of stock in terms whereof no tax under the
Central Act was payable. Indisputably determination of such a question at the
hands of the assessing authority was required for arriving at a finding of
fact as to whether the Central Sales Tax or the local sales tax would become
payable." (underlined words are inappropriate. Sale
occasions movement and not vice versa).
In para 42, the Court has
"The liability to tax on
inter-State sale as contained in S. 6 is expressly made subject to the other
provisions contained in the Act. Ss.(2) of S. 9, 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 there-under.’ S. 6A 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.
Indisput-ably, the burden would be on the dealer to show that the movement of
goods had occasioned not by reason of any transaction involving sale of goods,
but by reason of transfer of such goods to any other place of his business or
to his agent or principal, as the case may be. For the purpose of discharge of
such burden of proof, the dealer is required to furnish to the as-sessing authority
of within the prescribed time a declaration duly filled and signed by the
principal officer of the other place of business or his agent or principal.
Such declaration would contain the prescribed particulars in the prescribed
form obtained from the prescribed authority. Along with such declaration, the
dealer is required to furnish the evidence of such despatch 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 occasioned as a result of sale."
(Amendment by Act 20 of 2002 does not provide for furnishing of evidence of
despatch of goods which was already there, it provided for consequence of not
furnishing the declaration).
All Inter-State movement inter-State
sales ? :
Implicit in the above
observa-tions is that wherever there was inter-State movement of goods, the same
would be presumed to involve inter-State sale subject to tax u/s.6 of the
Central Sales Tax Act, unless the dealer pro-duced valid F form declaration to
claim immunity, as provided in S. 6A. This was for the reason that all
inter-State sales are exigible to tax without any threshold limit. In para 78,
the Court has observed :
"It is also to be borne
in mind that no presumption when movement of goods has taken place in the
course of inter-State sales, may be raised in the case of standard goods
but the same is not conclusive. It is only one of the factors which
is required to be taken into consideration along with others. In a case,
however, where the purchaser places order on the manu-facturer for
manufacturing goods which would be as per his specifications, a presump-tion
that agreement to sell has been entered into may be raised."
In support of the above
proposi-tion, the Court has referred to a large number of cases, which were held
to take place in the course of inter-State trade not by the mere application of
the above proposition but on the particular facts of the case by the application
of the principles laid down by the Supreme Court as to when a transaction can be
deemed to take place in the course of inter-State trade.
Limited issue :
Before the Bench, limited issue
for enquiry was about burden of proof in the matter of acceptance of F Form
declarations and not when a sale could be deemed to take place in the course of
inter-State trade or commerce or when a presumption could be made. After the
observations of the Bench, assessing authorities would be reluctant to accept F
Form declarations as the same could not be rejected once accepted, except in the
case of fraud or collusion, according to the Bench, there being no provision to
file appeal against it. How arduous could be the exercise to be carried out by
the assessing authority before acceptance of F Form declaration on the
basis of the same being true, enquiry to be made about the statements having
been made in the F Form declaration by the person issuing the same. The Bench
has stated that there could be no appeal against ac-ceptance of F Form
declarations though the same would be part of the assessment. What about
non-acceptance of F Form declarations before the assessing authority ? No
appeal could be preferred by the assessee dealer ?
Charging Section :
S. 6 of the Central Act is the
charging section providing for levy of Central Sales Tax on
inter-State sales of goods. Unless, therefore, there is a
sale of goods which is established to have taken place in the course of
inter-State trade or commerce, no tax could be levied under the Central Act.
Burden to prove whether a particular transaction is a sale that has taken place
in the course of inter-state trade or commerce is on the assessing authority as
observed by the Supreme Court in Commissioner of Sales Tax v. Suresh Chand
Jain, (1988 76 STC 45). There is no presumption that a given trans-action is
a sale of goods vide Madras High Court in T.P.S.R Factory Pvt. Ltd. v. Dy.
Commercial Tax Officer, 1967 20 STC 419. Neither the State Legislature nor
the Central Legislature has any legislative jurisdiction to levy tax on mere
branch transfers of the goods. Such transactions cannot be treated as sale at
all, vide Bombay High Court in Varun Polymol Organises Ltd. v. State of
Maharashtra, 1995 97 STC 55 Bom. If in the absence of F Form declaration
inter-State movement of goods, whether or not against a sale, has to be deemed
to be an inter-State sale, exigible to tax u/s.6 of the Central Act, such levy
would be deemed to be a tax on inter-State consignment of goods for which law
referred to in Article 269(3) of the Constitution has yet to be enacted by the
The expressions ‘subject to the other purposes
contained in the Act, or ‘for the purpose of this Act’ or ‘for all
purposes of this Act’, it is respectfully submitted, have not been construed
in the proper context of the various provisions of the Act and the Rules