before the central sales tax appellate authorityaarrulings.in/cstaa/25.04.2019 tropical agro...

1Appeal Nos. CST/8-11/2014

M/s Tropical Agro System (I) Ltd. versus The State of Tamil Nadu & Ors.

Before the Central Sales Tax Appellate AuthorityNew Delhi25th April, 2019

PRESENT

Hon’ble Mrs. Justice Ranjana P. Desai, ChairpersonMr. Ramayan Yadav, Member (Law)

Appeals Nos. :CST/ 8 / 2014CST/ 9 / 2014CST / 10 / 2014CST / 11 / 2014

Name & address of the Parties(Appellant(s) / Respondent (s)

: M/s Tropical Agro System (I) Ltd.Versus

State of Tamil Nadu and Ors.

Present for the appellant(s) : Mr. B. Raveendran, Advocate,Chennai

Present for the respondent(s) : Mr. K.V. Vijayakumar, StandingCounsel for State of Tamil Nadu.

Ms. Rama Ahluwalia for State ofMaharashtra

Ms. Madhumita Bhattacharjee,Advocate for State of West Bengal

O R D E R

These four appeals can be disposed of by a common order because

they involve similar facts and common questions and are related to same parties.

In all these appeals the State of Tamil Nadu is respondent No.1, the Tamil Nadu

Sales Tax Appellate Tribunal (“the Tribunal” for short) is respondent No. 2, the

Appellate Assistant Commissioner is respondent No. 3, the Deputy Commercial

Tax officer (“the Assessing Officer” for convenience) is respondent No.4 and



the Union Territory of Pondicherry is respondent No. 5. In CST Appeal Nos.

CST / 8 / 2014 and CST / 9 / 2014, the Union Territory of Delhi, the State of

Karnataka, the State of West Bengal, the State of Andhra Pradesh and the State

of Maharashtra are respondents nos. 6 to 10 respectively. By order dated

21.12.2017 of this Authority the Union Territory of Delhi/ Government of National

Capital Territory of Delhi has been deleted from the array of respondents.

The appellant has challenged orders of the Tribunal in all these appeals.

It would be appropriate to treat CST /10 /2014 as the lead case because the re-

assessment order dated 29.08.2000 passed in revisional proceedings out of

which this appeal arises is first in point of time. It is also the basis of all the other

assessment orders out of which the present appeals arise. In all the assessment

orders the same material has been relied upon and the reasoning is also

identical. It is, therefore, necessary to discuss reassessment order dated

29.08.2000 out of which CST/10/2014 arises at length. Facts could be also

gathered from the said order. Gist of the facts is as follows:

On 09.07.1997, a lorry (TAN 8895) carrying 40 barrels each containing 200 litres

of “Fenvelerate 20-EC” was intercepted at Kandamangalam Commercial Tax

Check Post. The details of consignment were as follows:

Consignor Tvl. Tropical Agro System (India) Ltd.,Mariamman Koil Street, Muthialpet,Pondicherry

Consignee Tvl. Zeneca ICI Agro Chemicals Ltd., 397/3,Madukarai Main Road, BodipalayamVillage, Coimbatore District.

Commodity Fenevelerate 20/EC-40 Barrels



Value Rs. 10,24,013/-

Documents produced i) D Note 60/09-07-97ii) Invoice (as per Central Excise Rules)

No. 19 dt. 09.07.97iii) Pondicherry Form XX No. A 310358iv) Lorry Gvr (which was maintained from

05.07.97)

On verification, it was found that the same goods had been transported in the

same lorry by the same driver on 08.07.1997 and it had crossed Pattanur

Commercial Tax Checkpost at 00.30 hrs. on 09.07.1997. Form No. 20 0114129

dated 08.07.1997 that accompanied the consignment revealed the goods as

having been transported from Chennai to Pondicherry. The Kandamangalam

Checkpost officials obtained copies of the following documents:

a) Goods Consignment Note No. 3182 dated 9/7/1997- InterwingsRoad lines, Eakkattuthangal, Chennai for transport of 40 barrels ofFenvelerate from Chennai to Pondicherry.

b) Transport Invoice No. 33 / 08.07.97

c) D.N/ 1038 / 08.07.97 and

d) Purchase order dated 22.05.97 placed by Tvl. Zeneca ICI AgroChemicals Ltd., Coimbatore with Tvl. Tropical Agro Systems (India)Ltd., Pondicherry for supply of Fenvelerate.

From the above, it became evident that the stock started its onward journey from

Tamil Nadu against an existing order of a purchaser in Tamil Nadu. However,

the appellant transferred them to Pondicherry under the guise of stock transfer

and sent them back to Tamil Nadu to comply with Tamil Nadu purchaser’s order.

This movement of goods was to avoid tax under the Tamil Nadu General Sales



Tax Act (‘the TNGST Act’), hence the Checkpost Officer collected ‘C’ fee of

Rs. 1000/- along with a tax of Rs. 4,096/- and released the goods.

Subsequent to this, the place of business of the consignor at Chennai and the

consignee at Coimbatore were visited by the Enforcement Officials of Villwpuram

Chennai and Coimbatore on 09.01.1998 and 10.01.1998. Inspection was

conducted which disclosed the following details:-

Factory at Ambattur : Details of dispatches of goods to theirPondicherry Branch with reference to Form XX,delivery challans, etc.

Consignee at

Coimbatore Agro

: Details of goods received from Tvl. TropicalPondicherry were gathered. The area salesManager deposed that the purchase orderswere placed by their Head Office at Chennaiand the factory at Coimbatore directly receivethe goods from Pondicherry on freight paidbasis.

Corporate Office of

the Consignor at

Chennai

: Following details were gathered:

i) The Company is a manufacturer of pesticidesand insecticides formulations. Raw materialswere purchased both from interstate against‘C’ forms and locally against form XVII. Noseparate stock accounts is maintained for theraw material purchases against Form XVII.

ii) The company is having 12 Branches salesdepots in other states. One such sales depotis at Pondicherry, functioning from 24.02.95.Usually, the company is not receiving anyindents from their Pondicherry Branchshowing their specific requirements of stock.

iii)The particulars regarding the goodstransferred to Pondicherry and sales effectedin Pondicherry branch, were there upon,gathered from the year 1995-96 onwards.



iv)The particulars of goods purchased againstForm XVII as available in one Form XVIIIRegister were also gathered.

v) The following documents relating to transportof stock through the Carriers, that is,Interwing Road Lines, Chennai wererecovered on issue of D7 receipt.

1) Freight Bill No. 2666 with ConsignmentNote 3118/29.05.97.

2) Freight Bill No. 2680 with ConsignmentNote 3129 & 3131 / 4.6.97.

3) Freight Bill No. 2688 with ConsignmentNote 3145 & 3148 / 08.06.97.

4) Freight Bill No. 2689 with ConsignmentNote 3146 & 3147/08.06.97.

5) Freight Bill No. 2701 with ConsignmentNote 3159 & 3160 / 18.06.97

6) Freight Bill No. 2707 with ConsignmentNote 3170 & 3171/ 27.6.97

7) Freight Bill No. 2710 with ConsignmentNote 3173 & 3174 / 30.6.97

A statement covering the above facts was given by Thiru. Madhavan

T.K. General Manager (Finance) – cum Secretary of the Company.

The verification of the above details and records revealed that the documents

were created by the appellant to make it appear that the goods had moved from

Tamil Nadu to Pondicherry as branch transfer and then to Tamil Nadu

(Coimbatore) as CST sales. In fact the transport documents showed that even at

the time of commencement of movement of goods from Chennai, the ultimate

destination was known to the appellant. To substantiate this observation, the

Assessing Officer has in all the assessment orders noted the movement of goods

connected with Freight bill No. 2688 dated 08.06.1997 with Consignment Note



Nos. 3145 and 3148 and Freight bill No. 2707/ 27.06.1997 with Consignment

Note Nos. 3170 and 3171. The illustrations need to be reproduced:

Illustration - I

Freight Bill No. 2688 / 8-6-97 of inter Wings Road lines, Chennai-97.

The above freight bill contains the following information

i. Bill has been raised on Tropical Agro, Chennaiii. A sum of Rs. 6610/- had been charged for the transport on ‘fixed’ weight/

rate basis.iii. The above sum of Rs. 6610 was to cover the transportation from

Chennai to Pondicherry and to Coimbatore.iv. Date of transport 7-6-97v. Consignment Note Nos. 3145 and 3148

Goods Consignment Note. 3145/ 7-6-97 and 3148/ 08.06.97

i. Truck No. TN-45-Y-5047 TN-45-Y-5047ii. Packages 34 barrels 34 barrelsiii. Goods Fenvelerate Fenvelerateiv. Value 8,56,824/- 8,56,824/-v. Consignor Tropical Agro, Chennai Tropical Agro,

Pondicherryvi. Consignee Tropical Agro,

PondicherryZeneca ICICoimbatore

vii. Documents Inv 21 DC No. 1023Form XX/0114115

Inv. 13 DC no. 54Form XX-64900

viii. Remarks Door Delivery Door Delivery

On the basis of the above the Assessing Officer has concluded that 34 barrels of

Fenvelerate had been transported from Chennai to Coimbatore via Pondicherry

in the same lorry bearing No. TN 45 Y 5047 and two Consignment Notes had

been prepared in Chennai at the time of movement of goods on 07.06.1997 itself.

The Assessing Officer has quoted the record created by the appellant for the

above movement of goods. It is described as under:-



First, for the stock transfer toPondicherry

: Stock Transfer invoice 21 andDC No. 1023/ 07.06.97 for Rs.8,56,824.00

Second, for the sale toconsignee

: Invoice No. 13 and DC No.54/08.06.97 for sales value ofRs. 8,70,400.00

It has also been noted that in the Goods Consignment Note No. 3148 for the

transport of goods from Pondicherry to Coimbatore a value of Rs. 8,56,824/-

(representing the value of goods transferred as per Stock Transfer Invoice)

alone has been mentioned. Had the Consignment Note been prepared after

issue of sale bill at Pondicherry, the actual value of Rs. 8,70,400/- might have

been mentioned in the Goods Consignment Note. It was therefore concluded

that the Consignment Note had been prepared in Chennai itself when the goods

first moved from there.

Illustration-II reads as under:

Freight Bill No. 2707/ 27-6-97

The above freight bill contains the following information.

i. The Bill has been raised on Tropical Agro, Chennaiii. A sum of Rs. 6510/- has been charged for the transport on ‘fixed’ weight

/ rate basis.iii. The above sum has been charged for the goods transported from

Chennai to Pondicherry and to Coimbatore.iv. Date of transport 26-6-97v. Consignment Note Nos. 3170 and 3171

Particulars available

in

G.C. No. 3170 G.C. No. 3171

i. Truck No. TN-67 5305 TN 67 5305ii. Packages 40 drums 40 drums



iii. Goods Fenvelerate Fenvelerateiv. Value 9,48,160 10,24,013v. Consignor Tropical Agro, Chennai Tropical Agro,

Pondicherryvi. Consignee Tropical Agro,

PondicherryZeneca ICI,Coimbatore

vii. Documents Inv. no. P. 31/ dt.26.06.97/ XX 11 41 24

None

viii. Remarks Door Delivery Door Delivery

On the basis of the above, it has been held that 40 drums of Fenvelerate had

been transported from Chennai to Coimbatore via Pondicherry in the same lorry

bearing No. TN 67- 5305 and the Consignment Notes had been prepared in

Chennai at the time of commencement of goods on 26.06.1997 itself. This is

evident from the fact that GC No. 3171 (allegedly raised at Pondicherry) is the

next serial no. of the GC No. 3170 admittedly raised at Chennai.

It appears that though only two illustrative instances are cited in the

order, the Assessing Officer examined the remaining documents which revealed

the same pattern. The order reveals that the Assessing Officer found that

specific quantities and specific types of pesticides had been transported from

Chennai to the branch at Pondicherry and sold to buyers in Tamil Nadu and other

States on the prior firm orders of the ultimate buyers in various places. The

documents further revealed that the stock transferred had been billed by the

branch in Pondicherry immediately on arrival in the exact quantity consigned

from Chennai and this reveals an attempt to evade tax under TNGST Act and

CST Act due to Tamil Nadu.



The Assessing Officer has placed reliance on Explanation 2 to Section 3

of the Central Sales Tax, 1956 (“the CST Act”) which reads as under:

3. xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx

Explanation 1: xx xx xx xx xx xx xx xx xx xx xx xx xx xxxx Explanation 2- Where the movement of goods commences andterminates in the same State it shall not be deemed to be amovement of goods from one State to another by reason merely ofthe fact that in the course of such movement the goods passthrough the territory of any other State.”

In the light of the above provision, it is observed by the Assessing Officer

that the goods which commenced journey from the factory premises of the

dealers at Chennai reached in the same lot at the premises of the ultimate buyers

via Pondicherry. Mere passage of the goods through Pondicherry without the

goods even being unloaded at Pondicherry or taken into stock by the Pondicherry

Branch to sell at its discretion, will not alter the basic characteristic of the

transaction as a local sale.

Vide the original Assessment Order dated 31.12.1997, the appellant was

assessed at a total and taxable turnover of Rs. 7,34,79,663/- and Rs. 9,02,000/-

respectively under the CST Act for the assessment year 1995-96. Relying on the

above freight bills and the evidence collected by the Enforcement Officer,

discussed above, the appellants were directed to produce copies of their stock

transfer invoices to Pondicherry, sales invoices raised at Pondicherry, copies of

lorry receipts for movement of goods from Tamil Nadu to Pondicherry and from

Pondicherry to the places of ultimate buyers in Tamil Nadu and other States.

The examination of the documents revealed that the goods stock transferred

from Tamil Nadu to Pondicherry as branch transfer were sold and dispatched in



the same lot, to the ultimate buyers in Tamil Nadu and other States and hence

the value of goods shown as branch transfers to Pondicherry from Chennai and

sales made to dealers in other States billed in the Pondicherry Branch in 1995-96

amounting to Rs. 1,37,25,247.00 were proposed to be assessed as inter-State

sales from Chennai to the places mentioned therein at 10% in the absence of ‘C’

‘D’ forms. Accordingly a notice was issued to the appellant for revision of the

assessment. The appellant was asked to submit objections, if any, against the

above proposal. The appellant raised several objections which were dismissed

by the Assessing Officer as untenable and by order dated 29.08.2000 the

Assessing Officer confirmed his proposal and re-determined the total and taxable

turnover of the appellant for the year 1995-96 under the CST Act as shown

below:

Taxable already determined in the proceedingsfirst cited taxed at 3.6%

: Rs. 902000.00

Add: Taxable turnover escaped assessment tothe Tax in the proceedings first cited taxable at10%

: Rs. 13725247.00

Taxable turnover redetermine Rs.14627247.00

Rs. 61078766.00

Add: Stock transfer to otherstate except to the Unionterritory of Pondicherry i.e.total stock transfer

Rs.72577663.00

Deduct

Stock transfer to the UnionTerritory of Pondicherry

Rs.11498897.00

Total turnover Rs.75706013.00



The taxable turnover is subjected to varying rate of tax as shown below:-

Taxable turnover Rate of tax Tax due

Rs. 902000.00 3.6% Rs. 32472.00Rs.13725247.00 10% Rs.1372525.00Total due Rs.1404997.00Paid Rs. 32472.00Balance Rs.1372525.00

Being aggrieved by this order, the appellant preferred CST / 156 / 2000

before the Appellate Assistant Commissioner who by his order dated 11.10.2002

allowed the appeal. Being aggrieved by order dated 11.10.2002, the State of

Tamil Nadu preferred appeal being Appeal No. 100/03 to the Tribunal. By order

dated 12.10.2012, the Tribunal partly allowed the said appeal. The appellant has

filed CST/10/2014 being aggrieved by the said order.

So far as assessment year 1996-97 is concerned, the appellant was

assessed vide original assessment order dated 06.06.1998 at a total and taxable

turnover of Rs. 11,62,28,830 and Rs. Nil respectively. When the above

mentioned incident of interception and evidence collected by the Enforcement

Officers were brought to the notice of the Assessing Authority, to find out whether

the appellant had adopted the same pattern for the entire stock transfer made to

Pondicherry, the appellant was directed to produce relevant record. The

Assessing Officer’s reassessment order dated 27.10.2000 discloses that

detailed examination of the stock transfer from Tamil Nadu to Pondicherry with

reference to the stock book of Pondicherry revealed that in almost all the cases,

the goods stock transferred from Tamil Nadu had been sold and dispatched in

the same lot to the ultimate buyers in Tamil Nadu and other States. The



Assessing Officer took note of the same two illustrative cases and other material

which was noticed in the reassessment order dated 29.08.2000. In the

circumstances, the value of goods shown as branch transfer to Pondicherry from

Chennai and sales made to dealers / others in other States billed in the

Pondicherry Branch in 1996-97 amounting to Rs. 16,02,264/- was proposed to be

assessed in the hands of the dealers as inter-State sales from Chennai to places

mentioned therein at 10% in the absence of C/D forms. A notice was issued to

the appellant accordingly for revision of the assessment. The appellant filed its

objections. The Assessing Officer rejected the objections and confirmed his

proposal and re-determined the turnover and tax liability under the CST Act as

under:

Details Turnover Rate Tax due

Exemption disallowed onvalue of goods shown asBranch transfer fromChennai to Pondicherryand sales made toDealers / others in otherStates, billed atPondicherry andassessed in the absenceof C/D Forms

16,02,264.00 10% Rs.160226/-

Taxable turnover to bere determined

10,86,29,370.00 Tax due Rs. 160226/-

Add exemption as stocktransfer restricted andallowed

16,02,264.00

10,86,29,370.00

Paid

Balance

Rs. Nil

Rs.160226/-

Total turnover re-determined

11,02,31,634.00



Being aggrieved by this order, the appellant filed CST No. 40/ 2001

before the Appellate Assistant Commissioner who by his order dated 11.10.2002

allowed the appeal. Being aggrieved by this order, the State of Tamil Nadu filed

STA 101/03 before the Tribunal. The Tribunal by its order dated 12.10.2012

partly allowed the said appeal. The appellant has filed CST/11/2014 being

aggrieved by the said order.

We must now go to the two assessment orders passed by the Assessing

office both dated 31.10.2000. Both relate to assessment period 1997-98. One

of them relates to the TNGST Act and the other relates to the CST Act. The

assessment order out of which CST/8/2014 arises relates to the TNGST Act and

the assessment order out of which CST/9/2014 arises relates to the CST Act.

We shall first turn to CST/8/2014. For the assessment period 1997-98,

the appellant reported total and taxable turnover of Rs. 68,80,831.00 under the

TNGST Act. The accounts of the appellant were called for and checked with the

following results.

Gross Sales related to Tamil Nadu : Rs. 70,36,697.32Less Sales return : Rs. 3,53,786.35Net sales : Rs. 66,82,928.97

The Assessing Officer has noted that out of sales returns of

Rs.3,53,758.35, the appellant claimed exemption only on a turnover of

Rs.1,29,286.00. The appellant did not claim exemption on a turnover of

Rs.2,24,502.35 as time barred. Therefore the total turnover of the appellant for

consideration under the TNGST Act was as follows:



Total sales (Tamil Nadu as peraccounts)

: Rs. 70,36,697.00

Less: 1) Sales return claimed : Rs. 1,29,266.002) CST Sales (Direct) : Rs. 26,800.00

Taxable turnover under TNGST Act : Rs. 68,80,631.00

The appellant claimed exemption on sales return for Rs. 1,29,266.00 for

which the appellant did not furnish details of credit notes issued by it. It was

therefore proposed to disallow the claim of exemption and to assess it at 4%.

Details of miscellaneous income need not be stated.

This assessment order dated 31.10.2000 also relates to interception of

lorry bearing no. TAN 8895 covering 40 barrels each containing 200 litres of

‘Fenvelerate’ of 20 EC at Kandamangalam Commercial tax checkpost on

09.07.1997 and the details of consignment gathered by the officers of the

department and the facts disclosed from the same, which are similar to what we

have reproduced hereinabove quoting from the reassessment order dated

29.08.2000 passed in revisional proceedings. The Assessing Officer made

similar observation that the stock started its onward journey from Tamil Nadu

against an existing order of a purchaser in Tamil Nadu but under the guise of

Deport transfer to Pondicherry they were sent to Pondicherry and from there they

were dispatched back to Tamil Nadu to comply with Tamil Nadu dealers

purchase order and motive behind this modus operandi was to avoid local taxes

under the TNGST Act. The Assessing Officer has referred to the same

inspection conducted by the Enforcement Officer at the business premises of the

appellant on 09.01.1998 and 10.01.1998 and the details gathered therefrom and

to the statement of Thiru Madhaven General Manager (Finance) of the appellant



who confirmed all the facts gathered by the Officers. The Assessing Officer has

also referred to the two illustrative cases which we have reproduced

hereinabove. Aggrieved by this order dated 31.10.2000, the appellant preferred

AP No. 101 of 2001 before the Appellate Assistant Commissioner.

On the same reasoning and in the same manner after rejecting the

objections of the appellant, the Assessing Officer by another order dated

31.10.2000 disallowed the claim of stock transfer to Pondicherry Branch from

Chennai and sales made to dealers in other States billed from Pondicherry

Branch in 1997-98, he also disallowed exemption on branch transfers to

branches in other States excluding Pondicherry. He assessed the appellant

finally for 1997-98 under the CST Act on taxable turnover determined at Rs.

2,78,90,022.00. Aggrieved by this order dated 31.10.2000 the appellant filed

CST No. 41 of 2001 before the Appellate Assistant Commissioner. The

Appellate Assistant Commissioner by a common order dated 11.10.2001

allowed both the appeals i.e. Appeal No. 101 of 2001 and Appeal No. 41 of 2001.

Being aggrieved by the order dated 11.10.2001 passed by the Appellate

Assistant Commissioner for the assessment year 1997-98 in respect of disputed

turnover of Rs. 4,12,18,506/- the State of Tamil Nadu preferred STA – 98/03 to

the Tribunal. Being aggrieved by the order passed by the Appellate Assistant

Commissioner for the assessment year 1997-98 in respect of disputed turnover

of Rs. 2,78,90,022.00 the State of Tamil Nadu preferred STA No. 99/2003 before

the Tribunal. The Tribunal by its order dated 12.10.2012 disposed of STA 98/03.

The applicant has preferred CST / 8 / 2014 challenging the said order. The



Tribunal by its order dated 12.10.2012 disposed of STA No. 99/03 along with

STA No. 100/2003 and STA No. 101/2003. The appellant has filed CST/9/2014

challenging order of the Tribunal dated 12.10.2012 to the extent it disposed of

STA 99/2003.

The journey of each assessment order upto this Authority could be

summarized for ready reference as follows-

The Tribunal by order dated 12.10.2012 disposed of STA No. 98/03 in

which assessment order dated 31.10.2000 in respect of assessment year

1997-98 covering disputed turnover of Rs. 4,12,18,506/- was challenged.

The said order is challenged in CST / 8 / 2014. The Tribunal by another

order dated 12.10.2012 disposed of STA No. 99/03 in respect of disputed

turnover of Rs. 2,78,90,022/- for the assessment year 1997-98, STA No.

100/03 in respect of disputed turnover of Rs. 1,37,25,247/- for the

assessment year 1995-96 and STA No. 101/03 in respect of disputed

turnover of Rs. 16,02,264/- for the assessment year 1996-97. The

appellant has filed CST / 9 /2014, CST / 10 /2014 and CST / 11/ 2014

respectively challenging the said orders of the Tribunal.

It is now necessary to go to the two orders of the Appellate Assistant

Commissioner which are in favour of the appellant and on which heavy reliance

is placed by the appellant’s counsel. We shall first refer to order dated

11.10.2001 by which the Appellate Assistant Commissioner has allowed Appeal

No. 101 of 2001 and Appeal No. 41 of 2001 filed by the appellant. The reasoning

of the Appellate Assistant Commissioner could be summarized as follows:-



The Appellate Assistant Commissioner held that the appellant has raised

stock transfer note only to the Pondicherry Branch and the delivery

challans and declaration in Form XX were also issued to the branches

directly and the payments of lorry freight were made for the transport of

goods from Tamil Nadu to Pondicherry. The Pondicherry Branch in turn

has accounted for the receipt of goods and it has sold the same to the

customers as local sales. It has also sold the same to other States

according to the orders received by it. The Appellate Assistant

Commissioner further held that the Assessing Officer as well as the

Enforcement Wing officials have not proved any conceivable link between

the movement of goods and the delivery of the goods to the ultimate

purchaser. Relying on the judgment of the Madras High Court in Deputy

Commissioner (CT) Madras (South) Division, Madras-1 vs. Kalpana

Lamp Components Pvt. Ltd and the judgment of Sales Tax Appellate

Tribunal (MB) in the State of Tamil Nadu v. Jindal Steel Agencies in

S.T.A. no. 785/2000 dt. 30.10.2001, the Appellate Assistant Commissioner

held that if the goods are transported in the same lorry and sold on the

same day, that cannot be construed as inter-State sales in the absence of

any conceivable link between the movement of goods and delivery of the

goods at the other end. Relevant paragraph of the judgment reads as

under:

“ Thus, the Hon’ble Sales Tax Appellate Tribunal (Main Branch) inTA. No. 176/98 and 236/98 has held that the goods transported inthe same lorry and sold on the same day cannot be construed asinter-state sales in the absence of any conceivable link between the



movement of goods and the delivery of the goods to the customersat the other end and the Hon’ble Sales Tax Appellate Tribunal(M.B.) has also held that the Department should produce thedocumentary evidences to prove that the goods have moved basedon the prior orders. The Assessing Officer or the EnforcementWing officials have not produced any documents or records toshow that there is a conceivable link between the movement ofgoods and the delivery of the goods to the ultimate purchaser. ThePondicherry Branch has independently acted on their own and thegoods were received from Chennai in the regular course of stocktransfer and the same were sold to the local Pondicherry customersand to the customers of Tamil Nadu and also to the customers ofother States. In view of the above the disallowance of exemptionand the assessment made by the Assessing Officer on the entireturnover under both the Acts for the year 1997-98 cannot besustained. Therefore the assessment made on the turnover of Rs.4,12,18,506/- and Rs. 2,78,90,022/- under TNGST and CST Actsrespectively are set aside.”

Similar is the reasoning of the Appellate Assistant Commissioner’s order

dated 11.10.2002 by which he has disposed of CST 156/2000 and CST 40/2001.

Before we go to the rival contentions it is necessary to mention that we are

not concerned here with the issue of penalty. Counsel for the parties have

confirmed this fact. We need not therefore go into that aspect of the matter.

Mr. B. Raveendran, Learned Counsel for the appellant has attacked the

impugned orders on various counts. Written submissions have also been filed by

the appellant. It is urged on behalf of the appellant that so far as the assessment

periods 1995-96 and 1996-97 are concerned original assessment was done.

Form F declarations were accepted and the transactions were treated as branch

transfers to Pondicherry and exemption was granted under section 6-A of the

CST Act. Relying on M/s Ashok Leyland (Ashok Leyland-II)1 and M/s Steel

1 134 STC 473



Authority of India Ltd.2, it is submitted that the deeming fiction and conclusive

presumption under section 6-A(2) of the CST Act having come into play it was

not open to the Revenue to re-open the concluded assessment and make

reassessment. It is urged that reassessment proceedings could be initiated on

grounds of fraud, collusion, misrepresentation and willful suppression of facts.

Such is not the case here. It is further submitted that it was not open to the

Assessing Officer to disallow the transactions pertaining to transfer of goods to

Pondicherry in their entirety on the basis of single transaction. Relying on M/s

Siddhartha Apparels3, M/s Indus Steel and Alloys4 and M/s Atlantic Foods5,

it is urged that disallowance should be affirmed only upto the date of inspection.

For the subsequent periods, the exemption under section 6-A of the CST Act

should have been allowed. The fact that the goods which commenced journey

in lorry No. TAN-8895 reached Pondicherry Branch in the same lorry is not

disputed. However relying on the Madras High Court judgment in M/s

Associated Cement Companies Ltd. 6 , it is urged that if the goods were

transported without unloading at Pondicherry to a customer in Tamil Nadu no

inference can be drawn that it is an inter-State sale, because such a mode is

adopted to save expenses towards loading and unloading and cost of providing

storage space. It is also urged that tax planning as opposed to tax evasion has

legal sanction. Relying on Madras High Court judgment in V.N. Narasimhan7

2 (2007) 10 VST 4513 13 VST 2224 18 VST 5465 21 VST 3116 23 VST 4867 AIR 1961 Madras 504



and in Bank of Chettinad Ltd.8, it is submitted that there is no legal impediment

in a party adopting a particular form of transaction to minimize the expenses. It is

submitted that this is exactly what has been done by the appellant and hence the

appellant should not have been subjected to such treatment. It is submitted that

in the circumstances, the impugned orders deserve to be set aside.

Ms. Rama Ahluwalia, Ld. Counsel for the State of Maharashtra has filed

written submissions. Counsel reiterated the said submissions. Counsel

submitted that the appellant’s F-Forms for the Assessment Years 1997-98, 1995-

96 and 1996-97 have been wrongly rejected disallowing the appellant’s branch

transfer claim. Counsel submitted that prior to 31.03.2010 the scope of the

Assessing Authority’s jurisdiction and powers was limited only to examining

whether the particulars contained in Form – F were true or not. After the

amendment of Section 6A(2) of the CST Act effective from 08.05.2010 the scope

of inquiry was expanded empowering the Assessing Authority not only to verify

the correctness of Form-F but also to verify the transaction to check if inter-State

sale had actually taken place. Counsel submitted that the Assessing Authority

therefore lacked jurisdiction to go behind Form-F and disallow the branch transfer

transaction on the ground that the appellant had wrongly shown inter-State sales

as branch transfer in order to evade tax. Counsel submitted that the goods in

question are not special or specific goods designed for any specific buyer and

few instances and statements recorded during the course of investigation /

inquiry cannot be a sufficient ground to hold that the transactions in question are

8 1940 (8) ITR 522



inter-State sales. Counsel submitted that there is no direct delivery of the goods

to the buyers and merely because goods are sold within a day or two by the

Branch Office that cannot be treated as an indication of movement of goods

pursuant to pre-existing contract. Counsel submitted that by virtue of Section 4

of the CST Act, the transactions are local sales in the other States and the State

of Tamil Nadu has no power to impose tax under the CST Act. Counsel

submitted that in the circumstances, the impugned orders deserve to be set

aside.

Mr. K.V. Vijayakumar, Learned counsel for the State of Tamil Nadu has

strenuously opposed the submissions of the appellant’s counsel. Counsel

submitted that the appellant has admitted the mode of transactions. The case of

the appellant that this mode was adopted for tax planning and not for tax

avoidance deserves to be rejected. Counsel submitted that the Assessing

Officer has scrutinized the available material in depth and come to a right

conclusion that local sales within Tamil Nadu and inter-State sales from Tamil

Nadu have been camouflaged as stock transfers. The Tribunal in well reasoned

orders has confirmed this conclusion. It does not deserve to be disturbed. In

support of his submissions, Counsel has taken us through the counter-affidavit

filed by Joint Commissioner (CT), Chennai (North) Division, Greams Road,

Chennai. Counsel urged that the appeals be dismissed.

It may be stated here that the Union Territory of Pondicherry (Respondent

No. 5 ) was initially represented by Mr. V.G. Prakasham. However, no counter-

affidavit was filed on behalf of the Union Territory of Pondicherry. No one



appeared for this respondent thereafter. Hence by order dated 17.05.2018, it

was directed that the Union Territory of Pondicherry be proceeded against ex-

parte. The States of Karnataka, West Bengal and Andhra Pradesh have also not

filed any counter-affidavits.

From the submissions of the appellant one thing is clear that the appellant

has not disputed the manner in which the goods have moved from Tamil Nadu to

Pondicherry and from Pondicherry to Tamil Nadu and other States. The

appellant has admitted that same lorry was used. The appellant’s case is that a

party can always select and adopt a particular form of transaction to minimize the

expenses and there is no legal impediment obstructing the party from doing so.

A party can always plan its transaction in such a manner that it pays less tax.

There is no tax evasion in such a case. In our opinion, if the appellant’s case

was so simple and innocuous as that there was no need for the Assessing

Officer to start revisional proceedings and reassess the appellant or pass

assessment orders disallowing branch transfer claim. For the reasons we shall

now state it is not possible to hold that this is a case of simple tax planning.

We have at some length discussed the reassessment order dated

29.08.2000 passed in respect of the assessment year 1995-96, because it is the

base of all the assessment orders and also because the same material gathered

by the Enforcement Officers and the same illustrative cases which are referred to

in this order are referred to in other assessment orders. The reasoning is similar

in all the assessment orders.



We will therefore focus on reassessment order dated 29.08.2000. This

order discloses in-depth analysis of the material and the legal provisions by the

Assessing Officer. The Assessing Officer has discussed the material gathered

during inspection of the appellants premises such as transport documents and

checkpost records. The Assessing Officer on examination of these documents

found that the movement of goods commenced at Chennai and terminated only

at the place of the ultimate buyers in Tamil Nadu and the goods were carried

mostly in the same vehicle from Chennai to the place of buyers. The bills

appeared to have been raised in the Branch Office at Pondicherry immediately

on arrival of vehicles at the branch and the goods were sold immediately in the

same quantity and in the same lot generally on the same date on which they

were received from Head Office at Chennai in the same lorry driven by the same

driver. The goods were never unloaded at the Branch Office at Pondicherry.

They were not stocked there, but they moved from Chennai based on prior

orders of the buyers in Tamil Nadu and other States. The ultimate destinations

of buyers were known to the appellant at the time of commencement of the

movement of goods at Chennai. This mode of operation came to light from

Freight Bills read with Consignment Notes to which reference is made in the

assessment orders. The Tribunal has also dealt with it in its orders. We may

quote relevant paragraph of the reassessment order dated 29.08.2000. That will

show the application of mind of the Assessment Officer.

15. Thus, the verifications of records referred to above such as stocktransfer invoices, sales invoices made at Pondicherry, transfer documentsetc. revealed the following position.



i. The movement of goods commenced at Chennai andterminated only at the place of the ultimate buyers;

ii. The goods were mostly carried in the same vehicle fromChennai to the places of the buyers;

iii. Bills were appeared to have been raised in the Branchimmediately on arrival of vehicles in the Branch;

iv. The goods were sold immediately in the same quantity andsame lot generally on same date as received from the Headoffice;

v. The goods were never unloaded at the Branch and were notstocked there;

vi. The movement must have commenced from Chennai basedon prior orders of the buyers in Tamilnadu and other states,as seen from the pattern of transactions as evidenced by therecords maintained by the dealers themselves.

In our opinion from the available record the Assessing Officer has rightly

concluded that the appellant has circuitously transferred the goods to their

already identified purchasers in various places in Tamil Nadu and other States

via Pondicherry so as to evade payment of tax. The Assessing Officer has

further rightly concluded that in the scheme of supplying the goods to customers

in Tamil Nadu and other States, the intervention of the Pondicherry Branch is

only as a conduit as evidenced by the transport records and the Stock Register

maintained at Pondicherry. It is pertinent to note that the Assessing Officer took

note of the fact that the appellant did not produce even a single purchase order

placed by any customer on its Pondicherry Branch and held that the appellant’s

contention that Pondicherry Branch independently received orders and executed

them is contrary to facts.



We have also noted that the Assessing Officer has rejected on sound

grounds the submission of the appellant that though the same lorry was used to

dispatch the goods from Tamil Nadu to Pondicherry and from Pondicherry to the

places of the ultimate buyers, the dispatches are of different character with

different GC Notes / lorry receipts covering them for the two dispatches. It is

observed that this claim has been disproved by the fact that on many occasions

the lorry receipts for the movement of the goods from Chennai to Pondicherry to

the places of ultimate buyers bore consecutive serial numbers of the same

transporter based in Chennai and when such a consignment was detained at

Kandamangalam Checkpost the driver of the vehicle deposed before the

Checkpost Officer that the goods detailed were the very same consignment

transported by him during the early hours of the same day from Chennai to

Pondicherry; that on arrival at Pondicherry the branch incharge informed that the

consignment has to be delivered to a party at Coimbatore who had already

placed an order and that the branch incharge handed over a set of documents for

movement from Pondicherry to Coimbatore, prepared in advance by him. It is

rightly concluded that the very fact that the branch incharge at Pondicherry had

prepared documents in advance for movement of goods from Pondicherry to

Coimbatore clearly proves that even at the time of dispatch from Chennai the

goods are earmarked for delivery to a customer at Coimbatore and the

movement of the goods to Pondicherry en route Coimbatore is only a make

believe interpolation to make it appear that there were two transactions i.e. one

dispatched from Chennai to Pondicherry and the other from Pondicherry to



ultimate buyers. It is further rightly observed that the appellants claim that the

dispatches from Chennai are not intended for ultimate buyers but only to their

own branch at Pondicherry is disproved by the fact that the goods were

transported in the same lorry from Pondicherry to the ultimate buyers without

being unloaded at Pondicherry. Note is also taken of the fact that the appellant

has not controverted the glaring circumstance that the transporter has charged

one single composite freight for the movement of the consignment from Chennai

to the place of destination of the ultimate buyers albeit through Pondicherry.

Significantly it is observed by the Assessing Officer that the above instance is

cited only as an addition to the other corroborative evidences and the payment of

freight by the Chennai Branch alone is not the basis for rejecting the stock

transfer claim made by the appellant. Thus it is clear that the Assessing Officer

has not merely relied on the illustrative cases cited in the order but has

considered voluminous corroborative evidence. There is intrinsic evidence of

application of mind in the lucid and reasoned order of the Assessing Officer.

We have already quoted Explanation 2 to Section 3 of the CST Act.

Having regard to the said provision, the Assessing Officer has rightly concluded

in the circumstances of the case that wherever it is established that the goods

shown as stock transfer from Chennai to Pondicherry were ultimately delivered

to a customer within Tamil Nadu such sales are to be treated as local sales in

Tamil Nadu and wherever the goods were ultimately delivered to customer

outside Tamil Nadu such sales are to be treated as inter-State sales from Tamil

Nadu. Mere passage of goods through Pondicherry will not alter the basic



character of the transactions. We find no substance in the contention that the

Assessing Officer has made a bald statement about the goods having been

dispatched to ultimate buyers in Tamil Nadu and other States. We have no

reason to disbelieve the statement made by the Assessing Officer that detailed

examination of the stock transfers from Tamil Nadu to Pondicherry with reference

to the stock book of Pondicherry revealed that in almost all the cases, the goods

stock transferred from Tamil Nadu have been sold and dispatched in the same

lot to the ultimate buyers in Tamil Nadu and other States.

We also find no substance in the submission of the appellant that the

Assessing Officer had disallowed the transactions pertaining to transfer of goods

to Pondicherry on the basis of a single transaction. It bears repetition to state

that the Assessing Officer has seen the entire voluminous record recovered by

the Enforcement Officers from the appellant’s business premises and the

illustrative cases and having found that the appellant has adopted a particular

modus operendi to evade tax he has disallowed the stock transfer claim. In

Hyderabad Engineering vs. State of Andhra Pradesh9 similar contention was

rejected by the Supreme Court noting that the view expressed by it in TELCO

Ltd. v. CCT10 that the Assessing Officer is expected to look into each transaction

in order to find out whether a completed sale had taken place which could be

brought to tax under section 3(a) of the CST Act, was not applicable to that case

because the Assessing Officer had not picked up a stray transaction to hold that

the transactions in question were inter-State sales but had looked into

9 (2011) 4 SCC 70510 (1970) 1 SCC 622



voluminous record and correspondence and correlated them to prove on facts

that the transactions are inter-State sales. In our opinion these observations are

attracted to the facts of this case.

It was submitted that since the appellant has filed Form F declarations the

deeming provision contained in Section 6-A(2) of the CST Act will spring in action

and the movement of goods to which the Form F declarations relate shall be

deemed to have been occasioned otherwise then as a result of sale. It is urged

that conclusive presumption contained in Section 6-A(2) of the CST Act having

come into force, the Assessing Officer could not have reopened the concluded

assessments which could be reopened only on limited grounds of fraud,

collusion, misrepresentation and willful suppression of facts as laid down by the

Supreme Court in Ashok Leyland (II) which is not the case here.

It is not possible to accept this submission. The reassessment order

dated 29.08.2000 provides answer to this submission. It is clear from the order

that the Assessing Officer was alive to the legal position and effect of filing of

Form F declarations by the assessees. This is what he has studied.

“It is true that once Form-F declaration is filed by the dealers, the scope ofenquiry before the assessing authority is to find whether the particularsfurnished in the Form-F are true and for this purpose the assessingauthority may make any enquiry he deems fit. The crucial factor to benoted here is that the purpose of such enquiry is not to find whether theparticulars in the Form-F are correct but to find whether the particulars aretrue. Precisely for this purpose alone the assessing authority has calledfor and verified the stock transfer invoices from Chennai, the LRs for themovement of the goods, the stock book of the Receiving Branch at Pondyand the sales invoices at Pondy. Only after such examination theassessing authority came to the inescapable conclusion that in thescheme of supplying the goods to customers in Tamilnadu and other



States, the intervention of the Pondicherry Branch is only as a conduit asevidenced by the transport records and the Stock Register maintained atPondy. This is further substantiated by the fact that the dealers have notproduced even a single purchase order placed by any customer on theirPondy Branch. Even, if such P.O. existed, in as much as the Branch isonly the arms of the H.A. at Madras and it had no independent identity andorder on the Branch is nothing but an order on the Company at Chennai.

Thus it is clear that the Assessing Officer had called for and verified the

stock transfer invoices from Chennai, the lorry movement of the goods, the Stock

Book of the Receiving Branch at Pondicherry and sales invoices raised at

Pondicherry and after such examination he came to the inescapable conclusion

that in the scheme of supplying the goods to customers in Tamil Nadu and other

States, the intervention of Pondicherry Branch is only a conduit. Thus the

Assessing Officer conducted an inquiry and passed an order recording a definite

finding that the F Form declarations are not dependable. It is well settled that no

particular form of enquiry is necessary. The Assessing Officer can devise his

own procedure and he may pass an order before the assessment or along with

the assessment as stated by the Supreme Court in Ashok Leyland(II). We may

also quote relevant observations of the Kerala High Court in CPK Trading

Company vs. Additional Sales Tax Officer11 which are quoted with approval

by the Supreme Court in Ashok Leyland(II)-

“A plain reading of Section 6-A(2) of the Central Sales Tax Act pointsout that in cases where the dealer exercises the option of furnishingthe declaration (F forms), the only further requirement is that theassessing authority should be satisfied, after making such enquiry, ashe may deem necessary, that the particulars contained in thedeclaration furnished by the dealer are ‘true’. The scope or frontiersof enquiry, by the assessing authority under Section 6-A(2) of the

11 1990 76 STC 211 Ker.



Central Sales Tax Act is limited to this extent, namely, to verifywhether the particulars contained in the declaration (F forms)furnished by the dealer are ‘true’. It means, the assessing authoritycan conduct an enquiry to find out whether the particulars in thedeclaration furnished are correct, or dependable, or in accord withfacts or accurate or genuine. That alone is the scope of the enquirycontemplated by Section 6-A (2) of the Act. On the conclusion ofsuch an enquiry, he should record a definite finding, one way or theother. As to what should be the nature of the enquiry, that can beconducted by the assessing authority under Section 6-A(2) of the Act,is certainly for him to decide. It is his duty to verify and satisfy himselfthat the particulars contained in the declaration furnished by thedealer are ‘true’. As a quasi-judicial authority, the assessing authorityshould act fairly, and reasonably in the matter. During the course ofthe enquiry, under Section 6-A (2) of the Act, it is open to him torequire the dealer to produce relevant documents or other papers ormaterials which are germane or relevant, to find whether theparticulars contained in the declaration (F forms) are ‘true’. It is notpossible to specify the documents or other materials or papers thatmay be required, to be furnished in all situations and in all cases. Itdepends upon the facts and circumstances of each case. The powervested in the officer is a wide discretionary power, to find, whether theparticulars contained in the declaration (F forms) are ‘true’. It is notpossible or practicable to lay down the exact documents or materialsthat may be required in all the cases, by the assessing authority, tocome to a proper and just finding as required by Section 6-A(2) of theAct.”

It is clear therefore that the Assessing Officer has after due enquiry

rejected the Form F declarations. No fault could be found with reassessment

because the appellant has misrepresented the facts. The documents recovered

by the Enforcement Officers from the appellant’s business premises disclosed

that the appellant had camouflaged direct sale of goods as consignment sales

and availed of the benefit of exemption under Section 6-A of the CST Act. The

goods were purposely circuitously moved through Pondicherry Branch which

acted as a conduit. The instant case is therefore clearly covered by the



exceptions carved out in Ashok Leyland(II) where concluded assessment can

be reopened.

Counsel for the appellant has relied on several judgments in support of his

submission that merely because the same lorry was used by the dealer for

transporting the goods or because the goods were sold on the same day or

because the goods were not unloaded at the branch and directly taken to the

buyer it cannot be concluded that there was inter-State sale. This is also done to

save expenses. It is not possible to accept this submission. The judgments cited

by the appellant turn on their own peculiar facts. In this case the record belies

the appellant’s case. Several circumstances noted by the Assessing Officer

prove to the hilt that the appellant projected inter-State sales as stock transfers.

The appellant clearly attempted to avoid tax under the TNGST Act and under the

CST Act due to Tamil Nadu. We are entirely in agreement with the Assessing

Officer’s view expressed in his well-reasoned orders. Unfortunately the Appellant

Assistant Commissioner overlooked vital aspects and core issues of the matter

and reversed the Assessing Officer’s orders. The Tribunal has, however,

examined the contentions of the parties, verified them with the records and

confirmed the Assessing Officer’s view. The Tribunal has concluded that there is

sufficient evidence on record to establish that a conceivable link is established

between the movement of goods and the buyer’s contract and the interposition of

an intermediary branch at Pondicherry will not alter the character of the

transactions. We concur with the Tribunal because its conclusion is in line with



the following observations of the Supreme Court in English Electric Co. v.

Deputy Commercial Tax Officers and Others12-

“16…… …. If there is a conceivable link between the movements ofthe goods and the buyer’s contract , and if in the course of inter-State movement the goods move only to reach the buyer insatisfaction of his contract of purchase and such a nexus isotherwise inexplicable, then the sale or purchase of the specific orascertained goods ought to be deemed to have been taken place inthe course of inter-State trade or commerce as such a sale orpurchase occasioned the movement of the goods from one State toanother. The presence of an intermediary such as the seller’s ownrepresentatives or branch office, who initiated the contract may notmake the matter different. Such an interception by a known personon behalf of the seller in the delivery State and such person’sactivities prior to or after the implementation of the contract may notalter the position.”

Counsel for the State of Maharashtra has supported the appellant’s case.

Her submissions are similar to those of the appellant. Since we have rejected

the appellant’s submissions the submissions of the State of Maharashtra are also

rejected.

In the view that we have taken the appeals are liable to be dismissed and

are accordingly dismissed.

Sd/-(Justice Ranjana P. Desai)

Chairperson

Sd/-( Ramayan Yadav )

Member (Law)

12 (1976) 4 SCC 460