bHARATJI_aGARWAL.pdf

8/20/2019 bHARATJI_aGARWAL.pdf

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TAB BAR ASSOCIATION , UTTARAKHAND 1

PRACTICAL ASPECTS OF SUBSEQUENT SALES UNDER SECTION 6(2) OF

CST ACT

BY

BHARATJI AGARWAL

SENIOR ADVOCATE

On the question as to whether subsequent sales under Section 6(2) of Central SalesTax Act, which are effected by transfer of document of title during the movement ofthe goods from one state to another, has been subject matter of controversy indifferent set of facts by different Departmental Authorities of the States whether it is

State of U.P., State of Orissa, State of Haryana, State of Assam or any other State,the various issues have arisen in different set of facts by taking the view which is notin accordance with the provisions of Central Sales Tax Act.

Much confusion has been created in the minds of the Departmental Authorities inview of the observations which have been made in few judgments, withoutappreciating the entire set of facts.

Hence, I am taking some practical aspects of subsequent sales under Section 6(2) ofthe Central Sales Tax Act by giving few examples which occasionally arose whiledeciding the question of exemption of subsequent sales under Section 6(2) of theCentral Sales Tax Act.

Example :

A Company, who is a purchaser, has two branches – one at Agra and the other atKanpur.

U.P. Purchaser places an order on Orissa seller for which invoice is raised in thename of Company of U.P. The Invoice was raised by the Orissa seller in the name ofthe company‗s branch of Kanpur, in which Central sales tax @

2% was charged against Form-C. The destination was shown as Karnal, for whichthe Orissa seller‘s Bill No. was also mentioned.

In the Challan-cum-invoice of the Orissa seller, it was mentioned as E-1 sale -

Karnal party address, District Karnal whose TIN number etc. was also mentioned.

The goods were sent by truck, for which the GR was prepared by TransportRoadways of Orissa, in which the destination was shown as Karnal, even though theconsignor was shown as the Orissa seller and consignee was shown as thecompany‘s branch of Kanpur.

During the movement of goods from Orissa to Karnal, the document of title, namely,GR was endorsed by the company with the following endorsement:—

“Entire Material of this GR/LR sold through Document Transit Sale. Covered with “E -1 & C “Forms to M/s. Karnal Dealer, Karnal, Haryana“.

After the material was sold during the movement of goods from one State toanother, the company‘s Kanpur branch issued its own invoice in respect of the sales


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made during the movement of goods from Orissa to Karnal and obtained 'E-1' formfrom the Orissa seller and ‗C‘ form from the purchasing Karnal dealer.

On the basis of the entry in the stock register of Kanpur branch, it is presumed bythe department that the delivery of the goods has been taken by the company andthereafter it has been sold to Karnal dealer.

The Commercial Taxes department also raised an objection that in the invoice of the

Orissa seller, the name of the Karnal purchaser should not have been mentioned.

Relevant Provisions of Central Sales Tax Act

Section 3 and Section 6 of the Central Sales Tax Act are very relevant which arebeing reproduced hereinbelow. Section 3 of the Central Sales Tax Act provides asfollows:

“3. When a sale or purchase of goods said to take place in the course of inter Statetrade or commerce - A sale or purchase of goods shall be deemed to take place inthe course of inter-State trade or commerce if the sale or purchase -

(a) occasions the movement of goods from one state to another; or

(b) is effected by a transfer of documents of title to the goods during theirmovement from one State to another:

Explanation 1- Where goods are delivered to a carrier or other bailee fortransmission, the movement of the goods shall, for the purposes of clause (b), bedeemed to commence at the time of such delivery and terminate at the time whendelivery is taken from such carrier or bailee.

Explanation 2 - Where the movement of goods commences and terminates in thesome State it shall not be deemed to be a movement of goods from one State toanother by reasons merely of the fact that in the course of such movement the

goods pass through the territory of any other State. ” The charging section underCentral Sales Tax Act is section 6 which provides as follows:-

―6. Liability to tax on inter-State sales –

(1) Subject to the other provisions contained in the Act, every dealer shall, witheffect from such date as the Central Government may, by notification in the officialGazette, appoint, not being earlier than thirty days from the date of suchnotification, be liable to pay tax under this Act on all sales of goods other thanelectrical energy effected by him in the course of inter-State trade or commerceduring any year on and from the date so notified; Provided

(1-A) ..... ..

(2) Notwithstanding anything contained in subsection

(1) or sub-section (1-A) where a sale of any goods in the course of inter-State tradeor commerce has either occasioned the movement of such goods from one State toanother or has been effected by a transfer of documents of title to such goodsduring their movement from one State to another; any subsequent sale during suchmovement effected by a transfer of documents of title to such goods to a registereddealer, 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 subsequent sale shall be exempt from tax under this sub-section

unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as thatauthority may, for sufficient cause, permit.


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(a) A certificate duly filled and signed by the registered dealer from whom the goodswere purchased containing the prescribed particulars in a prescribed form obtainedfrom the prescribed authority; and

(b) If the subsequent sale is made to a registered dealer, a declaration referred to insub-section

(4) of section 8.”

In view of Section 6(2) of the Central Sales Tax Act, the subsequent sales madeduring the movement of goods from one State to another by transfer of document oftitle to a registered dealer shall be exempt from payment of tax under Central SalesTax Act.

In case Form E-1 is obtained by the company of U.P. from the Orissa seller andForm-C is obtained by the company of U.P. from the Karnal purchaser, than itssubsequent sale shall not be liable to tax provided delivery has not been taken inU.P. by the company of U.P.

Emphasis in Section 6(2) is on the words ―subsequent inter-State sale during the

movement of goods from one State to another‖ by ―transfer of document of title‖. Objections of Department and case of A & G Projects

An objection was taken by department that in the invoices of Orissa seller the nameof the Karnal purchaser should not have been mentioned and the said objection hasbeen taken on account of a decision of the Apex Court in the case of A & G Projectsand Technologies v. State of Karnataka reported in 2009 VST (19), page 239.

The Hon‗ble Apex Court without noticing the earlier judgment of Supreme Court inthe case of G. A. Goliakotwala & Co. (P) Ltd. v. The State of Madras reported in 37STC page 536 has observed in the case of A & G Projects & Technologies Ltd. v.State of Karnataka reported in 2009 Vol. 19 VST page 239 that section 3(b) shallapply where the contract has come into existence only after thecommencement and before termination of inter-State movement. Someconfusion has been created in the minds of some of the Departmental Authoritiesbecause of this observation which was made in a different context altogether.

Analysis of A & G Projects case

The case of A & G Projects & Technologies Ltd. v. State of Karnataka was decidedpurely on the facts of that case. The Supreme Court in fact was not concerned withsection 6(2) of the Central Sales Tax Act. The case was very limited for deciding thequestion as to which State has jurisdiction to impose the tax in respect of inter-State

sale.Section 3(b) requires that sale is to be effected by transfer of document of title tothe goods after the commencement of movement of goods and before terminationand it docs not require that the contract should come into existence after thecommencement or before termination of the movement of the goods.

Different facts and different controversy in the

case of A & G Projects

In the case of A & G Projects & Technologies Ltd., three independent contracts wereawarded to A & G Projects —

(1) For supply of Capacitor Banks.(2) For execution of civil works, and


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(3) For erection and commissioning of Capacitor Banks at various Sub-Stations ofKarnataka Power Corporation Ltd. Pursuant to these contracts. A & GProjects arranged M/s. Baywest for procuring the equipment who had priorarrangements with the manufacturer of the said equipment.

Thus, there were three contracts – one between A & G Projects and KPTC forsupply of equipment, second was between A & G Projects and M/s. Baywest for

procurement of the equipments and the third was between M/s. Baywest and themanufacturer.

The Court treated all the three contracts under section 3(a) of the Central Sales TaxAct because the movement of the goods started front State of Tamil Nadu inpursuance of the prior contract to State of Karnataka and the case was decided withreference to section 9(1) of the Central Sales Tax Act.

The Hon‘ble Apex Court in A & G Projects case has held as follows:

“Analysing section 6(2), it is clear that sub-section (2) has been introduced inSection 6 in order to avoid the cascading effect of multiple taxation. A subsequent

sale falling under sub-section (2), which satisfies the conditions mentionedin the proviso thereto is exempt from tax as the first sale has been subjected to tax under sub-section

(1) of Section 6 of the CST Act, 1956. Thus, in order to attract section 6(2), it isessential that the concerned sale must be a subsequent inter-State sale effected bytransfer of document of title to the goods during the movement of the goods fromone State to another and it must be prescribed by a prior inter-State sale. It is onlythen that section 612) may be attracted in order to make such subsequent saleexempt from levy of sales tax. However, the proviso to sub-section (2) of section 6 prescribes further conditions and it is only on fulfilment of those conditions

that the subsequent sale stands exempted. If those conditions are not satisfied then, notwithstanding the fact that the sale is a subsequent sale,the exemption would not be admissible to such subsequent sales.This is thescheme of section 6 of the CST Act, l 956."

The observation of the Hon„ble Apex Court at page 247 which has raised acontroversy is as follows:–

“The dividing line between sales or purchases under section 3(a) and those fallingunder section 3(b) is that in the former case the movement is under the contractwhereas in the latter case the contract comes into existence only after thecommencement and before

termination of the inter-State movement of the goods." The Hon‟ble Apex Court wasonly concerned with the limited issue of deciding as to the appropriate State entitledto collect tax under section 9(1) of the CST Act when the sales were admittedlycovered by section 3(a) and the case was decided upon admitted facts, asmentioned by the Assessing Authority. Neither the case was argued nor decided withreference to section 6(2) of the Central Sales Tax Act. Hence, the observations madeat page 247 of Volume 19 VST cannot be treated as the decision of the Apex Court.

Requirements of Section 6(2) of Central Sales Tax Act

The conditions of Section 6(2) which are required to be seen and fulfilled for

claiming the exemption are as follows-The conditions of Section 6(2), which are required to be seen and fulfilled are asfollows: -


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(i) First sale should either be under section 3(a) or a sale under Section 3(b) of theCentral Sales Tax Act;

(ii) The second or subsequent sale has to be a sale under section 3(b); (m) Thesubsequent sale has to be made to a registered dealer;

(iv) The goods should be of a description referred to in section 8(3) of the CST Act;

(v) Form E-l has to be obtained from the selling dealer which is to be furnished bythe dealer effecting the subsequent sale by transfer of documents of title; and

(vi) Form „C‟ has to be obtained from the purchasing registered dealer; which has tobe furnished by the registered dealer effecting the subsequent sale, to the Assessing Authority.

Apart from these conditions, there are no other conditions which are required to befulfilled for claiming the benefit of exemption under section 6(2) of the Central SalesTax Act, as held by Division Bench of Hon‟ble Delhi High Court in the caseof Mitsubishi Corporation India Pvt. Ltd. v. Value Added Tax Officer, which isreported in 2010 Vol. 34 VST, page 417.

Earlier Judgments

In this connection, I rely upon a judgment of Hon‟ble Supreme Court in the case ofG. A. Galiakotwala & Co. (P) Ltd. v. The State of Madras, reported in 37 STC page536. In the said case Hon„ble the Supreme Court was concerned with the question ofthe transaction having been effected by transfer of document of title during inter-State movement in as much as the assessee had instructed the Bombay seller tosend the goods directly to the buyer of the dealer. The department case was thatthe dispatch of the goods by the Bombay seller to the buyers of

the assessee should be treated as inter-State sale under Section 3(a) and, therefore,section 6(2) will not be applicable.

Hon‟ble Apex Court while repelling the contention of the Department regardingapplicability of section 3(a) of the Central Sales Tax Act has observed as follows:–

“ ..... ..The mere fact that the goods were consigned by the Bombay seller to thebuyer mills as per the directions of the assessee will not make the transactions inter-State sales which have occasioned the movement of the goods.... “

Accordingly the Hon„ble Apex Court has held that the First sale by the Bombay sellerto the assessee is covered under section 3( a) while the second sale made by theCompany to its buyer by transfer of document of title is covered under section 3(b)of the Central Sales Tax Act. The Hon‟ble Apex Court has held as follows:–

“We are, therefore, of the view that the sale by the seller of Bombay to the assesseealone should be treated as an inter-Stale sale coming under section 3(a) and thesubsequent sale in respect of the same goods by the assessee to the buyer-millscannot be a sale under section 3(a) as it is not possible to say that the said sale is itsale under section 3(a), it could only be a sale under section 3(b). Even otherwiseon the facts we have to hold that there has been a transfer of documents of title bythe assessee to the buyer-mills during the inter-State movement of the goods. Oncethe assessee‟s sales are taken as coming under section 3(b), the jurisdiction of theMadras State to assess the transactions cannot be challenged.”

Section 6(2) specifically provides that the subsequent sale made during the

movement of goods from one State to another by transfer of documents of title to aregistered dealer shall be exempt from payment of tax under Central Sales Tax Act.Section 6(2) including the first proviso is reproduced below:–


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“6. Liability to tax on inter -State sales – (1) Subject to the other provisionscontained in the Act, every dealer shall with effect from such date as the CentralGovernment may, by notification in the official Gazette, appoint, not being earlierthan thirty days from the date of such notification, be liable to pay tax under this Acton all sales of goods other than electrical energy effected by him in the course ofinter- State trade or commerce during any year on and from the date so notified;

Provided(1-A) .......

(2) Notwithstanding anything contained in subsectio (1) or sub-section (1-A) wherea sale of any goods in the course of inter-State trade or commerce has eitheroccasioned the movement of such goods from one State to another or has beeneffected by a transfer of documents of title to such goods during their movementfront one State to another, any subsequent sale during such movement effected bya transfer of documents of title to such goods to a registered dealer, if the goods areof the description referred to in sub-section (3) of section 8, shall be exempt fromtax under this Act. Provided that subsequent sale shall be exempt from tax underthis sub-section unless the dealer effecting the sale furnishes to the prescribedauthority in the prescribed manner and within the prescribed time or within suchfurther time as that authority may, for sufficient cause, permit.

(a) A certificate duly filled and signed by the registered dealer from whom the goodswere purchased containing the prescribed particulars in a prescribed form obtainedfrom the prescribed authority; and

(b) if the subsequent sale is made to a registered dealer a declaration referred to insub-section (4) of section 8.”

In the case of G.A. Galiakotwala & Co. (P) Ltd. (supra), the Hon‟ble Apex Court

has also considered this question at page 541 with reference to a transactionmentioned above

where the goods were sent directly by the Bombay seller to the purchaser of theassessee and the assessee has effected the subsequent inter-State sale by transferof document of title during the movement of goods from one State to another. TheHon‟ble Apex Court at page 542 has held as follows :–

“The third contention of the appellant was that the appellant was entitled toexemption in respect of the turnover under section 6(2) of the Central Act. Section6(2) of the Central Act lays down that where a sale in the course of inter-State tradeor commerce of goods of the description referred to in section 8(3) of the Central

Act has occasioned the movement of goods from one State to another or has beeneffected by transfer of documents of title to such goods during their movement fromone State to another, any subsequent sale to a registered dealer during suchmovement effected by a transfer of documents of title to such goods shall not besubject to tax under the Act. A dealer claiming exemption for subsequent sale duringthe movement of goods from one State to another is required by section 6(2) of theCentral Act to furnish to the prescribed authority in the prescribed manner acertificate duly filled and signed by the registered dealer by whom the goods were purchased containing the particulars. In the present case, the appellant would beentitled to exemption on production of appropriate form by the Bombay seller and

by showing that the buyer is a registered dealer.. .. “ However, in the aforesaid case since Form E-1 was produced from the Bombay sellerbut Form-C was not produced from the buyer of the assessee to show that he was


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registered dealer in cotton, hence the benefit of exemption under Section 6(2) wasdenied.

The principle of law clearly enunciated by Hon‟ble Apex Court on identical facts thatin respect of the inter-State sale made by transfer of documents of title if theappropriate forms are produced from the Bombay seller and also from the purchaseri.e. registered dealer, namely E- l, and „C‟, then the exemption can be granted under

section 6(2) of the Central Act.Hon‟ble Gujarat High Court had an occasion to consider the identical fact with regardto the second inter-State sale in the case of State of Gujarat v. Haridas MujijikThakker, reported in l992 (Vol. 84) STC page 317, in which the assessee receivedthe orders from the purchasers of Gujarat for carbon dioxide cylinders or dry ice.Thereafter assessee placed the purchase orders from Bombay suppliers which in turnused to send the goods directly to the purchaser according to the instructions of theassessee. The amount and rate charged by the assessee from its purchaser wasapparently higher than the rate and price by the Bombay seller for the same goods.

Even though the goods were sent directly to the customer of the assessee situatedat Surat and Ahmedabad but the Gujarat High Court has held that the sales by theGujarat dealer to its customer situate at Surat and Ahmedabad was an inter Statesale under section 3(b) of the Central Act and accordingly the second salewas treated as inter-State under section 3(b) even though there was no actualendorsement made by the dealer in favour of the customer.

According to me, it is not necessary to follow the procedure of the case decided bythe Gujarat High Court reported in 84 STC 317 where the constructive delivery isdeemed to have taken place in favour of the assessee and thereafter subsequentdelivery to its purchaser.

The scope of Section 3(b) of Central Sales Tax Act came up for consideration beforeHon‘ble Supreme Court in the case of Tata Iron & Steel Company Ltd. v. S. R.Sarkar reported in 11 STR 655 (SC) in which the Hon‘ble Supreme Court hasobserved at page 666 as follows:–

“The sale contemplated by clause (b) is one which is effected by transfer ofdocuments of title to the goods during their movement from one State to another;Where the property in the goods has passed before the movement has commenced,the sale will evidently not fall within clause (b); nor will the sale in which the property in goods passed after the movement from one State to another has ceasedto be covered by that clause. Accordingly a sale effected by transfer of documents of

title after the commencement of movement and before its conclusion as defined bythe two termini set out in Explanation (1) and no other sale will be regarded as aninter-State sole under section 3(b}.”

Again on page 673, it is clarified as under:–

“But under the Sales of Goods Act, if a document of title to goods is used in theordinary course of business as proof of possession or control of goods, endorsementor delivery thereof according to mercantile practice will amount to delivery of thegoods thereby represented the transfer of documents contemplated by section 3(b)is therefore such transfer as in law amounts to delivery of the goods. Transfer ofdocuments either by endorsement or delivery does contemplate transfer of title.”

The expression „document of title of goods‟ has been defined in section 2(b) ofthe Sale of Goods Act as follows:–


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“a bill of lading, dock -warrant, warehouse keeper‟s certificate, wharfingers‟certificates, railway receipt, warrant or order for the delivery of goods and any otherdocument used in the ordinary course of business as proof of possession or controlof goods, or authorising or purporting to authorise, either by endorsement ordelivery, the possessor or the document to transfer or receive goods therebyrepresented.”

According to me a procedure should be followed that the document of title, namely,GR/RR must be endorsed in favour of the purchaser without taking delivery of thegoods either from the transporter or from the railways and the documents of titlemust be endorsed in favour of the purchaser during the movement of the goodsitself and delivery should be taken from the carriers by the Karnal purchaser.

Procedure to follow for Section 6(2) of C.S.T. Sales

The procedure to be adopted for effecting the sale by transfer of document of titleshould be as follows :–

i. There should he a movement of goods from one State to outside the State.

ii.

Ownership of the goods should be transferred during inter-State movement ofthe goods after movement has started from the State, by transfer ofdocuments of title to the goods to the purchaser of the other State.

iii. Transfer of document of title, namely, GR/ RR can be made by endorsement ofthe said document in favour of the purchaser and/or delivery of documents oftitle to the goods.

iv. (iv) A written endorsement should be made for transferring document of title infavour of the purchaser as follows:-

―The subsequent sale is being made to the registered dealer, namely,. . . .. (nameand address of the dealer) under section 6(2) of the Central Sales Tax Act (sale intransit); hence GRJRR is transferred in favour of .... .... ..(dealer) to whom thegoods may be delivered."

In view of the specific provisions in Explanation I to Section 3(b) of the Central SalesTax Act, the movement of goods from one State to another shall commence at thetime of delivery of the goods to the transporter and shall terminate when thedelivery is taken from the transporter or bailees.

In other words, the movement of the goods shall be deemed to continue till thegoods are in possession of the transporter or bailee to whom the goods are deliveredfor their movement from one State to another.

During this intervening period between the time of delivery from thetransporter/carrier, the actual endorsement should be made for which the relevantevidence must be preserved.

Another Example :

Dealer of U.P. placed purchase order on a Delhi dealer and directed him to send thegoods to a dealer of Guwahati directly who shall be subsequent purchaser asfollows:

i. Goods have been dispatched directly from Delhi to Guwahati.

ii. Goods have not entered in the State of U.P. where the first purchaser, who has

purchased the goods from Delhi is satiated, and has made subsequent sales todealer of Guwahati.


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iii. U. P. dealer has not used Form XXXVIII for importing the goods within the Stateof U.P.

iv. Entire goods have been sent directly from Delhi to Guwahati.

v. GR was prepared directly from Delhi to Guwahati.

vi. There is no evidence of delivery having been taken by the dealer of U.P. in theState of U.P.

vii. The GR had reached directly to the purchaser of Guwahati.

viii. In the GR, consignors is Delhi seller and consignee is the U.P. dealer.

ix. Form E-I has been obtained from the Delhi selling dealer and Form ‗C‘ has beenobtained by the U.P. dealer from the Guwahati purchasing dealer, which will befurnished to the assessing authority.

In view of the aforesaid facts. it cannot be said that the delivery of the goodshas been taken by the dealer in the State of U.P. but U.P. dealer recorded thepurchase and subsequent sales in his account books.

According to me, admittedly sales were made by the Delhi dealer and theinvoice was raised in the name of the U.P. dealer, hence it was a first sale undersection 3(a) of the Central Sales Tax Act.

The second sale was made by transfer of document of title under section 3(b),since the document of title viz. GR was in the name of the Delhi seller, who wasthe consignor and the U.P. dealer was the consignee. Admittedly Form E-1 wasgiven by the Delhi selling dealer and Form ‗C‘ was given by the Guwahatipurchasing dealer, which it filed before the assessing authority of U.P. and

admittedly documents of title were transferred by the U.P. dealer in favour ofthe Guwahati purchaser. lt will be clearly a second inter-State sale during themovement of the goods from Delhi to Guwahati and the assessing authority ofU.P. cannot treat it as a first sale under section 3(a) of the Central Sales TaxAct by the U.P. dealer to the Guwahati purchaser in view of the law laid down inthe case of G.A. Galiakotwala & Co. (P) Ltd. v. The State of Madras, reported in37 STC page 536, decided by three Judges of the Supreme Court and alsoby Mitsubishi Corporation Inditt Pvt. Ltd. v. Value Added Tax Officer, which isreported in 2010 Vol. 34 VST, page 417. ‗

Which State – to assess and levy CST — in respect of sales u/s. 3(a)and 3(b) of CST Act If the delivery is taken by the purchaser in Delhi i.e., theplace of the business of the selling dealer, still no tax can be imposed in theState of U.P. in view of section 9( l) of the Central Sales Tax Act which providesthat the tax shall be levied in the State from where the movement of goodscommenced. Section 9(1), including the proviso, of the Central Sales Tax Actprovides as follows:–

“9. Levy and collection of tax and penalties – (1) the tax payable by any dealerunder this Act on sales of goods effected by him in the course of inter-Statetrade or commerce, whether such sales fall within clause (a) or clause (b) of

section 3, shall be levied by the Government of India and the tax so leviedshall be collected by that Government in accordance with the provisions of sub-section (2) in the State from which the movement of the goods commenced.


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Provided that , in the case of sale of goods during their movement from oneState to another being a sale subsequent to the first sale in respect of the samegoods and being also a sale which does not fall within sub-section (2) of section6, the tax shall be levied and collected –

(a) where such subsequent sale has been effected by a registered dealer, in the

State from which the registered dealer obtained or, as the case may be, couldhave obtained, the form prescribed for the purposes of sub-section (4) ofsection 8 in connection with the purchase of such goods, and

(b) where such subsequent sale has been effected by an unregistered dealer, inthe State from which such subsequent sale has been effected.

If U.P. dealer has taken the delivery of the goods at the place of Delhi dealeritself, hence it will be a sale within the State of Delhi and not the first inter-State sale under section 3(a) of the Act.

Even if it is treated as inter-State sale from Delhi to U.P., it shall be undersection 3 (a) of CST Act.

In this connection, a reference can be made to the case No. 3 of the judgmentof the Supreme Court in the case of Balabhagas Hulashchund, reported in 37STC, page 207 at pages 214 & 215, which reads as follows:-

“Case No. III – B a purchaser in State Y, comes to State X and purchases thegoods and pays the price thereof. After having purchased the goods he thenbooks the goods from State X to State Y in his own name. This it also a case

where the sale is purely on internal sale having taken place in Slate X and themovement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property."

Identical question arose before then Supreme Court in the case of A & GProjects, reported in 2009 (Vol. l9) VST, 239 at page 249, in which Hon‘bleApex Court has held as follows:

“13. The question before us is : if the sales stood covered under section 3(a)and if they were not entitled to exemption under section 6(2), whether the

appellant could have been taxed by the Department by invoking the proviso tosection 9(1) of the CST Act, 1956? The object of section 9(1) is two-fold. Firstly,it provides that the tax on inter-State sales under section 3(a) shall be levied bythe Government of India and collected by the State Government from which themovement of goods commenced. Secondly, it specifies the appropriate Statecompetent to levy tax on second and subsequent sales made during themovement of goods from one State to another as also the authority, wheresuch second and subsequent sales are exigible to tax. As stated above, section6(2) of the CST Act, 1956 provides for subsequent sale to be exempt from taxon the conditions prescribed therein. However, if and where those conditions

are not satisfied even such subsequent sales would attract tax and only in suchcircumstances the proviso to section 9(1) which specifies the State, which iscompetent to levy the tax, would come in. [See : Jadhavjee Laljee v. State of Andhra Pradesh [I989] 74 STC 201 (AP) at page 204.] The proviso to section


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9(1) contemplates two situations, namely, (a) where such subsequent sale ismade by a registered dealer and (b) where such subsequent sale is made by anunregistered dealer. In respect at situation (a), the proviso to section 9(1) prescribes that the appropriate State competent to levy tax on such subsequentsale shall be the State from which the registered dealer obtains a declaration inC from where in the case falling in situation (b), it provides that the appropriate

State competent to levy the tax shall be the State from which such subsequentsale has been effected. However, the entire proviso to section 9(l) appliesonly to “subsequent sales” covered by section 3(b) and not to salesunder section 3(a) of CST Act, I 956.

14. Applying the above analysis to the facts of the case, we are of theview that the proviso to section 9(1) of the CST Act, 1956 is notapplicable to the facts of the present case as the Assessing Officer hascategorically held that all the three sales fell under section 3(a) of theCST Act, 1956. Once the said sales fall under section 3(a) then under section 9(1) the tax has got to be collected by the State of Tamil Nadufrom which the movement of the goods commenced. The ease of theappellant regarding subsequent sales effected during the movement ofthe goods stood specifically rejected both by the Assessing Officer andthe FAA and, therefore, the question of taxing such sales under the proviso to section 9(1) of the CST Act, 1956 did not arise. "

Conclusions

Even in such cases where the sales are made in the State of the first sellingdealer and thereafter the movement of goods takes places, as given in the

aforesaid example of a dealer in U.P. purchasing the goods from Delhi dealer,the assessment cannot be made by the Assessing Authority of U.P. in view ofwhat has been held in para 14 of the judgment of the Supreme Court in A & GProjects, quoted above.

subsequent sales underSection 6(2) of Central Sales Tax Act

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bHARATJI_aGARWAL.pdf