IN TRANSIT SALES, BRANCH TRANSFERS – Part 2

4.         Taking the support of the above observations the department has started disallowing branch transfers and in transit sales made within the state. 

5.1       In Tamil Nadu the Accountant General has raised objection against the allowance of sales u/s 6[2] where the transit sale is made to the party within the state. According to the interpretation of the AG, the transactions should necessarily be with independent states, which means that three independent states will be involved in the claim for exemption u/s 6[2].  The Tamil Nadu tax authorities are bent upon to open the assessments of the dealers where the exemption u/s 6[2] is allowed in respect of sale to local parties. 

5.2       The Supreme Court in its judgment in case of A & G Project has no where observed that to claim exemption u/s 6[2] the sale must be to the party from other state. On the contrary Tamil Nadu Govt had issued notification on 31-12-1993 that the dealers can effect the sales in transit with in 40 days of the arrival of the goods in TN. The Madras high court has held in case of Shri Harimhanran [114 STC 598] that the dealer is not prohibited to claim such exemption even after the limitation period of 40 days. 

5.3       The judgment of the Supreme Court in case of A & G Project was referred by the Delhi high court in case of Mitsubishi Corporation [34 VST 417] and the Delhi high court observed that to claim the exemption u/s 6[2] following conditions should be fulfilled.

            1. The first sale could be either a section 3[a] or 3[b] sale.

            2. The second or subsequent sale has to be a section 3[b] sale.

            3. The subsequent sale has tobe to a registered dealer.

            4. The goods should be of a description referred to in section 8[3] of CST Act.

            5. The E-I form is to be furnished by the petitioner.

            6. The C form obtained from the purchaser has to be furnished.

Thus even according to the Delhi high court it is not necessary that three states should be involved to claim the exemption u/s 6[2]. 

5.4       The Allahabad high court had also held in case of Mewalal Kewal Kishore [38 STC 551] that there can be inter-state sale covered by section 3 [b] even where both the seller and the purchaser is from the same state. It is enough that the railway receipts are endorsed after the goods had been handed over to the railway and there was nothing to indicate that the goods had not moved. Here also the other State was not involved.

Written by admin on December 17th, 2010 with comments disabled.
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