AGENDA

  • In depth study of transactions involving Declaration Forms C, F and H.
  • Documentation required to verify the correctness of the Declaration Forms.

Declaration in Form C

♠ SEC. 3 OF THE CST ACT, 1956

  • Sec. 3 of the CST Act, 1956 defines what constitutes an Inter-state sale. It reads as under:

¤ A sale or purchase of goods shall, be deemed to take place in the 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 their movement from one State to another.

Explanation 1:

Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2:

Where the movement of goods commences and terminates in the same state, it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.

Salient Features of Interstate Sale

  1. There should be completed sale.
  2. Agreement or Contract with a stipulation regarding movement of goods from one State To another State.
  3. Goods should move due to stipulation in the agreement.
  4. Concluded Sale should take place in a State different from the State from where the movement started.
  5. The movement might be incidental to the Contract of Sale.
  6. Where the property in goods passes on to the buyer is not important.
  7. Sale can precede the movement or movement can precede the sale.
  8. If the movement of goods commence and terminates in the same State, even though it passed through other State, it will not be inter State Sale.

Landmark Judgments

♣ CST Vs. Pure Beverages Ltd. (142 STC 542) Gujrat.

♣ CST Vs. Nivea Time (108 STC 6)

  • In the above decisions the courts have held that even where the goods are delivered to the purchaser or his agent in the first state, if there is a movement of goods to the other state and the same is occasioned or incidental to the contract of sale, the conditions specified in Sec. 3 stand fulfilled.

♣ Cst V. Lakhmi Ladha & Co. STC 366 (Bom)

  • In this his case Lakhmi Lodha & CO. was manufacturer of Tarpaulins at Bombay. They entered into contract with Gujarat State Road Transport Corporation for supply of Tarpaulins to Ahemedabad. The goods were first transferred to branch at Surat and that branch delivered the goods to the transport corporation. It was held to be inter state transaction as the goods had moved from Bombay to Surat under a contract of Sale.

♣ SHri International Finance Ltd. v. State of Orissa (2008) 16 vst 193 (Orissa)

  • Lease Transaction – If Goods Moved to other State, it is inter State transaction.

Goods Covered In Registration Certificate

  • Form C can be issued only for the goods covered by the Registration Certificate. However it is not necessary that each and every item should be included but the class of goods to which such item pertain must necessarily be included in the Certificate of Registration with full description [State of Tamil Nadu v. South India Drum Manufacturing Company (60 STC 110) (Mad.)].
  • Moreover, the term ‘etc’ to be interpreted for the purpose of goods dealt with in would cover all those goods and also allied goods which are of the similar substance. [State of Tamil Nadu v A. S. A. M. Adian Chettiar (55 STC 353) (Mad.)]

RATE OF TAX ON INTER-STATE SALE [SEC. 8(1)]

Rate of Tax on Inter-state sale [Sec. 8(1)] :

¤ The rate of tax shall be 2% (against C-Form) or at local rate applicable to sale or purchase of such goods inside that state, whichever is lower.

¤ If C-Form is not received rate of tax will be the local rate applicable to such goods.

VERIFICATION OF C-FORM
[SEE RULE 12(1)]

1. The C-Form must be received from the state in which the goods were delivered.

2. The date of issue should be later than the quarter for which C-Form is issued.

3. Name, Registration No. & date of effect of the issuing dealer is properly mentioned.

4. Name, Registration No. & address of the seller is properly mentioned.

5. C-Form covers all the transaction executed during a single quarter.

6. Bill No, Date, Amount & dispatch details are properly mentioned.

7. It must be properly stamped & signed.

Declaration in Form F

  • The transfer of goods from one state to another otherwise than by way of sale to one’s own place of business or to the agent’s place of business is treated as branch transfer or commonly known as stock transfer.
  • Here also movement of goods from one state to another is a must.
  • The distinguishing factor between Branch transfer and Inter-state sale is that in the former there is no sale of goods, whereas in the later, there is sale involved.
  • If a person sends goods outside from his state to his branch office in another state then it is not sale because you cannot sell goods to yourself.

F form required for stock transfer

  • As per section 6A(1) submission of F form is mandatory to prove stock transfer wef 11/05/2002.
  • Otherwise, the transaction will be treated as sale for all purposes of CST Act.
  • The H.O./Principal produces such F forms to its assessing authority to prove such stock/branch transfer.

One F Form for one month

  • First Proviso to Rule 5 of CST Rules 1957 provides that one F form covering receipts during the month can be issued.
  • If space in F form is not adequate, a separate list may be attached as annexure to form F giving details.

F-Form Verification

♣ Details on F-Form.

a. Tin No. & address Stamp

b. Qty./Weight, Amount, Item

c. Transport details

d. Stamp and Sign

e. Date of issue

♣ L.R. is also completely filled as above

♣ Sale Patti covers all the details of goods sold by the agent on behalf of the principal, expenses on relation to sale, brokerage and payment details. It should also be properly stamped and signed.

♣ F-Form issuing date should be after Sale patti date.

♣ Date of entry in books should be equal or later than sale patti date.

♣ Transport charges as per L.R. & sale patti are to be same. Transport details as per L.R. / Sale Patti / F-Form are to be Same.

♣ On the date of dispatch corresponding entry is made in stock register.

♣ Goods delivered at godown/place of Branch / Agent and not at ultimate customer’s destination.

♣ Insurance in owner’s name.

♣Form F can be produced till the stage of Audit/ Assessment/ Appeal.

Sale in the course of Export

  • Section 8(1)(a)(ii) of MVAT Act specifically states that whereas sale or purchase of any goods takes place in the course of export of the goods out of territory of India it shall not be liable to tax.
  • Section 5(1) of the CST Act states “A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if,
  • i. the sale either occasions such export or
  • ii. is effected by transfer of documents to title to the goods after the goods have crossed the Custom frontiers of India
  • Section 5(3) of the CST Act states “not withstanding contained Sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.”
  • Thus the term export has been divided into 2 categories

a. Direct Export [Sec. 5(1)]

b. Penultimate sale occasioning export [Sec. 5(3)]

Penultimate Sale occasioning Export [Sec 5(3)]

  • In Mohammad Sirajuddin’s case (1975) 36 STC 136, it was held that only direct export qualified for exemption from tax.
  • This created various hardships to small and medium scale manufacturers.
  • To remove this bottleneck section 5(3) was introduced wef 01.04.1976.
  • The local manufacture of goods will be entitled to claim exemption u/s 5(3) if the penultimate sale for those goods affected in favor of exporter is directly connected with the export of goods outside the territory of India.

Important Judgments

  • In the cases of Nipha Exports Pvt. Ltd. (2007) 8 VTC 466 (SC), Azad Coach Builders Pvt. Ltd. (2010) 36 VST 1 (SC) the following principles emerged in the interpretation of Section 5(3),

a. There must be an intention on part of both buyer and seller to export.

b. There must be obligation to export and there must be actual export.

c. The obligation must have arose by reason of contract or agreement between them.

d. To occasion the export there must exists such a bond between the contract of sale and the actual exportation that each link is directly connected with the one immediately preceding it.

e. The phrase “Sale in the course of export” comprises of 3 essentials: Sale-actual export-sale part and parcel of export.

  • V. win garments v. additional deputy commercial tax officer, tirupur (2011) 42 vst 330.

¤ with Form H production of agreement with foreign buyer not mandatory.

Form H Verification

  • Section 5(4) states that provisions of section 5(3) shall not apply unless the dealer furnishes the declaration specified in rule 12(10) i.e. Form H.
  • Form H must be complete in all respect as discussed earlier.
  • H Form must contain export order number.
  • H form must be supported with bill of lading and other documents in relation to actual export of goods outside India.
  • As per form 704, separate disclosure is to be made when H Form is not received from the exporter situated within Maharashtra (Annexure H) and exporter situated outside Maharashtra (Annexure I)

Acceptance of computer generated self generated declaration forms.

The department has issued Circular No. F(11) Tax / CCT / 2010 / 349 dated 27.05.2011 regarding acceptance of computer generated self printed declaration forms. It reads as under :

¤ In this backdrop, you are directed to accept such computer generated self printed form prescribed under the Central Sales Tax Act, 1956, after due verification of facts mentioned in such forms from the website of the Commercial Taxes Department of the concerned State or through the TINXYS.

(Author can be reached at bharat.0703@gmail.com)

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