MVAT Trade Cir – 5T of 2009 – Tax Treatment of Goods sent to other States.

TRADE CIRCULAR

  
No.VAT/MMB/1008/ 15/ADM-6         Mumbai Dt : 29.1.2009                        Trade Cir.5T of 2009

 Sub :  Tax Treatment of Goods sent to other States.

 Ref  :   Trade Cir.16T of 2007 dated 20th February 2007. 
 
Gentlemen/Sir/ Madam, 
 
This office had issued a Trade Circular dated the 20th February  2007.   A view had been taken  in that Trade Circular that Section 6A of the  C.S.T.Act, 1956 deals only with transactions between agents and principals  and  does  not  deal with  transactions which  are  on  a  principal  to  principal  basis. 

2.              The Alahabad High Court has delivered a judgment dated the 17th  August 2007  in  the case of M/s Ambica Steels Ltd. V/s The State of Uttar  Pradesh.  The Petitioner in that case had sent iron and steel ingot to various  Companies  situated  outside  the  State  of  Uttar  Pradesh  for  the  purpose  of  converting  them  into  iron and  steel  rounds, bars and  flats.   The  converted  material  was  to  be  sent  back  to  the  petitioner  in  Uttar  Pradesh.  The  Petitioner Company also  received  iron scrap  from various  firms outside  the  State of Uttar Pradesh  for the purpose of converting the same  into  iron and  steel  billets  and  ingots  with  a  direction  to  return  the  converted  goods  to those  firms.    The  issue  before  the  Court  was  whether  the  petitioner  is required to submit the declaration in Form F in respect of the transactions of job work performed by it or got done by others.  The High Court has taken a view  that  it would be necessary  to  furnish declarations  in Form F  in  such instances.   It also appears that the question whether Section 6A of the CST Act deals only with  transactions between agent and principal or whether  it deals with  transactions which are on a principal  to principal basis was not raised before the High Court.

3.  In  the  Trade  Circular  dated  20th  February  2007,  a  view  has  been  taken  that when  goods  are  sent  to  another  State  for  job work  or  for  manufacturing  etc.,  the  transaction  will  normally  be  on  a  principal  to  principal basis with an independent operator and not on a principal to agent  basis.    It  is,  further  stated  in  the  circular  that  Section  6A  will  have  no TR 09/5 T 29.1.09.doc1/ 29/2009 applicability  as  regards  the  transactions  where  the  goods  are  sent  on  a  principal to principal basis.  It is possible that in view of the judgment of the  Uttar  Pradesh High  Court,  dealers  situated  in  other  States may  require  a  declaration  in Form F  from Maharashtra dealers  if any goods are sent  from  these States  to Maharashtra  for  job work  etc.   Similarly,  if  a Maharashtra  based  dealer  sends  any  goods  to  another  State  for  job work,  then  the  job  worker  in  that  State  may  require  the  Maharashtra  dealer  to  issue  a declaration  in  Form  F  while  returning  the  goods  to  Maharashtra.  It  is, therefore, decided that in such cases, declaration in Form F will be issued as per  normal  procedure  to  dealers  in  Maharashtra .    There  is,  however,  no change  in  the  views  of  the Sales Tax Department as  expressed  in  the  said trade  circular.    The  Trade  Circular  will  continue  to  apply  for  the contingencies  laid  down  in  the  circular  except  for  the  change  indicated  above.  

4.  This circular cannot be made use of  for  legal  interpretation of  provisions of law, as it is clarificatory in nature.  If any member of the trade  has any doubt, he may refer the matter to this office for further clarification.

5.  You are requested  to bring  the contents of  this circular  to  the  notice of all the members of your association.

                                                
Yours faithfully, 

(Sanjay Bhatia.) 

Commissioner of Sales Tax,   

Maharashtra State, Mumbai.