Purchase tax cannot be levied on stock transfer from one State to another for eventual export of goods as it is sale in the course of export

CA Bimal Jain

Facts:

A.B. Mauri India (P.) Ltd. (“the Petitioner”), engaged in trading of yeast, bakery ingredients and chillies, was having multistate branches including one at the Special Economic Zone Kakkanad, Cochin in the State of Kerala, and another in Secunderabad in the State of Andhra Pradesh. The substantial part of the business was direct export of chillies to foreign countries through Cochin branch.

As a modus operandi, the Secunderabad branch of the Petitioner purchased chillies from farmers i.e. unregistered dealer and from the market i.e. registered dealer. Thereafter it was transferred to Cochin branch by way of stock transfer against Form F for exporting. However, the Assessing Authority, Secunderabad sought to levy Purchase tax in terms of Section 4(4)(iii) of the AP VAT Act on the value of chillies purchased from farmers. The contention of the Petitioner that purchase of chillies by the Secunderabad branch constituted purchase in the course of export out of territory of India falling under Section 5(1) of CST Act and, therefore, State of Andhra Pradesh lacked jurisdiction to levy Purchase tax in view of constitutional prohibition in Article 286(1)(b) of the Constitution was set aside.

Held:

The Hon’ble High Court of Andhra Pradesh held that as long as the chillies were transferred from Secunderabad branch to Cochin branch, which had been exported and the conditions enumerated in Section 5(1) of the CST Act are satisfied, then the stock transfer from one branch to another for its eventual export cannot be subjected to tax in terms of Section 4(4)(iii) of AP VAT Act, as it is a sale in the course of export.

(Author can be reached at Email: bimaljain@hotmail.com)

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