Q.1 Please explain the scheme of “in transit sale” covered by section 6(2) of CST Act, 1956?
Ans.: Section 3(a) of CST Act,1956 defines the interstate sale/purchase transaction. Section 3(b) defines the interstate sale effected by transfer of documents of title to goods. When the goods are in movement from one State to other. The whole section 3 reads as under:
“3. When is a sale or purchase of goods said to take place in the course of inter-state trade or commerce — A sale or, purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase —
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occasion the movement of goods from one State to another; or
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is effected by a transfer of documents of title to the goods during their movement from one State to another…”
Section 6(2) of CST Act gives exemption to subsequent interstate sale effected by transfer of documents of title to goods when the goods are in movement from one state to another. However such exemption to subsequent inter-state sale is subject to production of Form E-I, as obtained from prior vendor and ‘C’ form from buyer.
A simple example can be that, suppose A of Mumbai has sold goods to B of Ahmedabad. The goods are dispatched by lorry and L.R. is taken out by A (Mumbai) where in A is consignor and B (Ahmedabad) is consignee. If before taking delivery from transporter, B decides to sell his goods to ‘C’ of M.P., he can simply endorse the L.R. in name of ‘C’ and the sale will be complete. This is the second or subsequent interstate sale in the course of same movement. In this case A must have charged 4% CST in his bill. Being a second interstate sale effected by B to C, B is equally liable to pay CST on above transaction. However the intention of Government is not to levy multiple taxes on sale taking place in one course of movement. Therefore the subsequent sale is given exemption. However it is subject to production of given forms. In above example, the sale by B to C will be exempt if B produces before his assessing authority Form EI issued by A of Mumbai and Form ‘C’ issued by C of M. P.
In light of above it is clear that the sale effected by transfer of documents of title to goods is eligible for exemption u/s. 6(2). These exempted sales are also referred to as “Sale in transit”.
Q.2 What is the procedure for transfer of documents of title to goods and the relevant judgments therefore. Whether pre- determined sales are covered by above category of “in transit sale”?
Ans.: The ‘sale by transfer of documents of title to goods’ has been interpreted by judiciary in many cases, some of them are cited subsequently for reference.
Normally the sale is effected by endorsement of transport documents. On the backside of the document like, L.R. the vendor can put his signature and transfer the documents to buyer. As held by Bombay High Court in case of Chhaganlal Savchand (62 ITR 133) the transfer of documents can be effected even by delivery.
It is also held by judiciary that transfer of documents can take place even by instruction. Therefore it is not necessary that the sale by transfer of documents takes place when the document is first taken out between first seller and his buyer and then transferred by the buyer to his buyer. The buyer of first seller can give instruction to dispatch the goods directly to his customer. If such instructions are given and accordingly the goods are dispatched to third party (i.e., buyer’s buyer) it is because of transfer effected by the buyer of first seller. The transfer takes place while booking the goods in transport and this is also a transfer during course of movement. This is known as notional or constructive transfer. Since this transfer is taking place during course of movement from one State to other it is eligible for exemption u/s. 6(2). In such case the first seller is consignor and the buyer’s buyer is consignee. However the commercial bills will be by first seller to his buyer and then by the first buyer to his buyer. In such a case to enable the first buyer to claim exemption, E-I form is to be issued by first seller to such first buyer.
It will be appreciated that even if the sale is predetermined by your buyer to his buyer it does not make any difference. On the contrary it makes the case strong in the sense that there is real transfer of documents at the loading station itself and any possibility of make believe transfer gets avoided. Therefore predetermined sale cannot be an issue. The same will be clear from the judgment given below.
The above legal position is clear, amongst others, from following judgments.
M/s. State of Gujarat vs. Haridas Mulji Thakker (84 STC 317)(Guj):- In this case the facts are that the Gujarat dealer received order from another dealer in Gujarat. For supplying the said goods, the vendor dealer in Gujarat placed order on Maharashtra dealer and instructed to send the goods directly to the Gujarat purchasing party. Gujarat High Court held that the sale by Maharashtra dealer to Gujarat vendor dealer is first interstate sale and the one by Gujarat vendor dealer to Gujarat purchasing dealer is second interstate sale. Gujarat High Court also held that the second interstate sale is exempt u/s. 6(2) being effected by transfer of documents of title to goods. In this case though there was no physical transfer of L.R. etc. Gujarat High Court held that there is constructive transfer by instruction and hence duly covered by section 6(2). This judgment duly covers both issues, that there is no need for physical transfer and also that having predetermined parties does not affect the claim.
M/s. Fatechand Chaturbhujdas vs. State of Maharashtra (S.A.894 of 1990 dated.12-8-1991) decided by Maharashtra Sales Tax Tribunal :- In this case the local party purchased goods from other local party and directed the same to be despatched to outside State party. Even though local party was shown as consignor, taking the view that while placing order there is term for outside place dispatches, Maharashtra Sales Tax Tribunal held that the sale between two local parties is first interstate sale and the sale by local party to outside party is subsequent interstate sale, duly exempt u/s. 6(2).
In short even if there is predetermined sale, there is no adverse effect on the sale to be claimed u/s. 6(2). On the other hand, in light of above judgments, the claim gets more authentic. The transfer of property to ultimate purchaser (consignee) gets synchronized at the time of booking the goods with the carrier and hence the subsequent sales take place by transfer of documents of title to goods as held by High Court in above case of 84 STC 317. The claim of exemption is to be allowed under above circumstances subject to production of required forms.
M/s. Duvent Fans P. Ltd. vs. State of Tamil Nadu (113 STC 431)(Mad.) :- Local dealer purchased goods from other local dealer and directed to send them to his purchaser’s place in other State. Madras High Court held that the first transaction is first interstate sale and the second sale is also subsequent interstate sale exempt u/s.6(2) of CST Act. The above judgment is directly on issue and hence will govern the field.
In fact there are many judgments on this issue. However since the legal position about transfer of documents as well as predetermined sale is clear from above judgments, no further citations are given here for sake of brevity.
Thus the “sale in transit” can be effected by any of above modes.
Authored by: C. B. Thakar, Advocate
I want to deliver a consignment from Orissa to Kerala for own use what is the form used by orissa govt. and what are the rules.
Dear sir,
. my question is regarding direct transportation of material from one state to another on my invoiwce. Fir ex. I received order from X in Hyderabad and I purchased material from Y in punjab then is it possible for me to issue material directly from Punjab to X in Hyderabad on our invoice (it means invoice from Gujarat) ?? Pls guide me how to make this transaction??
hi sir
can we do a transit sale against c – form
as we are located in telangana state. we have taken an order from a contractor situated in mumbai. and we have to bill to mumbai and delivery to andra pradesh state where the site is located.
is it possible.
Hey Anurag, you can check this site PDFfiller where you can find few templates for commercial invoice. This site PDFfiller also has some tutorials on how to fill it out and a few related forms that you might find useful. Here is a link to a commercial invoice that I was able to use http://goo.gl/lnT8ve.
any one can give clarification on payment of VAT on imported goods.( is vat applicable on Basic value of the material or including duty and other charges?
WE ARE CALCUTTA BASED IMPORTER. IMPORTED FABRIC FROM CHINA TO CHENNAI PORT BY SEA. NOW WE WAN’T TO BRING THOSE GOODS IN CALCUTTA BY ROAD TRANSPORT.
PLS LET ME KNOW IS WAY BILL REQUIRED FOR CARRYING GOODS FROM CHENNAI TO CALCUTTA OR TRANSIT PASS IS REQUIRED. ALSO LET ME KNOW WHO WILL AMKE THE TRANSIT PASS.
I want to send goods from mumbai to UDAIPUR whereas buyer is in Delhi , road permit from consinee in UDAIPUR is issued in favor of party in Delhi , is it possible to send goods directly from Mumbai to UDAIPUR on this road permit
sir,
we want to know that how should we manege of buyback document and taxes procedure.
Rds,
Dushyant Sharma
I am unable to Submit the Excise Return in Dealer.
I raised on Excise Invoice and after 5 days the material has been rejected and returned by the party. Then I raised one more invoice to another party. Now please guide me how show in Dealer Excise Return which the Invoice has been retuned.
Thanks
CTM
Sir,
I want to send the goods from Hyderabad to Tamilnadu state for which on the way officials are asking for TP (transit pass) for which i don’t understand what to do and from where i have to get TP. pls advice me
thanking you
regards
mohd taufeeq hussain
Sir,
i want to send the goods to tamilnadu state for which on the way officials are asking for TP transit pass for which i don’t understand what to do and from where i have to get TP. pls advice me
thanking you
regards
mohd taufeeq hussain
DEAR SIR,
AS I AM WORKING IN A REGISTERED DEALERSHIP COMPANY IN CHENNAI , AND I HAVE DOUBT REGARDING ZERO RATED SALES, IF WE SELL A MATERIAL TO THE CLIENT WHOSE BUSINESS IS IN A SEZ ZONE WITHIN TAMILNADU , IS THAT WE HAVE TO COLLECT FORM I FROM THAT CLIENT?
BECAUSE ONE OF MY CLIENT SAYS THAT IT IS WITHIN TN SO, SEZ DOCUMENTS IS ENOUGH IF IT IS INTERSTATE ONLY FORM I IS REQUIRED , IS THAT TRUE ,PLS HELP ME IN THIS REGARD.
is waybill required to supply material to company in SEZ?
Dear Sir,
We are registered dealer in Mumbai,
We have imported the goods from china to vissakapatnam port(A.P),
1. we have order for supply same imported goods to Ranchi (Jharkhand)
2. We directly want to dispatch the goods from Vizakport to Ranchi to save transportation cost,
how can we make the billing and dispatches,
Kindly Advice,
Regards
We are a dealer in Ahmedabad. We are buying goods from our manufacturer in Coimbatore which are despatched mostly on RR sale basis & we get only the LR copy. For 1 case our customer in Ahmedabad has to export these goods. The goods are being despatched from our manufacturer to the end customer on RR sale basis (Order is in our name & invoice will be ours) . Pls advise whether End customer has to issue H form directly in the manufacturers name for CST to be nil or else customer issues H form in our favour & we issue H form to the manufacturer. If it is done by 1st case ie End customer issues H form in favour of Manufacturer than what will be the effect on our Sales Tax.
a delear is registered in vat in new delhi import from china goods delevired at chenni port and as it is export to england from chenni port ? it is export or tranist sales required any forms or documents pl. confirm.
My consignee has not yet received CST, but I’ve dispatched the material from Maharashtra to West Bengal.
What can be done if no CST is received by the time material reaches WB border.
Pls suggest a way out.
Sir A of punjab is purchasing goods from B manufacturer in Karnatka against 2% cst form c. Goods are to be sold to C of Tamilnadu Chennai.
Kindly guide me the procedure. E1 FORM has to be obtained prior to dispatch? Will E1 form be required at karnatka border? Invoice made by A to C will have to show any tax in invoice? What will happen to the profit of A? Will it not attract any tax? Will C come to know about the goods being purchased from B and vice versa? When to hand over invoice of A to the transporter? Csn Endorsed LR be kept only upto karnatka border and once goods reach Tamilnadu transporter can attach fresh LR with no mention of karnatka so that secrecy of buyer seller can be maintained? Please reply as I am anticipating transaction on 2nd June, 2014. Regards.
Dear Sir,
There is a dealer in Karnataka Namely “A” buying the goods from Gujarat manufacturer Namely ‘B” and would like to supply within Gujarat to a buyer Namely “C’. How the document has to make. Does it attract VAT. And if yes can “C” take a credit of VAT. Please also let me know how the “B” has to prepare his Invoice.
Thanks and regards,
Bhupendra Shah
Dealer register in state of Maharashtra, it purchase goods from dealer in Gujarat & sale it in maharashtra through sale in transit & dealer in gujrat directly deliver goods to buyer. thereafter we perform erection on buyer’s place. will it liable to tax?
Dear Sir, We are trading in Electrical Items ,& sales to construction co in trasit sale by way of direct delivery from manufacturer to constuction co and billing from manufacture buyer is our name & consignee is construction co and GR/ Bilty is inthe name of construction co. We taken C form from construction co & again we issue “c” form to mfr.& receive E1 form from Mfr. Please advice that this transaction is wrong or right as per 6 (2) of CST act.1956. If it is wrong how we can do it as per law.
Dear sir i am a trader belongt to Haryana i will buy goods in Gujarat and goods will consume in utter pradesh . utar pardesh give me c form and excise duty only. uttar pradesh wants to excise modwat . but i have no excise registration.. i want uttar pardesh use gujrat excise registration. pl tell me which paper document will i need in this transit sale in 3 state.
Dear Sir,
We have purchased towels from Trident mills against H form as in their state towels are taxable and charged 6.05% and in mumbai we have sold to other party in sales against H form as towels have no tax in maharashtra. Please reply how can we give H form to Trident mills as we are selling locally to our party as third party will give H form to us in our name
We have a contract of UHVBN on turnkey basis we purhcase itra-state and supply sale in transit to UHBVN kindly consult it is legale.
I am a delear of electrical goods, i have no excise registration, my customer
required excise gatepass, than our manufacture company send material in customer
name is our name and consignee name our party’s name. they have send material to
sale in 2% CST & i am also sale in 2% CST, it is Sales In transit transection.
please give advise.
thanks
Dear Sir/ Madam,
My company is a Manufacturing company exisable unit registered in Ghaziabad, i have a supplier in chennai and my client is also in chennai.
sir,
we want to to reduce transport cost, so willing to send that material, direct from my supplier to my client, is it possible? if yes, then how the invoicing and FORM work will be done? and what will be about taxes and duties?
Please suggest the best as earliest.
thanks
H.N. Gupta
Sir, Can you guide me for the following transaction – Manufacturer A ( In excise ) based in Haryana sells goods to trader B ( regd. under Excise in MUMBAi ) Trader B sells the goods in transit to end user manufacturer C in punjab. Now , the goods in transit cannot be directly diverted to punjab untill and unless they arrive in maharashtra and then they have to be re-booked through another transport to Punjab. Also, C in punjab should get Cenvat credit from Original Manufacturer A.
I am based in karnataka and have received an order from my client (based in ap) for supply of materialswhich I will get from raipur. My vlient wants the materials for his work site in karnataka. So can I bill him sale in transit though the material is goinv to be unloaded in karnataka?
I Import the goods from china and i received goods chennai port I have an order from karnataka state dealer is the same day my plan is that I have avoid the transport charges so that how shall I follow the transaction procedure and how to raise the require document to delivery at karanata state dealer
Dear Sir,
My one client from Delhi had purchased some goods from us against C from. Still we are waiting for C forms from last two to three years. Is it possible to claim fir against non receipt of C form.
regards
Dear Sir,
we are having company register office in Delhi and Sales Tax registration in Haryana. Please advice can I take vat input on local purchase from delhi.
Please advice
Sachin Kumar Suri
sir
pl conform in sale in transit we can
mention cst amount in bill or total amount
Regards
Anand
does the exmption of no cst will available in following case –
A purchase goods from Interstate and also receives E-1. He sells that goods to a local dealer without any tax as E-1 sales.
Is it correct
the Quary
X & Y are in the state of Andhra Pradesh. X Placed order on Y and the delivery instructions given to delivery the goods to Z who is in karnataka.
As per my knowledge the CST is applicable and i request for clarifications regarding the above.
does the exmption of no cst will available in following case –
A purchase goods from Interstate and also receives E-1. He sells that goods to a local dealer without any tax as E-1 sales.
Is it correct?
Dear Sir,
pls solve my question that if A is a manufacturing company registered in delhi & has its branch at Uttaranchal with registration which is a subsidy zone & all items are exempted which are manfacturing in delhi.Can A company supply/sale these products on Uttaranchal bill/invoice as sale in transit diractly from delhi & avail exemption ,& which form should require with these exempted goods to sale to other states
Our firm registration at Tamil Nadu, we got metal scrap supply in MP, same time we also purchase and sale same state, how can i make bill our firm name, please guide me briefly.
Thanks Regards
Mohandas.
Our firm registration at Tamil Nadu , we got metal scrap supply order from Delhi same time am purchase the goods Delhi only and also supply Delhi, purchase and selling same state, How can I made bill our firm Name. please guide me.
Tanks Regards
Mohandas.
I am a dealer from Mumbai, I have received order from XYZ co in Gujrat and I am purchasing the said material from one vendor in Gujrat.
My questions are as below –
1) what is applicable ? CST or VAT from my supplier
2) Which tax I should charge in my invoice to my customer in Gujrat – VAT / CST? and at what rate??
Please Reply
Hi
I wanted to ask that in transit sale if i am the consignee than i have to issue my bill to next party in 7 days from my purchase bill date
Dear sir,
we want to supply exempted goods from U.P to Delhi & other states,which form is require for supply these goods to our delhi branch & sell for other states.we buy taxable raw material from delhi so for these which form is require
please guide me to know these forms for stock transfer of both taxable or exempted goods & for sale
Thanks
Regards
Deepak Dhyani
DEAR SIR,
WE HAVE DISPATCHED THE MATERIAL FROM LUDHIANA TO GHAZIABAD (UP)ON 16/01/2013
BUT OUR BILL NO.002 DT.31/12/2012.AND OUR TRCUK HOLD AT SHAMBOO EXPORT BARRIER
DUE TO OLD DTD.BILL.WE HAVE NO KNOWLEDGE ABOUT THIS.PLEASE ADVICE ?.
ALSO CONFIRM WHAT IS THE LIMITED PERIOD AFTER INVOICED THE MATERIAL ?.
Sir,
We have Purchased some Bearings from Punjab and we are sending the same goods to Hyderabad,for repair Works what is Procedure?
we are an EOU in Rajasthan, we want to purchase material Agaisnt C form with E-1 transaction.
can we claim CST refund on these purchases.
rgd
Manoj
Hello sir ,
company abc is purchasing goods from maharashtra
Bill to party : abc , maharashtra
consignee party : xyz , indore (mp)
how the transaction takes place . Do ‘abc’ need to charge 2% cst again to ‘xyz’
How to get the relief from double taxation if applicable .
sir,
We have registered delear in Maharashtra (A). We have purchase goods from Delhi(Consigner) and sale same goods to our customer registered with maharashtra(B)(Consignee) without taking delivery by A raise Invoice to B against “c” form and required form E1 from B.
pl suggest this E1 transaction is correct. if not correct pl suggest.
Thanks
Mahant
‘A’ (kerala) purchased from ‘B’ manufacturer (kerala) and sell to ‘C’ mumbai for exporting. Goods goes directly to ‘C’ from ‘B’. What all documents needed to avoid tax in invoice? Transportation documents?
Please reply in detail
If the billing is within the mumbai online services is taken
for oms than cst is applicable or vat? please advise.
Dear Sir
Company “A”(Govt Organisation ) gives order to Company “B” in the state of haryana with clear instruction to supply the material in sale in Transit basis. Company “B” registered with HVAT orders for material to company “C” in Rajasthan and have issued Road Permits of there own. The materials are supplied by Company “C” on issuance of C form and road permits from company “B” . The company “B” has taken E1 from Comapny “C” and on production of the same to Employer as company “A” requisite form C was issued to Company “B”. The material as supplied by company “C” were delivered by company “B” to company “A”
Kindly advvice whether the sale as made should be considered as Sale in Transit oor not.
Hi,
I am a dealer from Mumbai, I have received order from XYZ co in Gujrat and I am purchasing the said material from one vendor in Gujrat.
My questions are as below –
1) what is applicable ? CST or VAT from my supplier
2) Which tax I should charge in my invoice to my customer in Gujrat – VAT / CST? and at what rate??
Pls revert.
Thanks