Movement Of Goods To CFAs In Other States Is Stock Transfer, Not Inter-State Sale; Central Sales Tax Not Leviable: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that movement of goods to carrying and forwarding agents in other states is stock transfer, not inter-state sale, central sales tax not leviable. Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) stated that “the supplies made from the stockyards/warehouses to the Distributors would be a local sale in the State where the stockyards/warehouses are situated. Until the goods are appropriated by the stockyards/warehouses from out of the stocks available with them, they continue in the inventory of the stockyards/warehouses. Thus, supplies made to the stockyards/warehouses are merely stock transfers.” The issue before the Tribunal was whether the movement of goods from the mother warehouse of Castrol in the State of Maharashtra to the Carrying and Forwarding Agents in other States are supplies made in discharge of pre-existing purchase orders which fall within the scope of section 3(a) of the CST Act as claimed by the State of Maharashtra or are supplies in the nature of “Stock Transfers” which fall within the scope of section 6A of the CST Act as claimed by Castrol. The department argued that the sales activity done through CFAs is merely an arrangement of sales or system developed by Castrol for PAN India activity. The Distributors are identified before movement of the goods and the goods are in turn routed through the CFAs. Thus, section 3(a) of the CST Act is attracted, and Castrol is liable to pay central sales tax on the movement of goods from the State Maharashtra to other States. The Castrol India submitted that there is also nothing in the Agreements with the Distributors that may even remotely suggest that the movement from the mother warehouse of Castrol in the State of Maharashtra is towards discharge of a specific order from the Distributors. It was further argued that the movement of the goods from the mother warehouse of Castrol in the State of Maharashtra to the CFAs in other State are supplies in the nature of “Stock Transfers”, which fall within the scope of section 6A of the CST Act. The Tribunal observed that “when stockyards/warehouses are maintained in different States for the purpose of more effective and timely distribution of the goods then when goods are distributed from the stockyards/warehouses to the dealers from time to time, more particularly when the supply to the stockyards/warehouses is a continuous process and not related to the requirement of any particular customer or order placed by the customer and the appropriation of goods are made out of the stocks available in the stockyards/warehouses, the supplies made to the stockyards/warehouses by the manufacturer cannot be termed as inter-State sales.” The Tribunal held that the movement of the goods from the mother warehouse of Castrol in the State of Maharashtra to the CFAs located in other States are supplies in the nature of “Stock Transfers”, which fall within the scope of section 6A of the CST Act and are not supplies made in the discharge of pre-existing orders which fall within the scope of section 3(a) of the CST Act. In view of the above, the Tribunal dismissed the appeal. Case Title: State of Maharashtra v. M/s. Castrol India Ltd. Case Number: CENTRAL SALES TAX APPEAL NO. 13 OF 2017 Counsel for Appellant/ Department: Rama Ahluwalia for the State of Maharashtra Counsel for Respondent/ Assessee: Rohan Shah, Senior Advocate assisted by Udayan Choksi and Harish Suri Click Here To Read/Download The Order

Movement Of Goods To CFAs In Other States Is Stock Transfer, Not Inter-State Sale; Central Sales Tax Not Leviable: CESTAT

Mehak Dhiman

Tags