By TIOL News Service

NEW DELHI, MAY 01, 2019: THE issue at hand before the bench of the Sales Tax Appellate Tribunal is whether re-opening of concluded assessment is valid where the assessee is found to have misrepresented facts by camouflaging direct sale of goods as consignment sales & to have availed exemption u/s 6A of CST Act despite being ineligible for such benefit. YES is the answer.

Facts of the case

In the relevant period, a lorry containing 40 barrels containing Fenvelerate 20-EC was intercepted at a Commercial Tax check post. On verification, it was found that the goods had been transported in the same lorry a day before and which had been driven by the same driver. The accompanying Form No 20 0114129 revealed that the goods had been transported from Chennai to Puducherry. The check point officials obtained copies of the relevant documents such as Goods Consignment Note, Transport Invoice & Purchase Order. The officials inferred that the goods began their onward journey from Tamil Nadu against an existing order of a purchaser in Tamil Nadu. It was alleged that the assessee transferred them to Puducherry under the guise of stock transfer and sent them back to Tamil Nadu, so as to avoid payment of tax under the TNGST Act. Taxes with applicable fees were collected before releasing the goods.

Thereafter, the business premises of the consignor at Chennai and the consignee at Coimbatore were searched by the Enforcement Wing. Examination of relevant documents revealed that the documents had been doctored by the assessee so as to describe the movement of the goods as a branch transfer and thereafter as CST sales. The AO also studied two illustrations describing the movement of the goods. On assessment thereafter, the AO determined the taxable turnover at about Rs 7.34 crores and Rs 9.02 lakhs respectively. Later, upon considering relevant documents produced by the assessee, revealed that the goods stock transferred from Tamil Nadu to Pondicherry as branch transfer were sold and dispatched in the same lot, to the ultimate buyers in Tamil Nadu and other States and hence the value of goods shown as branch transfers to Pondicherry from Chennai and sales made to dealers in other States billed in the Pondicherry Branch in 1995-96 amounting to about Rs 1.37 crores were proposed to be assessed as inter-State sales from Chennai to the places mentioned therein @ 10% in absence of ‘C’ ‘D’ forms. Accordingly an SCN was issued to the assessee for revision of the assessment. The assessee's objections were dismissed by the AO, who proceeded to re-determine the total taxable turnover at about Rs 7.57 crores. On appeal, the Appellate Commissioner allowed relief to the assessee. The Revenue then approached the Tribunal, which allowed partial relief to the assessee.

On appeal, the Tribunal was of the view that,

++ considering Explanation 2 to Section 3 of the CST Act, the AO has rightly concluded in the circumstances of the case that wherever it is established that the goods shown as stock transfer from Chennai to Pondicherry were ultimately delivered to a customer within Tamil Nadu such sales are to be treated as local sales in Tamil Nadu and wherever the goods were ultimately delivered to customer outside Tamil Nadu such sales are to be treated as inter-State sales from Tamil Nadu. Mere passage of goods through Pondicherry will not alter the basic character of the transactions. There is no substance in the contention that the AO has made a bald statement about the goods having been dispatched to ultimate buyers in Tamil Nadu and other States. There is no reason to disbelieve the statement made by the Assessing Officer that detailed examination of the stock transfers from Tamil Nadu to Pondicherry with reference to the stock book of Pondicherry revealed that in almost all the cases, the goods stock transferred from Tamil Nadu have been sold and dispatched in the same lot to the ultimate buyers in Tamil Nadu and other States;

++ the AO had called for and verified the stock transfer invoices from Chennai, the lorry movement of the goods, the Stock Book of the Receiving Branch at Pondicherry and sales invoices raised at Pondicherry and after such examination he came to the inescapable conclusion that in the scheme of supplying the goods to customers in Tamil Nadu and other States, the intervention of Pondicherry Branch is only a conduit. Thus the AO conducted an inquiry and passed an order recording a definite finding that the F Form declarations are not dependable. It is well settled that no particular form of enquiry is necessary. The AO can devise his own procedure and he may pass an order before the assessment or along with the assessment as stated by the Supreme Court in M/s Ashok Leyland (Ashok Leyland-II) 134 STC 473;

++ the AO has after due enquiry rejected the Form F declarations. No fault could be found with reassessment because the assessee has misrepresented the facts. The documents recovered by the Enforcement Officers from the appellant’s business premises disclosed that the appellant had camouflaged direct sale of goods as consignment sales and availed of the benefit of exemption under Section 6-A of the CST Act. The goods were purposely circuitously moved through Pondicherry Branch which acted as a conduit. The instant case is therefore clearly covered by the exceptions carved out in Ashok Leyland(II) where concluded assessment can be reopened.

(See 2019-TIOL-06-CSTAA-CST )