IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 344 of 2007()
1. STATE OF KERALA
... Petitioner
Vs
1. M/S. CROMPTON GRAVES LTD., ERNAKULAM.
... Respondent
For Petitioner :GOVERNMENT PLEADER
For Respondent :SRI.VIJAYAN. K.U.
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :14/10/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
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S.T. Rev. No.344 of 2007
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Dated this the 14th day of October, 2009.
ORDER
Ramachandran Nair, J.
The question raised in the revision filed by the State is whether
the Tribunal was justified in holding that mere production of C Forms
is sufficient proof of interstate sales. We have heard Government
Pleader for the petitioner and counsel appearing for the respondent.
2. The respondent is a reputed company engaged mostly in the
sale of products manufactured by them. Manufacturing facilities are
outside Kerala and the local office is only a selling Branch engaged
mostly in local sales. During the year 1999-2000, respondent
accounted interstate sales to the tune of Rs.87,34,475/- to Mahe. Even
though C Forms were produced to claim concessional rate, the
Assessing Officer demanded from the respondent proof of transport of
goods from the depot in Kerala to the buyer in Mahe, which respondent
failed to produce and consequently C Forms filed were rejected and the
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turnover was assessed under the local Sales Tax Act. Even though first
round appeals were dismissed, the Tribunal merely based on the C
Forms produced by the respondent and based on observation in a
judgment of this court, allowed the appeals against which this revision
is filed by the State.
3. The Government Pleader relied on Division Bench decision of
this court in RENUKA AGENCIES V. INTELLIGENCE OFFICER
(2008) 16 KTR 501 and contended that mere production of C Form is
not sufficient evidence of interstate sale. On several occasions this
court had considered cases relating to tax evasion practised by dealers
by using Mahe, part of the Union Territory of Pondicherry located
within Kerala. Going by the findings in several judgments, there is
nothing wrong in the Assessing Officer doubting genuineness of the
transactions of interstate sale and asking for clear proof about
movement of goods from Kerala to outside State for accepting
interstate sales. Besides this, two types of interstate sales are covered
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by Section 3(a) and 3(b) of the CST Act. While clause (a) of Section 3
deals with sale occasioning interstate movement of goods, clause (b)
deals with sale in the course of movement of goods from one State to
another by endorsement of document of title to goods. In either cases,
there should be physical movement of goods from one State to another
and the same will be evident from transport document such as Lorry
Receipt, Railway Receipt or such other goods vehicle record pertaining
to transport of goods. We do not know what prevented the respondent
from producing documents of transport of goods from their depot at
Cochin to Mahe which is north of Cochin by around 250 kilometres. In
fact, if goods are physically transported from Cochin to Mahe, then the
details of such transport would find entry in the Entry Check Post
maintained by Sales Tax Department at Mahe. Therefore, in our view,
there is no justification for the respondent’s failure to produce proof of
transport from Cochin to Mahe.
4. As held in the decision abovereferred, we are of the view that
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mere production of C Form is not sufficient proof of physical transport
of goods from one State to another. C Form only shows that an
interstate purchase for local sale is accounted by a dealer in one State.
If dealers in two States collude, there is absolutely no difficulty for the
dealer to account local sales as interstate sales by getting the dealer in
the other State to account bogus interstate purchase and accounting
sales thereof. Since the sale covered by Section 3(a) or 3(b) of the
CST Act should necessarily involve movement of goods from one State
to another, it is absolutely within the powers of the Assessing Officer
to demand documents towards proof of transport of goods from the
depot of the dealer to the purchaser in the other State. It is upto the
department to cross-check the documents of transport with entries in
the Check Post register to verify whether there is physical transport of
goods. As already mentioned, the transaction in this case itself is
suspicious because goods have reached from manufacturing facilities in
North India to far south in Kerala and again it is transported to dealers
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in Mahe for local sale there. If this transaction is believed, then
respondent would have suffered heavy loss on account of unnecessary
transportation of the very same goods by 500 kilometres. In other
words, sale could have been made by respondent’s factory directly to
the dealer in Mahe or atleast respondent’s Branch could have made
interstate sales in the course of movement from factory to their Branch
at Cochin thereby saving freight for 500 kilometres. In view of our
finding that failure of the respondent to prove interstate movement will
justify assessment of the turnover under the KGST Act, we have to
necessarily reverse the order of the Tribunal which has allowed the
appeal just based on C Forms produced. However, we feel one more
opportunity can be granted to the respondent to produce available proof
of interstate movement of goods before the Assessing Officer within a
period of two months from the date of receipt of copy of this judgment
for the officer to reconsider the matter and if required, cross-check the
Check Post records if available. We make it clear that if proof of
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interstate movement is produced for substantial quantity of the
turnover, then the entire claim should be allowed because at this
distance of time the respondent may not be able to produce L.Rs. for
all the transactions. It is upto the respondent to produce copies of
L.Rs., details of freight paid through Cheques etc. If evidence is
produced, the Assessing Officer will revise the assessments granting
concessional rate. On the other hand if respondent fails to produce
documents for substantial turnover of interstate sales, then the
Tribunal’s order will stand reversed and the assessments made under
the KGST Act will stand confirmed.
C.N.RAMACHANDRAN NAIR
Judge
V.K.MOHANAN
Judge
pms