Case Note & Summary
The petitioner, a manufacturer and job worker, received spent catalyst from customers within and outside Maharashtra, processed it, and returned the recharged catalyst. The sales tax authorities, relying on Trade Circular No. 2T of 2010, treated the inter-state movement of goods back to customers as inter-state sales, demanding production of F forms under section 6A of the Central Sales Tax Act, 1956, and raised a substantial demand including tax, interest, and penalty. The petitioner challenged the circular as ultra vires and the assessment order as illegal. The High Court examined the scope of section 6A and held that it applies only to transfers to one’s own branch, agent, or principal, and not to principal-to-principal job work transactions. Consequently, the requirement of F forms was not applicable, and Trade Circular No. 2T of 2010 was declared ultra vires and set aside. Earlier circulars 16T of 2007 and 5T of 2009, which correctly clarified the position, were upheld. The assessment order and the tribunal’s conditional stay order were quashed.
Headnote
A) Interpretation of Statutes - Section 6A of Central Sales Tax Act, 1956 - Scope and Applicability - Central Sales Tax Act, 1956, Section 6A - The section places burden of proof on dealer claiming exemption only in case of transfers to his own branch, agent, or principal; it does not cover principal-to-principal job work transactions. Held that inter-state movement of goods from job worker to customer is not a deemed sale, and no F form declaration is required under section 6A. (Paras 11(k)-11(p))
B) Sales Tax - Declaration Forms - Form F under Rule 12(5) of Central Sales Tax (Registration and Turnover) Rules, 1957 - Central Sales Tax Act, 1956, Section 6A; Central Sales Tax (Registration and Turnover) Rules, 1957, Rule 12(5) - The rule prescribes Form F only for the categories mentioned in section 6A(1); neither the Act nor the rules contemplate such form for independent principal-to-principal transactions; hence, demand for F form in such a job work scenario was without legal basis. (Paras 11(l)-11(p))
C) Administrative Law - Trade Circulars - Validity of Circular No. 2T of 2010 dated 11.01.2010 - Central Sales Tax Act, 1956; Maharashtra Value Added Tax Act, 2002 - The circular extended requirement of F forms and applied section 6A to principal-to-principal job work, exceeding the statutory mandate; held ultra vires and without jurisdiction, and consequently set aside. (Paras 2(a), 11)
D) Precedent - Earlier Circulars and Judicial Decisions - Clarificatory Circulars 16T of 2007 and 5T of 2009 - Central Sales Tax Act, 1956 - The department had earlier correctly clarified non-applicability of section 6A and F forms to job work transactions; attempt to distinguish Allahabad High Court decision in Ambica Steels Limited was not accepted. (Paras 11(q)-(r))
Issue of Consideration
Whether Section 6A of the Central Sales Tax Act, 1956 applies to inter-state movement of goods from a job worker to a customer on principal-to-principal basis; whether Trade Circular No. 2T of 2010 is ultra vires the Act; whether the assessment order and tribunal order are liable to be set aside.
Final Decision
The writ petitions were allowed. Trade Circular No. 2T of 2010 dated 11.01.2010 was declared ultra vires Section 6A and set aside. The assessment order dated 14.08.2014 and the tribunal's order dated 17.07.2015 were quashed. Section 6A held not applicable to principal-to-principal job work transactions.
Law Points
- Section 6A of Central Sales Tax Act
- 1956 applies only to transfers to own branch
- agent
- or principal
- not to principal-to-principal job work transactions
- F forms not required for such transactions
- Trade Circular No. 2T of 2010 is ultra vires and without jurisdiction.
Case Details
2016 LawText (BOM) (02) 43
Writ Petition No. 7400 of 2015 with Writ Petition No. 7934 of 2015
S. C. Dharmadhikari, B. P. Colabawalla
V. Sridharan, Prakash Shah, Rahul Thakar, Puneeth Ganapathy, Jas Sanghavi, Aniket Ghosh for Petitioner; V. A. Sonpal for Respondents
Johnson Matthey Chemicals India Pvt. Ltd.
The State of Maharashtra and Others
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Nature of Litigation
Challenge to assessment order, trade circular, and tribunal order regarding applicability of Section 6A of CST Act to inter-state job work transactions.
Remedy Sought
Petitioner sought declaration that Trade Circular 2T of 2010 is ultra vires, that Section 6A does not apply, and quashing of assessment order and tribunal order along with consequential relief.
Filing Reason
Sales tax authorities levied tax treating inter-state movement of goods from job worker to customer as deemed sale, relying on impugned circular, and raised demand without jurisdiction.
Previous Decisions
Assessment order dated 14.08.2014; Appeal to Joint Commissioner resulted in conditional stay; Tribunal in Appeal No. 447/2015 upheld deposit of Rs.7,96,00,000 under CST Act and reduced liability under MVAT Act to Rs.11,00,000.
Issues
Whether Section 6A of Central Sales Tax Act, 1956 applies to inter-state movement of goods from a job worker to its customer on principal-to-principal basis.
Whether Trade Circular No. 2T of 2010 dated 11.01.2010 is ultra vires and without jurisdiction.
Whether the assessment order dated 14.08.2014 and the tribunal's order dated 17.07.2015 are valid.
Submissions/Arguments
Petitioner argued that Section 6A covers only transfers to branch, agent, or principal, not independent principal-to-principal job work; hence, no requirement of F forms.
Petitioner contended that Circular 2T of 2010 was without jurisdiction and contrary to the Act, while earlier circulars 16T/2007 and 5T/2009 correctly clarified the law.
Respondents relied on the circular and contended that inter-state movement must be supported by F forms, failing which it is deemed a sale under Section 6A.
Ratio Decidendi
Section 6A of the Central Sales Tax Act, 1956, which casts the burden of proof on a dealer claiming exemption, applies only to transfers to the dealer’s own place of business (branch) or to his agent or principal. It does not cover inter-state movement of goods from a job worker to an independent customer. Consequently, no F form declaration is required, and such movement cannot be deemed a sale under Section 6A. A trade circular extending this provision beyond its statutory scope is ultra vires.
Judgment Excerpts
Rule in both Petitions. Respondents waive service. By consent, Rule is made returnable forthwith.
it is clear from the emphasised portions above that section 6A contemplates only three transferees, viz. (i) transfers made to one's own place of business (branch transfer) in another state or (ii) to his agent in another state of (iii) to his principal in another state.
There are no rules prescribed by Central Government or State of Maharashtra under the CST Act, 1956 governing the procurement forms in the case of transactions between two independent principals.
even the Rule prescribing 'F' form under the CST Rules, 1957 does not contemplate 'F' form between two independent principals.
The Respondents had issued Trade Circular No. 16T of 2007 dated 20th February, 2007. By the said trade circular, the position about non requirement of 'F' forms in relation to job work transaction was clarified.
Procedural History
Assessment order passed on 14.08.2014 under CST and MVAT Acts. Petitioner filed appeal before Joint Commissioner of Sales Tax; stay application granted on condition of part payment of Rs.7,96,00,000 under CST Act and Rs.35,00,000 under MVAT Act vide order dated 24.03.2015. Petitioner appealed to Tribunal; Tribunal's order dated 17.07.2015 dismissed appeal under CST Act (No. 447/2015) upholding deposit, while partly allowing MVAT appeal reducing part payment to Rs.11,00,000. Both writ petitions filed under Article 226 challenging said orders and Trade Circular 2T of 2010.
Acts & Sections
- Central Sales Tax Act, 1956: 6, 6A, 13(4)
- Maharashtra Value Added Tax Act, 2002: 29(3), 30(2), 30(3)
- Constitution of India: Article 226
- Central Sales Tax (Registration and Turnover) Rules, 1957: Rule 12(5)
- Central Sales Tax (Bombay Rules), 1957: Rule 4(13)
