Punjab vat /cst
arunkalia
(Querist) 30 November 2012
This query is : Resolved
when we sending goods to other branch in other state and within state then what procedure will we have to follow? which documents we have to send along with vehicle which carrying goods to other and within state? please guide me in this matter.
Raj Kumar Makkad
(Expert) 01 December 2012
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 —
occasion the movement of goods from one State to another; or
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.
Raj Kumar Makkad
(Expert) 01 December 2012
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.
