IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 14TH OCTOBER 2009 / 22ND ASWINA 1931 ST.Rev..No. 344 of 2007() ------------------------- AGAINST THE ORDER DATED 08/02/2006 IN TA.179/2005 of S.T.A.T.ADDL.BENCH,ERNAKULAM .................... REVISION PETITIONER/APPELLANT/REVENUE: ---------------------------------------------------------- STATE OF KERALA REP. BY JOINT COMMISSIONER(LAW), COMMERCIAL TAXES, ERNAKULAM. BY G.P. SRI.MOHAMMED RAFIQ RESPONDENT(S): APPELLANT/ASSESSEE: ---------------------------------- M/S. CROMPTON GRAVES LTD., ERNAKULAM. ADV. SRI.VIJAYAN. K.U. SRI.K.N.SREEKUMARAN THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 14/10/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... S.T. Rev. No.344 of 2007 .................................................................... 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 2 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 3 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 4 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 5 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 6 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