Supreme Court Directs No Coercive Steps Against ITC In ₹11.59-Crore CST Demand

The Supreme Court on Tuesday directed that no coercive steps be taken against ITC Ltd in its challenge to the Telangana High Court judgment that upheld a ₹11.59 crore commercial tax demand on its inter State stock transfers.

The High Court on July 22, 2026 dismissed ITC's six writ petitions. It held that the transactions involving movement of goods from Andhra Pradesh to other States were, in substance inter State sales under Section 3(a) of the Central Sales Tax Act and therefore liable to tax.

A Division Bench of Justices K.V. Viswanathan and Arun Palli while issuing notice, posted the matter on November 16, 2026 for hearing. 

"Issue notice, returnable on 16th November, 2026. In the meantime, there shall be no coercive steps against the petitioner-company.", the Court said. 

The dispute concerns ITC's transfer of goods from warehouses in Andhra Pradesh to its warehouses in other States. ITC maintained these were stock transfers supported by Form F, with local taxes paid when the goods were subsequently sold. The Revenue alleged that the movement was pursuant to pre-existing purchase orders and therefore constituted inter-State sales taxable under Section 3(a) of the CST Act.

The Revenue issued a show cause notice on November 27, 2007 followed by ITC's reply on December 22, 2007 and a personal hearing on January 7, 2008. ITC argued that Form F established genuine stock transfers and relied on settled precedents. The Revenue relied on wholesale dealers' statements indicating that purchase orders preceded the movement of goods.

The Telangana High Court found that the purchase orders and advance payments showed that the movement of goods was occasioned by sales and held that Form F did not prevent the assessing authority from examining the true nature of the transactions.

While holding that the transactions were actually inter State sales being presented as stock transfers, the High Court observed:

“Upon lifting of the veil of the transaction it is ex-facie evident that the petitioner has been effecting 'sale' of goods from its various warehouses across the country to different States and masking them under the guise of 'transfer of stock' to evade payment of sales and commercial tax.”

The High Court consequently held that the ₹11.59 crore demand was lawful and dismissed all six writ petitions.

For Petitioner: Arvind Datar, Kavin Gulati, Sr. Advocates, Advocates Mahesh Agarwal, Rishi Agrawala, Alok Yadav, Sayaree Basu Mallik, Paranjai Singh, E. C. Agrawala, AOR