No CST If State Tax Already Paid On Inter-State Movement Of Goods: Andhra Pradesh High Court

The Andhra Pradesh High Court on 9 February held that once tax is levied and collected on goods under the Andhra Pradesh General Sales Tax Act (APGST Act), no Central Sales Tax (CST) can be imposed on their inter-State movement, even if statutory declaration forms such as C-Forms or F-Forms are not furnished or are defective.

A Division Bench of Justice R Raghunandan Rao and Justice T.C.D. Sekhar allowed a petition challenging the CST assessment for the assessment year 2004–05, filed by Gourav Kumar Anuj Kumar, a general merchant and commission agent based in Guntur district.

The Bench observed:

“In the present case, the dealer has claimed that a part of the turnover relates to sales under C-Forms and a part of the turnover relates to branch transfer covered under F-Forms. The assessing authority had verified the C-Forms and F-Forms and disallowed certain turnovers on the ground that the said turnovers are not properly covered under the C-Forms and F Forms.”

The petitioner was engaged in purchasing turmeric and other agricultural produce within Andhra Pradesh on behalf of non-resident principals and dispatching the same outside the State.

While the assessment under the APGST Act for 2004–05 was completed without dispute, the assessing authority also finalised a parallel assessment under the CST Act, treating certain turnovers as taxable due to deficiencies in the statutory declaration forms.

The petitioner had disclosed a total turnover of Rs. 5.67 crore relating to turmeric dispatched outside the State. The assessing authority bifurcated this turnover into transactions purportedly covered by F-Forms (branch transfers) amounting to Rs. 4.00 crore and C-Form sales amounting to Rs. 1.66 crore.

Upon verification, turnovers of Rs. 42.32 lakh under F-Forms and Rs. 7.09 lakh under C-Forms were disallowed on the ground that either no forms were filed or that the forms filed were defective. These disallowed turnovers were subjected to CST at the rate of 10%.

Challenging the assessment, the petitioner contended that the levy was contrary to G.O.Ms. No. 296, Revenue (CT-II) Department, dated 09.04.1999, issued under Section 8(5) of the Central Sales Tax Act, 1956, which grants exemption from CST on inter-State sales of turmeric, chillies and cashew nut, provided tax has already been levied and collected under the APGST Act.

The petitioner also assailed a departmental circular dated 08.03.2006, which directed the levy of CST in the absence of C-Forms or F-Forms, notwithstanding the Government Order.

Agreeing with the petitioner, the High Court held that even if the movement of goods were to be treated as inter-State sales, attracting tax at the maximum rate under the CST Act due to absence or defects in statutory forms, the levy would still stand exempted once it is established that State tax had already been paid on the goods.

The Bench noted that the assessment order itself recorded the disputed turnovers related to "tax paid goods" under the APGST Act. In such circumstances, the exemption under G.O.Ms.No.296 would operate in favour of the petitioner. The Bench stated:

"A perusal of the order of assessment, under the CST Act would show that the assessing authority has observed that the turnovers, under consideration, were turnovers of “tax paid goods”. In such circumstances, it would have to be held that G.O.Ms.No.296 would be available to the petitioner and even if certain turnovers are to be treated as sales, which would attract tax at the highest rate, the same would still be exempted on account of G.O.Ms.No.296."

Concluding that the levy of CST was contrary to law, the High Court set aside the assessment order and allowed the writ petition

For Petitioner: Advocate, Shaik Jeelani Basha