Introduction Section 6A of Central Sales Tax Act, 1956 (CST Act) requires that, if there is any inter-state transfer to branch or agent or principal, as the case may be, then ‘F’ form is required to be obtained from transferee. If such form is not obtained, it will be deemed to be inter-state sale for all purposes of CST Act.
Section 6A refers to inter-state branch transfer or to agent/ principal (collectively referred to as ‘branch transfer’). However, in addition to branch transfer of stock, there is also inter-state branch transfer for job work. Like, a dealer in Gujarat may send his goods for processing to its job worker in Maharashtra. Job worker will complete the processing and send processed goods to its employer i.e. the dealer who had sent him goods for process.
In this case, there are two transfers, one from Gujarat to Maharashtra and again from Maharashtra to Gujarat.
Difference between Branch Transfer and Job Work Transfer
The stark difference between branch transfer and job work transfer is that the branch transfer is to oneself. However, in case of job work transfer the transfer is to independent job worker. The relationship is of principal to principal and job worker charges its own processing charges for the same. In other words, the relationship in job work transactions is like seller and buyer. If any goods are involved in the process, which gets transferred to principal then job worker may be liable to discharge works contract liability on such processing charges.
Though ‘F’ form is required for inter-state branch transfers, it was not contemplated in relation to job work transfer. In fact the Commissioner of Sales Tax, Maharashtra State has issued circular bearing no.16T of 2007 dated 20.2.2007 explaining the above position and stating that F forms not required for job work transfers.
Judgment of Hon. Allahabad High Court in case of Ambica Steel Ltd . (12 VST 216)(All).
The requirement of obtaining of F forms again came in light when the Hon. Allahabad High Court had an occasion to decide a similar issue. In that case, the dealer challenged the requirement of ‘F’ forms for job work transfer.
The Hon. Allahabad High Court ruled that F forms are necessary for job work transfer and also upheld validity of the requirement.
The Commissioner of Sales Tax, Maharashtra State, again issued circular bearing no.5T of 2009 dated 29.1.2009 reiterating its earlier view that inspite of above judgment of the Hon. Allahabad High Court, legally F forms are not required for job work transfer.
However, M/s. Ambica Steel Ltd. went to the Supreme Court against the Allahabad High Court judgment. In the Supreme Court, the dealer did not contest the legality of requirement of F forms as per section 6A but got case remanded back on premises that it will be producing forms before assessing authority.
The Hon. Supreme Court accordingly disposed of the matter vide judgment reported in case of Ambica Steel Ltd. (24 VST 356)(SC).
Based on the above Supreme Court judgment, the Commissioner of Sales Tax, Maharashtra State, again issued circular bearing no.2T of 2010 dated 11.1.2010 withdrawing earlier circulars and advising for obtaining ‘F’ forms for job work transfers also. One more circular bearing no.12T of 2010 dated 22.3.2010 was issued stating that the withdrawal is prospective i.e. from 11.1.2010.
Based on the above circulars, the sales tax authorities have started levying tax under CST Act when F forms are not available for inter-state job work transfers.
The Bombay High Court on the above issue
Based on one such assessment order, the issue was contested before the Hon. Bombay High Court in case of Johnson Matthey Chemicals India Pvt. Ltd. vs. State of Maharashtra (W.P.No.7400 of 2015 along with W.P.No.7934 of 2015). The said writ petition was decided vide judgment dated 16.2.2016.
The facts in case of this writ petition are narrated by the High Court as under:
“4) The Petitioner holds a registration number as set out in para 4 of the Petition. It is claimed that the Petitioner is manufacturer and job worker, engaged in the manufacture of different grades of support catalyst, including activated charcoal support. It is stated that this is predominantly a process resulting in the production of recharged catalyst from spent catalyst. It is stated that the Petition relates to job work transactions. The Petitioner receives a specified quantity of spent catalyst from its customers from within as well as outside the state of Maharashtra. The Petitioner undertakes job work of converting the spent catalyst received from the customers into support catalyst and sends back the recharged support catalyst to such customers.”
The basic arguments of the petitioner were as under:
i) The intention of insertion of section 6A was to refer to branch transfers, as there were chances of evasion.
ii) Only branch transfers are covered by Section 6A as clear from language used in section 6A.
iii) No provision in Act/Rules to obtain ‘F’ forms where transactions are between principal to principal.
iv) Section 6A(1) will operate when there is actual interstate sale and failure to bring F form, and not otherwise.
v) Section 6A will aid section 6 to levy tax on otherwise completed inter-state sale, but not otherwise.
The Respondents argued that section 6A applies to all non sale inter- state movements and it is merely rule of evidence.
Having noted arguments from both sides, the Hon. Bombay High Court has concurred with the judgment of the Allahabad High Court in case of Ambica Steel Ltd. (12 VST 216)(All). The observations of the Hon. Bombay High Court are as under:
“46) We do not think that there is any ambiguity in the legal position. Further, we do not see anything ambiguous or vague in the circular issued by the State of Maharashtra after this judgment in the case of Ambica Steels Limited (supra) by both, the Allahabad High Court and the Hon’ble Supreme Court of India. We are of the firm view that furnishing and scrutiny/verification of the declaration in that form is a requirement in law and if that is fulfilled, the burden on the dealer is taken to be discharged. If that declaration is not furnished, then, the consequences follow. The goods might have been dispatched for job work and not as and by way of sale, but that is the plea or case of the dealer. If that is the case and the burden is on him to prove it, then, he has to obtain the declaration. If the declaration is not being issued by some States in the form prescribed, namely form ‘F’ and the dealer made all the efforts to obtain it but failure to produce it is not his fault, then, he may, as the Hon’ble Supreme Court of India clarifies, request the Assessing Officer to take that circumstance into consideration. If that request is made, the Assessing Officer can, depending upon the facts and circumstances of a particular case, pass such orders as are permissible in law. Therefore, we do not agree that the circular of 2010 misinterprets the order of the Hon’ble Supreme Court of India. It neither misreads nor misinterprets the judgment of the Allahabad High Court.
Throughout ,the understanding is that the burden is on the dealer and he has to discharge it in the manner prescribed in law. If the burden has to be discharged in the manner set out, then, no other mode or manner is permissible. Therefore, all that the Hon’ble Supreme Court clarifies is that if some States are not issuing ‘F’ form, then, that approach of a particular State should be brought to the notice of the Assessing Officer in the dealer’s State. That the Assessing Officer should be convinced that the dealer made all efforts, but for no fault of his, he could not obtain the ‘F’ form. Thereupon and pursuant to the liberty given by the Hon’ble Supreme Court of India and the dealer raising the plea, the Assessing Officer, while taking note of it, would consider the peculiar facts and circumstances and may pass requisite orders.
Even that is not the rule but an exception. The requirement is not displaced necessarily and as urged. We do not, therefore, see any merit in the contentions of Mr. Sridharan and while challenging the circular of 2010.” (underlining ours)
