PRACTICAL ASPECTS OF SUBSEQUENT SALES UNDER SECTION 6(2) OF

CST ACT
BY
BHARATJI AGARWAL
SENIOR ADVOCATE
On the question as to whether subsequent sales under Section 6(2) of Central Sales
Tax Act, which are effected by transfer of document of title during the movement of
the goods from one state to another, has been subject matter of controversy in
different set of facts by different Departmental Authorities of the States whether it is
State of U.P., State of Orissa, State of Haryana, State of Assam or any other State,
the various issues have arisen in different set of facts by taking the view which is not
in accordance with the provisions of Central Sales Tax Act.
Much confusion has been created in the minds of the Departmental Authorities in
view of the observations which have been made in few judgments, without
appreciating the entire set of facts.
Hence, I am taking some practical aspects of subsequent sales under Section 6(2) of
the Central Sales Tax Act by giving few examples which occasionally arose while
deciding the question of exemption of subsequent sales under Section 6(2) of the
Central Sales Tax Act.
Example :
A Company, who is a purchaser, has two branches – one at Agra and the other at
Kanpur.
U.P. Purchaser places an order on Orissa seller for which invoice is raised in the
name of Company of U.P. The Invoice was raised by the Orissa seller in the name of
the company‗s branch of Kanpur, in which Central sales tax @
2% was charged against Form-C. The destination was shown as Karnal, for which
the Orissa seller‘s Bill No. was also mentioned.
In the Challan-cum-invoice of the Orissa seller, it was mentioned as E-1 sale Karnal party address, District Karnal whose TIN number etc. was also mentioned.
The goods were sent by truck, for which the GR was prepared by Transport
Roadways of Orissa, in which the destination was shown as Karnal, even though the
consignor was shown as the Orissa seller and consignee was shown as the
company‘s branch of Kanpur.
During the movement of goods from Orissa to Karnal, the document of title, namely,
GR was endorsed by the company with the following endorsement:—
“Entire Material of this GR/LR sold through Document Transit Sale. Covered with “E1 & C “Forms to M/s. Karnal Dealer, Karnal, Haryana“.
After the material was sold during the movement of goods from one State to
another, the company‘s Kanpur branch issued its own invoice in respect of the sales

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made during the movement of goods from Orissa to Karnal and obtained 'E-1' form
from the Orissa seller and ‗C‘ form from the purchasing Karnal dealer.
On the basis of the entry in the stock register of Kanpur branch, it is presumed by
the department that the delivery of the goods has been taken by the company and
thereafter it has been sold to Karnal dealer.
The Commercial Taxes department also raised an objection that in the invoice of the
Orissa seller, the name of the Karnal purchaser should not have been mentioned.
Relevant Provisions of Central Sales Tax Act
Section 3 and Section 6 of the Central Sales Tax Act are very relevant which are
being reproduced hereinbelow. Section 3 of the Central Sales Tax Act provides as
follows:
“3. When 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 inter-State trade or commerce if the sale or purchase (a) occasions the movement of goods from one state to another; or
(b) is effected by a transfer of documents of title to the goods during their
movement from one State to another:
Explanation 1- Where goods are delivered to a carrier or other bailee for
transmission, the movement of the goods shall, for the purposes of clause (b), be
deemed to commence at the time of such delivery and terminate at the time when
delivery is taken from such carrier or bailee.
Explanation 2 - Where the movement of goods commences and terminates in the
some State it shall not be deemed to be a movement of goods from one State to
another by reasons merely of the fact that in the course of such movement the
goods pass through the territory of any other State. ” The charging section under
Central Sales Tax Act is section 6 which provides as follows:―6. Liability to tax on inter-State sales –
(1) Subject to the other provisions contained in the Act, every dealer shall, with
effect from such date as the Central Government may, by notification in the official
Gazette, appoint, not being earlier than thirty days from the date of such
notification, be liable to pay tax under this Act on all sales of goods other than
electrical energy effected by him in the course of inter-State trade or commerce
during any year on and from the date so notified; Provided
(1-A) ..... ..
(2) Notwithstanding anything contained in subsection
(1) or sub-section (1-A) where a sale of any goods in the course of inter-State trade
or commerce has either occasioned the movement of such goods from one State to
another or has been effected by a transfer of documents of title to such goods
during their movement from one State to another; any subsequent sale during such
movement effected by a transfer of documents of title to such goods to a registered
dealer, if the goods are of the description referred to in sub-section (3) of section 8,
shall be exempt from tax under this Act.
Provided that subsequent sale shall be exempt from tax under this sub-section
unless the dealer effecting the sale furnishes to the prescribed authority in the
prescribed manner and within the prescribed time or within such further time as that
authority may, for sufficient cause, permit.
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(a) A certificate duly filled and signed by the registered dealer from whom the goods
were purchased containing the prescribed particulars in a prescribed form obtained
from the prescribed authority; and
(b) If the subsequent sale is made to a registered dealer, a declaration referred to in
sub-section
(4) of section 8.”
In view of Section 6(2) of the Central Sales Tax Act, the subsequent sales made
during the movement of goods from one State to another by transfer of document of
title to a registered dealer shall be exempt from payment of tax under Central Sales
Tax Act.
In case Form E-1 is obtained by the company of U.P. from the Orissa seller and
Form-C is obtained by the company of U.P. from the Karnal purchaser, than its
subsequent sale shall not be liable to tax provided delivery has not been taken in
U.P. by the company of U.P.
Emphasis in Section 6(2) is on the words ―subsequent inter-State sale during the
movement of goods from one State to another‖ by ―transfer of document of title‖.
Objections of Department and case of A & G Projects
An objection was taken by department that in the invoices of Orissa seller the name
of the Karnal purchaser should not have been mentioned and the said objection has
been taken on account of a decision of the Apex Court in the case of A & G Projects
and Technologies v. State of Karnataka reported in 2009 VST (19), page 239.
The Hon‗ble Apex Court without noticing the earlier judgment of Supreme Court in
the case of G. A. Goliakotwala & Co. (P) Ltd. v. The State of Madras reported in 37
STC page 536 has observed in the case of A & G Projects & Technologies Ltd. v.
State of Karnataka reported in 2009 Vol. 19 VST page 239 that section 3(b) shall
apply where the contract has come into existence only after the
commencement and before termination of inter-State movement. Some
confusion has been created in the minds of some of the Departmental Authorities
because of this observation which was made in a different context altogether.
Analysis of A & G Projects case
The case of A & G Projects & Technologies Ltd. v. State of Karnataka was decided
purely on the facts of that case. The Supreme Court in fact was not concerned with
section 6(2) of the Central Sales Tax Act. The case was very limited for deciding the
question as to which State has jurisdiction to impose the tax in respect of inter-State
sale.
Section 3(b) requires that sale is to be effected by transfer of document of title to
the goods after the commencement of movement of goods and before termination
and it docs not require that the contract should come into existence after the
commencement or before termination of the movement of the goods.
Different facts and different controversy in the
case of A & G Projects
In the case of A & G Projects & Technologies Ltd., three independent contracts were
awarded to A & G Projects —
(1) For supply of Capacitor Banks.
(2) For execution of civil works, and

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(3) For erection and commissioning of Capacitor Banks at various Sub-Stations of
Karnataka Power Corporation Ltd. Pursuant to these contracts. A & G
Projects arranged M/s. Baywest for procuring the equipment who had prior
arrangements with the manufacturer of the said equipment.
Thus, there were three contracts – one between A & G Projects and KPTC for
supply of equipment, second was between A & G Projects and M/s. Baywest for
procurement of the equipments and the third was between M/s. Baywest and the
manufacturer.
The Court treated all the three contracts under section 3(a) of the Central Sales Tax
Act because the movement of the goods started front State of Tamil Nadu in
pursuance of the prior contract to State of Karnataka and the case was decided with
reference to section 9(1) of the Central Sales Tax Act.
The Hon‘ble Apex Court in A & G Projects case has held as follows:
“Analysing section 6(2), it is clear that sub-section (2) has been introduced in
Section 6 in order to avoid the cascading effect of multiple taxation. A subsequent
sale falling under sub-section (2), which satisfies the conditions mentioned
in the proviso thereto is exempt from tax as the first sale has been
subjected to tax under sub-section
(1) of Section 6 of the CST Act, 1956. Thus, in order to attract section 6(2), it is
essential that the concerned sale must be a subsequent inter-State sale effected by
transfer of document of title to the goods during the movement of the goods from
one State to another and it must be prescribed by a prior inter-State sale. It is only
then that section 612) may be attracted in order to make such subsequent sale
exempt from levy of sales tax. However, the proviso to sub-section (2) of section 6
prescribes further conditions and it is only on fulfilment of those conditions
that the subsequent sale stands exempted. If those conditions are not
satisfied then, notwithstanding the fact that the sale is a subsequent sale,
the exemption would not be admissible to such subsequent sales.This is the
scheme of section 6 of the CST Act, l 956."
The observation of the Hon„ble Apex Court at page 247 which has raised a
controversy is as follows:–
“The dividing line between sales or purchases under section 3(a) and those falling
under section 3(b) is that in the former case the movement is under the contract
whereas in the latter case the contract comes into existence only after the
commencement and before
termination of the inter-State movement of the goods." The Hon‟ble Apex Court was
only concerned with the limited issue of deciding as to the appropriate State entitled
to collect tax under section 9(1) of the CST Act when the sales were admittedly
covered by section 3(a) and the case was decided upon admitted facts, as
mentioned by the Assessing Authority. Neither the case was argued nor decided with
reference to section 6(2) of the Central Sales Tax Act. Hence, the observations made
at page 247 of Volume 19 VST cannot be treated as the decision of the Apex Court.
Requirements of Section 6(2) of Central Sales Tax Act
The conditions of Section 6(2) which are required to be seen and fulfilled for
claiming the exemption are as followsThe conditions of Section 6(2), which are required to be seen and fulfilled are as
follows: TAB BAR ASSOCIATION , UTTARAKHAND

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(i) First sale should either be under section 3(a) or a sale under Section 3(b) of the
Central Sales Tax Act;
(ii) The second or subsequent sale has to be a sale under section 3(b); (m) The
subsequent sale has to be made to a registered dealer;
(iv) The goods should be of a description referred to in section 8(3) of the CST Act;
(v) Form E-l has to be obtained from the selling dealer which is to be furnished by
the dealer effecting the subsequent sale by transfer of documents of title; and
(vi) Form „C‟ has to be obtained from the purchasing registered dealer; which has to
be furnished by the registered dealer effecting the subsequent sale, to the Assessing
Authority.
Apart from these conditions, there are no other conditions which are required to be
fulfilled for claiming the benefit of exemption under section 6(2) of the Central Sales
Tax Act, as held by Division Bench of Hon‟ble Delhi High Court in the case
of Mitsubishi Corporation India Pvt. Ltd. v. Value Added Tax Officer, which is
reported in 2010 Vol. 34 VST, page 417.
Earlier Judgments
In this connection, I rely upon a judgment of Hon‟ble Supreme Court in the case of
G. A. Galiakotwala & Co. (P) Ltd. v. The State of Madras, reported in 37 STC page
536. In the said case Hon„ble the Supreme Court was concerned with the question of
the transaction having been effected by transfer of document of title during interState movement in as much as the assessee had instructed the Bombay seller to
send the goods directly to the buyer of the dealer. The department case was that
the dispatch of the goods by the Bombay seller to the buyers of
the assessee should be treated as inter-State sale under Section 3(a) and, therefore,
section 6(2) will not be applicable.
Hon‟ble Apex Court while repelling the contention of the Department regarding
applicability of section 3(a) of the Central Sales Tax Act has observed as follows:–
“ ..... ..The mere fact that the goods were consigned by the Bombay seller to the
buyer mills as per the directions of the assessee will not make the transactions interState sales which have occasioned the movement of the goods.... “
Accordingly the Hon„ble Apex Court has held that the First sale by the Bombay seller
to the assessee is covered under section 3( a) while the second sale made by the
Company to its buyer by transfer of document of title is covered under section 3(b)
of the Central Sales Tax Act. The Hon‟ble Apex Court has held as follows:–
“We are, therefore, of the view that the sale by the seller of Bombay to the assessee
alone should be treated as an inter-Stale sale coming under section 3(a) and the
subsequent sale in respect of the same goods by the assessee to the buyer-mills
cannot be a sale under section 3(a) as it is not possible to say that the said sale is it
sale under section 3(a), it could only be a sale under section 3(b). Even otherwise
on the facts we have to hold that there has been a transfer of documents of title by
the assessee to the buyer-mills during the inter-State movement of the goods. Once
the assessee‟s sales are taken as coming under section 3(b), the jurisdiction of the
Madras State to assess the transactions cannot be challenged.”
Section 6(2) specifically provides that the subsequent sale made during the
movement of goods from one State to another by transfer of documents of title to a
registered dealer shall be exempt from payment of tax under Central Sales Tax Act.
Section 6(2) including the first proviso is reproduced below:–
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“6. Liability to tax on inter-State sales – (1) Subject to the other provisions
contained in the Act, every dealer shall with effect from such date as the Central
Government may, by notification in the official Gazette, appoint, not being earlier
than thirty days from the date of such notification, be liable to pay tax under this Act
on all sales of goods other than electrical energy effected by him in the course of
inter- State trade or commerce during any year on and from the date so notified;
Provided
(1-A) .......
(2) Notwithstanding anything contained in subsectio (1) or sub-section (1-A) where
a sale of any goods in the course of inter-State trade or commerce has either
occasioned the movement of such goods from one State to another or has been
effected by a transfer of documents of title to such goods during their movement
front one State to another, any subsequent sale during such movement effected by
a transfer of documents of title to such goods to a registered dealer, if the goods are
of the description referred to in sub-section (3) of section 8, shall be exempt from
tax under this Act. Provided that subsequent sale shall be exempt from tax under
this sub-section unless the dealer effecting the sale furnishes to the prescribed
authority in the prescribed manner and within the prescribed time or within such
further time as that authority may, for sufficient cause, permit.
(a) A certificate duly filled and signed by the registered dealer from whom the goods
were purchased containing the prescribed particulars in a prescribed form obtained
from the prescribed authority; and
(b) if the subsequent sale is made to a registered dealer a declaration referred to in
sub-section (4) of section 8.”
In the case of G.A. Galiakotwala & Co. (P) Ltd. (supra), the Hon‟ble Apex Court
has also considered this question at page 541 with reference to a transaction
mentioned above
where the goods were sent directly by the Bombay seller to the purchaser of the
assessee and the assessee has effected the subsequent inter-State sale by transfer
of document of title during the movement of goods from one State to another. The
Hon‟ble Apex Court at page 542 has held as follows :–
“The third contention of the appellant was that the appellant was entitled to
exemption in respect of the turnover under section 6(2) of the Central Act. Section
6(2) of the Central Act lays down that where a sale in the course of inter-State trade
or commerce of goods of the description referred to in section 8(3) of the Central
Act has occasioned the movement of goods from one State to another or has been
effected by transfer of documents of title to such goods during their movement from
one State to another, any subsequent sale to a registered dealer during such
movement effected by a transfer of documents of title to such goods shall not be
subject to tax under the Act. A dealer claiming exemption for subsequent sale during
the movement of goods from one State to another is required by section 6(2) of the
Central Act to furnish to the prescribed authority in the prescribed manner a
certificate duly filled and signed by the registered dealer by whom the goods were
purchased containing the particulars. In the present case, the appellant would be
entitled to exemption on production of appropriate form by the Bombay seller and
by showing that the buyer is a registered dealer.. .. “
However, in the aforesaid case since Form E-1 was produced from the Bombay seller
but Form-C was not produced from the buyer of the assessee to show that he was
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registered dealer in cotton, hence the benefit of exemption under Section 6(2) was
denied.
The principle of law clearly enunciated by Hon‟ble Apex Court on identical facts that
in respect of the inter-State sale made by transfer of documents of title if the
appropriate forms are produced from the Bombay seller and also from the purchaser
i.e. registered dealer, namely E- l, and „C‟, then the exemption can be granted under
section 6(2) of the Central Act.
Hon‟ble Gujarat High Court had an occasion to consider the identical fact with regard
to the second inter-State sale in the case of State of Gujarat v. Haridas Mujijik
Thakker, reported in l992 (Vol. 84) STC page 317, in which the assessee received
the orders from the purchasers of Gujarat for carbon dioxide cylinders or dry ice.
Thereafter assessee placed the purchase orders from Bombay suppliers which in turn
used to send the goods directly to the purchaser according to the instructions of the
assessee. The amount and rate charged by the assessee from its purchaser was
apparently higher than the rate and price by the Bombay seller for the same goods.
Even though the goods were sent directly to the customer of the assessee situated
at Surat and Ahmedabad but the Gujarat High Court has held that the sales by the
Gujarat dealer to its customer situate at Surat and Ahmedabad was an inter State
sale under section 3(b) of the Central Act and accordingly the second sale
was treated as inter-State under section 3(b) even though there was no actual
endorsement made by the dealer in favour of the customer.
According to me, it is not necessary to follow the procedure of the case decided by
the Gujarat High Court reported in 84 STC 317 where the constructive delivery is
deemed to have taken place in favour of the assessee and thereafter subsequent
delivery to its purchaser.
The scope of Section 3(b) of Central Sales Tax Act came up for consideration before
Hon‘ble Supreme Court in the case of Tata Iron & Steel Company Ltd. v. S. R.
Sarkar reported in 11 STR 655 (SC) in which the Hon‘ble Supreme Court has
observed at page 666 as follows:–
“The sale contemplated by clause (b) is one which is effected by transfer of
documents of title to the goods during their movement from one State to another;
Where the property in the goods has passed before the movement has commenced,
the sale will evidently not fall within clause (b); nor will the sale in which the
property in goods passed after the movement from one State to another has ceased
to be covered by that clause. Accordingly a sale effected by transfer of documents of
title after the commencement of movement and before its conclusion as defined by
the two termini set out in Explanation (1) and no other sale will be regarded as an
inter-State sole under section 3(b}.”
Again on page 673, it is clarified as under:–
“But under the Sales of Goods Act, if a document of title to goods is used in the
ordinary course of business as proof of possession or control of goods, endorsement
or delivery thereof according to mercantile practice will amount to delivery of the
goods thereby represented the transfer of documents contemplated by section 3(b)
is therefore such transfer as in law amounts to delivery of the goods. Transfer of
documents either by endorsement or delivery does contemplate transfer of title.”
The expression „document of title of goods‟ has been defined in section 2(b) of
the Sale of Goods Act as follows:–
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“a bill of lading, dock-warrant, warehouse keeper‟s certificate, wharfingers‟
certificates, railway receipt, warrant or order for the delivery of goods and any other
document used in the ordinary course of business as proof of possession or control
of goods, or authorising or purporting to authorise, either by endorsement or
delivery, the possessor or the document to transfer or receive goods thereby
represented.”
According to me a procedure should be followed that the document of title, namely,
GR/RR must be endorsed in favour of the purchaser without taking delivery of the
goods either from the transporter or from the railways and the documents of title
must be endorsed in favour of the purchaser during the movement of the goods
itself and delivery should be taken from the carriers by the Karnal purchaser.
Procedure to follow for Section 6(2) of C.S.T. Sales
The procedure to be adopted for effecting the sale by transfer of document of title
should be as follows :–
i.

There should he a movement of goods from one State to outside the State.

ii.

Ownership of the goods should be transferred during inter-State movement of
the goods after movement has started from the State, by transfer of
documents of title to the goods to the purchaser of the other State.

iii.

Transfer of document of title, namely, GR/ RR can be made by endorsement of
the said document in favour of the purchaser and/or delivery of documents of
title to the goods.

iv.

(iv) A written endorsement should be made for transferring document of title in
favour of the purchaser as follows:-

―The subsequent sale is being made to the registered dealer, namely,. . . .. (name
and address of the dealer) under section 6(2) of the Central Sales Tax Act (sale in
transit); hence GRJRR is transferred in favour of .... .... ..(dealer) to whom the
goods may be delivered."
In view of the specific provisions in Explanation I to Section 3(b) of the Central Sales
Tax Act, the movement of goods from one State to another shall commence at the
time of delivery of the goods to the transporter and shall terminate when the
delivery is taken from the transporter or bailees.
In other words, the movement of the goods shall be deemed to continue till the
goods are in possession of the transporter or bailee to whom the goods are delivered
for their movement from one State to another.
During this intervening period between the time of delivery from the
transporter/carrier, the actual endorsement should be made for which the relevant
evidence must be preserved.
Another Example :
Dealer of U.P. placed purchase order on a Delhi dealer and directed him to send the
goods to a dealer of Guwahati directly who shall be subsequent purchaser as
follows:
i.

Goods have been dispatched directly from Delhi to Guwahati.

ii.

Goods have not entered in the State of U.P. where the first purchaser, who has
purchased the goods from Delhi is satiated, and has made subsequent sales to
dealer of Guwahati.

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iii.

U. P. dealer has not used Form XXXVIII for importing the goods within the State
of U.P.

iv.

Entire goods have been sent directly from Delhi to Guwahati.

v.

GR was prepared directly from Delhi to Guwahati.

vi.

There is no evidence of delivery having been taken by the dealer of U.P. in the
State of U.P.

vii.

The GR had reached directly to the purchaser of Guwahati.

viii.

In the GR, consignors is Delhi seller and consignee is the U.P. dealer.

ix.

Form E-I has been obtained from the Delhi selling dealer and Form ‗C‘ has been
obtained by the U.P. dealer from the Guwahati purchasing dealer, which will be
furnished to the assessing authority.
In view of the aforesaid facts. it cannot be said that the delivery of the goods
has been taken by the dealer in the State of U.P. but U.P. dealer recorded the
purchase and subsequent sales in his account books.
According to me, admittedly sales were made by the Delhi dealer and the
invoice was raised in the name of the U.P. dealer, hence it was a first sale under
section 3(a) of the Central Sales Tax Act.
The second sale was made by transfer of document of title under section 3(b),
since the document of title viz. GR was in the name of the Delhi seller, who was
the consignor and the U.P. dealer was the consignee. Admittedly Form E-1 was
given by the Delhi selling dealer and Form ‗C‘ was given by the Guwahati
purchasing dealer, which it filed before the assessing authority of U.P. and
admittedly documents of title were transferred by the U.P. dealer in favour of
the Guwahati purchaser. lt will be clearly a second inter-State sale during the
movement of the goods from Delhi to Guwahati and the assessing authority of
U.P. cannot treat it as a first sale under section 3(a) of the Central Sales Tax
Act by the U.P. dealer to the Guwahati purchaser in view of the law laid down in
the case of G.A. Galiakotwala & Co. (P) Ltd. v. The State of Madras, reported in
37 STC page 536, decided by three Judges of the Supreme Court and also
by Mitsubishi Corporation Inditt Pvt. Ltd. v. Value Added Tax Officer, which is
reported in 2010 Vol. 34 VST, page 417. ‗
Which State – to assess and levy CST — in respect of sales u/s. 3(a)
and 3(b) of CST Act If the delivery is taken by the purchaser in Delhi i.e., the
place of the business of the selling dealer, still no tax can be imposed in the
State of U.P. in view of section 9( l) of the Central Sales Tax Act which provides
that the tax shall be levied in the State from where the movement of goods
commenced. Section 9(1), including the proviso, of the Central Sales Tax Act
provides as follows:–
“9. Levy and collection of tax and penalties – (1) the tax payable by any dealer
under this Act on sales of goods effected by him in the course of inter-State
trade or commerce, whether such sales fall within clause (a) or clause (b) of
section 3, shall be levied by the Government of India and the tax so levied
shall be collected by that Government in accordance with the provisions of subsection (2) in the State from which the movement of the goods commenced.
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Provided that, in the case of sale of goods during their movement from one
State to another being a sale subsequent to the first sale in respect of the same
goods and being also a sale which does not fall within sub-section (2) of section
6, the tax shall be levied and collected–
(a) where such subsequent sale has been effected by a registered dealer, in the
State from which the registered dealer obtained or, as the case may be, could
have obtained, the form prescribed for the purposes of sub-section (4) of
section 8 in connection with the purchase of such goods, and
(b) where such subsequent sale has been effected by an unregistered dealer, in
the State from which such subsequent sale has been effected.
If U.P. dealer has taken the delivery of the goods at the place of Delhi dealer
itself, hence it will be a sale within the State of Delhi and not the first interState sale under section 3(a) of the Act.
Even if it is treated as inter-State sale from Delhi to U.P., it shall be under
section 3 (a) of CST Act.
In this connection, a reference can be made to the case No. 3 of the judgment
of the Supreme Court in the case of Balabhagas Hulashchund, reported in 37
STC, page 207 at pages 214 & 215, which reads as follows:“Case No. III – B a purchaser in State Y, comes to State X and purchases the
goods and pays the price thereof. After having purchased the goods he then
books the goods from State X to State Y in his own name. This it also a case
where the sale is purely on internal sale having taken place in Slate X and the
movement of goods is not occasioned by the sale but takes place after the
property is purchased by B and becomes his property."
Identical question arose before then Supreme Court in the case of A & G
Projects, reported in 2009 (Vol. l9) VST, 239 at page 249, in which Hon‘ble
Apex Court has held as follows:
“13. The question before us is : if the sales stood covered under section 3(a)
and if they were not entitled to exemption under section 6(2), whether the
appellant could have been taxed by the Department by invoking the proviso to
section 9(1) of the CST Act, 1956? The object of section 9(1) is two-fold. Firstly,
it provides that the tax on inter-State sales under section 3(a) shall be levied by
the Government of India and collected by the State Government from which the
movement of goods commenced. Secondly, it specifies the appropriate State
competent to levy tax on second and subsequent sales made during the
movement of goods from one State to another as also the authority, where
such second and subsequent sales are exigible to tax. As stated above, section
6(2) of the CST Act, 1956 provides for subsequent sale to be exempt from tax
on the conditions prescribed therein. However, if and where those conditions
are not satisfied even such subsequent sales would attract tax and only in such
circumstances the proviso to section 9(1) which specifies the State, which is
competent to levy the tax, would come in. [See : Jadhavjee Laljee v. State of
Andhra Pradesh [I989] 74 STC 201 (AP) at page 204.] The proviso to section
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9(1) contemplates two situations, namely, (a) where such subsequent sale is
made by a registered dealer and (b) where such subsequent sale is made by an
unregistered dealer. In respect at situation (a), the proviso to section 9(1)
prescribes that the appropriate State competent to levy tax on such subsequent
sale shall be the State from which the registered dealer obtains a declaration in
C from where in the case falling in situation (b), it provides that the appropriate
State competent to levy the tax shall be the State from which such subsequent
sale has been effected. However, the entire proviso to section 9(l) applies
only to “subsequent sales” covered by section 3(b) and not to sales
under section 3(a) of CST Act, I 956.
14. Applying the above analysis to the facts of the case, we are of the
view that the proviso to section 9(1) of the CST Act, 1956 is not
applicable to the facts of the present case as the Assessing Officer has
categorically held that all the three sales fell under section 3(a) of the
CST Act, 1956. Once the said sales fall under section 3(a) then under
section 9(1) the tax has got to be collected by the State of Tamil Nadu
from which the movement of the goods commenced. The ease of the
appellant regarding subsequent sales effected during the movement of
the goods stood specifically rejected both by the Assessing Officer and
the FAA and, therefore, the question of taxing such sales under the
proviso to section 9(1) of the CST Act, 1956 did not arise. "
Conclusions
Even in such cases where the sales are made in the State of the first selling
dealer and thereafter the movement of goods takes places, as given in the
aforesaid example of a dealer in U.P. purchasing the goods from Delhi dealer,
the assessment cannot be made by the Assessing Authority of U.P. in view of
what has been held in para 14 of the judgment of the Supreme Court in A & G
Projects, quoted above.

subsequent
sales
Section 6(2) of Central Sales Tax Act

TAB BAR ASSOCIATION , UTTARAKHAND

under

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