Central Sales Tax not applicable on Mere Stock Transferring of Beer from Manufacturing Units to depots situated in other State: CESTAT rules Carlsberg India Pvt. Ltd [Read Order]

In a ruling in favour of Carlsberg India Pvt. Ltd, the Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that Central Sales Tax is not applicable on mere stock transferring of beer from manufacturing units to depots situated in other State.

 Carlsberg India Pvt. Ltd, United Breweries Ltd and Mount Shivalik Industries Ltd, the three appellant assessees filed the appeal challenging the order passed by the Rajasthan Tax Board. The issue involved in these appeals relates to demand of central sales tax on movement of goods from the manufacturing units of the appellants situated in the State of Rajasthan to their depots in the State of Bihar and the State of Jharkhand. The impugned order has treated the movement to be arising out of inter-state supply of goods instead of inter-state stock transfers as claimed by the appellants.

The appellants hold licenses for manufacture and sale of liquor under the Rajasthan Excise Act, 1950  and are also registered dealers under the Rajasthan Value Added Tax Act, 2003  as well as under the Central Sales Tax Act, 1956 . The appellants manufacture beer under various brand names at their breweries located in the State of Rajasthan.

The State of Bihar framed a policy known as the Liquor Sourcing Policy  for sourcing of all kinds of liquor, including beer. Clause 6 of the Liquor Policy provides that the supplies to the Corporation shall be based on Order for Supply9, to be issued by the Corporation. The Corporation issues OFS on the local depots of the appellants situated in State of Bihar for supply of specified quantity of the beer. The OFS has a validity period within which goods are required to be delivered to the depots of the Corporation.

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A person desiring to sell liquor in the State of Bihar is also required to enter into a Master Agreement with the Corporation in terms of the Liquor Policy. The Master Agreement provides that the quantity of beer to be procured and distributed shall be determined by the Corporation from time to time keeping in view the demand of beer supplied by the manufacturer and the manufacturer has to bottle, seal, pack, load, transport, unload and stock the beer at the depots of the Corporation at its cost and risk. Delivery has to be in line with the OFS placed by the Corporation and shall be completed within the period specified by the Corporation.

Carlsberg alleged that in order to comply with the requirement of maintaining a minimum stock of beer at the local depots in the State of Bihar and also to ensure delivery of beer to the Corporation within the validity period prescribed in the OFS, it effected inter-state stock transfers of beer from its factory in the State of Rajasthan to its depots in the State of Bihar from time to time through Form-F, depending on an estimated market demand. Accordingly, Carlsberg treated transfer of beer from its factory in the State of Rajasthan to its depots in the State of Bihar as stock-transfer.

Carlsberg believed that such movement of goods was not occasioned by reason of any sale agreement. The sale of goods from its depots in the State of Bihar to the Corporation in terms of the OFS issued by the Corporation was treated by Carlsberg as local sale in the State of Bihar, on which local VAT at the rate of 50% was paid. 

The facts pertaining to the other two companies, namely United Breweries and Mount Shivalik are stated to be similar except that they had depots in the State of Jharkhand also, which State had a liqour policy like the State of Bihar.

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In respect of supplies from within State or outside the State, the manufacturer/supplier or their authorized representatives shall, after the issue of OFS., deposit the Import Fee, Excise Duty and other applicable duties/ fees for their respective brands with the Excise Department and obtain required transport permit to ensure delivery. Manufacturers/Suppliers may please take note that they are responsible for remitting/ depositing the correct quantum of duties/ fees and that they are liable for any short payment of duties.

It was found that Clause 10.1 of the Liquor Policy clearly provides that the supply of beer to the Corporation against OFS shall be construed as an agreement to sell under section 4(3) of the Sale of Goods Act. Clause 5A of the License also requires Carlsberg to maintain a minimum stock of liquor at its depots in the State of Bihar as prescribed by the Corporation from time to time and to recoup the stock within seven days in case it goes below the minimum limits.

It was observed that Carlsberg is, justified in asserting that in order to comply with the requirement of maintaining a minimum stock at the local depots in the State of Bihar and also to ensure the delivery of beer to the Corporation within the validity period prescribed in the OFS, it has to effect inter-state stock transfer of beer from its factory in the State of Rajasthan to its depots in the State of Rajasthan from time to time through Form-F.

The movement of goods from the State of Rajasthan to the depots of Carlsberg in the State of Bihar, therefore, cannot be said to have been occasioned by reason of any sale agreement. The appellants treated the sale from its depots in the State of Bihar to the Corporation in the State of Bihar as sale and paid local VAT.

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A two member bench of the Justice Dilip Gupta, President and P.V. Subba Rao, Member (Technical) held that the movement of goods cannot also be considered incidental to the Master Agreement. Further held that reliance on clause 2 of the Master Agreement to justify that the movement of goods occurred incidental to the Master Agreement, is not correct.

The CESTAT set aside the order and allowed all the fourteen appeals filed by Carlsberg, United Breweries and Mount Shivalik..

To Read the full text of the Order CLICK HERE

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