TN to Kerala Transfers Deemed Inter-State Sales, Not Branch Transfers: CESTAT Confirms CST Liability as D7 Records Reveal Pre-Arranged Orders for Sales [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the central sales tax liability, confirming that goods transfers from Tamil Nadu to Kerala were inter-state sales and not branch transfers citing D7 records revealing pre-arranged orders for sales.

Ansa Cosmochems, the appellant is a proprietary concern manufacturing talcum powder under the brand name “Z,” filed an appeal challenging the Tamil Nadu Sales Tax Appellate Tribunal's (TNSTAT) order partially allowing their appeal.

The case arose from the appellant’s claim for CST exemption on goods transferred from their manufacturing unit in Coimbatore, Tamil Nadu, to their branch in Palakkad, Kerala. The appellant argued that these were branch transfers, not sales.

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The department’s counsel claimed that the movement of goods was occasioned by pre-arranged sales to Argus Cosmetics, a Chennai-based company, so it was qualifying as inter-state sales.

The department’s counsel relied on D-7 records recovered during an inspection, including slips, notebooks, and correspondence, to show pre-arranged orders from Argus Cosmetics. The department argued that these transactions were performed for sales, and payments from Argus to the appellant’s head office in Tamil Nadu further established the linkage.

The appellant’s counsel argued that the branch transfers were legitimate and not sale-linked. They submitted Form F as evidence to claim CST exemption..

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The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) reviewed the D-7 records, correspondence, invoices, and prior judgments, including Indian Oil Corporation Ltd. v. Union of India (47 STC 1) which established principles for determining inter-state sales.

The tribunal observed that the evidence including dispatch instructions and payments, clearly linked the goods’ movement to sales to Argus Cosmetics. The tribunal held that the appellant failed to discharge its burden under Section 6A of the CST Act to prove that the transfers were not sales. The tribunal dismissed the appellant’s appeal.

To Read the full text of the Order CLICK HERE

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