Absence of Contractual Obligation Shows Branch Transfer, Not Inter-State Sale: CESTAT Remands Matter [Read Order]
CESTAT held that the absence of a contractual obligation made CMS Computer’s transfers branch transfers, remanding the case for verification of exemption under Notification 6/2002-CE.
CESTAT - obligation - Taxscan
CESTAT - obligation - Taxscan
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has remanded the matter involving M/s CMS Computers Ltd. for verification, after observing that the absence of a contractual obligation indicated that the movement of goods from the Noida unit to the Mumbai unit was a branch transfer and not an inter-State sale, thus entitling the assessee to exemption under Notification No. 6/2002-CE dated 1.3.2002.
The assessee-appellant, CMS Computers Ltd., engaged in computer systems and also carries out manufacturing, trading, leasing, and works contract activity across India.
The case arose when the Department alleged that CMS Computers cleared goods manufactured at its Noida unit under the claim of “stock transfer” to its Mumbai branch, but in fact effected inter-State sales to customers. It was alleged that the benefit of the notification was wrongly availed.
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The adjudicating authority confirmed the demand of duty along with interest and penalty, holding that the goods were actually cleared for inter-State sale and not stock transfer.
On appeal, the Commissioner (Appeals) upheld the order, finding that there was a direct nexus between the movement of goods and the sale to customers, and therefore the exemption was not available.
The assessee argued that the transfers were only branch transfers and not by any prior contract of sale. It contended that there was no evidence of any contractual obligation requiring the goods to move from Noida to Mumbai for delivery to buyers.
The assessee also submitted that the demand was raised without proper verification of records, such as Form-F declarations, invoices, and correspondence, which could establish the branch-transfer nature of the transactions.
The Tribunal observed that the main issue was whether the movement of goods from Noida to Mumbai was occasioned by a contract of sale. It noted that no document had been brought on record by the Department to establish such a contractual obligation.
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The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) emphasized that in the absence of such proof, the movement should be treated as a branch transfer, which would entitle the assessee to exemption under Notification No. 6/2002-CE.
However, since complete verification of the relevant records had not been carried out, the Tribunal remanded the matter to the adjudicating authority for fresh adjudication.
Accordingly, Accordingly, the appeal was allowed by way of remand for fresh adjudication.
The assessee was represented by Rama Ahluwalia, while Rahul S. Thakkar represented the revenue.
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