Issuance of form e-1

Section 6(2)

Notwithstanding anything contained in sub-section (1) or sub-section (1A), 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 descriptttttion referred to in sub-section (3) of section 8, shall be exempt from tax under this Act.

No you will not be required to issue Form E1 to the buyer as the condition mentioned in section 6(2) [highlighted in yellow] is not fulfilled.

In order to fulfil condtions of section 6(2) the first sale should be interstate sale which in your case is a local sale (within the state).

You will charge VAT to the buyer and you will not get any Form C from the buyer.

An expert may confirm.

shivani

shivaniadream @ gmail.com

Thanks Shivaniji for your valuable reply.

Even i was of the same understanding but there is a contradictory judgement by Maharashtra Sales Tax Tribunal on the said matter:

M/s. Fatechand Chaturbhujdas vs. State of Maharashtra (S.A.894 of 1990 dated.12-8-1991) decided by Maharashtra Sales Tax Tribunal :- In this case the local party purchased goods from other local party and directed the same to be despatched to outside State party. Even though local party was shown as consignor, taking the view that while placing order there is term for outside place dispatches, Maharashtra Sales Tax Tribunal heldthat the sale between two local parties is first interstate sale and the sale by local party to outside party is subsequent interstate sale, duly exempt u/s. 6(2).

And infact during the course of assessment of one of our customer (with whom we are having the said arrangement) the sales tax authorities have raised question on not receiving the E-1 Forms.

So now i am really concerned whether the said transactions do come under the net of Sec 6(2) or is there any any way to fight the case.

I feel the Tribunal is right because as per the contract of sale the goods are bound to move from one state to another and if you look at section 3 interstate sale is one that ocassions the movement of goods from one state to another. So the first sale (in light of the new information given by you) will be interstate sale and the subsequent sale will be exempt under section 6(2).

So the

first sale is interstate sale (section 3)

you will issue form E1 and receive Form C.

shivani

shivaniadream @ gmail.com