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When sale is complete

Preeti (Consulting) (159 Points)

12 December 2007

A has made inter state sale to B and the goods are dispatched by him on "A" 30th April ,2007 and received by B on 2 May,2007 .

When the CST liability will arise ?

Date of dispatch of goods i.e 30th April,2007 OR

Date of when goods delivered to B i.e 2nd May , 2007.

Please furnish the source also of reply , if u can .

Thanks

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6 Replies

manoj (service) (35 Points)
Replied 13 December 2007

When the bill is raised on 30th April then the rules & regulations will be applicable of 30th April. Sale is complete or not is a separate issue of sale but legally cst should be applicable on 30th April.

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Ravishankar (C.A) (454 Points)
Replied 13 December 2007

Tax Liability arises as soon as the Bill/Invoice is raised - here the taxable event is raising of the invoice and not delivery of the goods

CA. O.P. Agarwalla (C.A.) (2916 Points)
Replied 13 December 2007

CST is leviable on Compoleted Sales. Date or time of completion of sales depends on the terms of contract between seller & buyer. Further, Section 2(g) (as amended in w.e.f. 11-5-2002) define that sale with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes ........ Hence the time of transfer of property may be treated as time of completion of sale or time of CST liability. Regarding time of sales. AVAT Act Says:- (1) Notwithstanding anything contained in the Sale of Goods Act, 1930 (Central Act 3 of 1930), for the purpose of this Act, the time of sale of goods shall be deemed to be the earliest of the following,— (a) issue of the tax invoice; (b) receipt of payment, in full or in part; (c) transfer of title or possession of the goods or incorporation of the goods in the course of execution of any works contract. However, I dont think that any section in local VAT Act can determine the time of completion of sales under CST Act. Sale of Goods Act (3 of 1930), section 4 says as under:- Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional (3) Where under a contract of sale the property in the goods in transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. It is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods or takes place while the goods are in transit. What is important is that movement of goods and the sale must be inseparably connected - CST, UP v. Bakhtawar Lal Kailash Chand Arhti - (1992) 87 STC 196 = 1992 AIR SCW 2246 = AIR 1992 SC 1952 = JT 1992 (4) SC 388 (SC 3 member bench) [In Balabhgas Hulaschand v. State of Orissa (1976) 37 STC 207 (SC) = AIR 1976 SC 1016 = (1976) 2 SCC 44 = 1976 2 SCR 939, it was held that concluded sale should take place in a State which is different from the State from which goods move. However, now the later judgment (i.e. 1992 judgment) should prevail. Even if goods move from one state to another in pursuance of agreement to sale and the sale is completed in the State in which goods are received, it will be an inter-State sale. - Balabhgas Hulaschand v. State of Orissa 1976 2 SCR 939 = (1976) 37 STC 207 (SC) = AIR 1976 SC 1016 = (1976) 2 SCC 44. [However, this would be so only if there is stipulation in the agreement regarding transfer of property in goods]. Sale need not precede the inter-State movement. Sale can be either before the movement or after the movement. - Oil India Co. Ltd. v. Superintendent of Taxes (1975) 3 SCR 797 (SC) = AIR 1975 SC 887 = (1975) 35 STC 445 (SC). It is immaterial in which State the property in the goods is passed. It is not necessary that inter-State movement must precede the sale - ITC Classic Finance and Services v. CCT - (1995) 97 STC 330 (AP HC) * English Electric Co. of India Ltd. v. Dy CTO - (1976) 38 STC 475 (SC) = AIR 1978 SC 19 = (1977) 1 SCR 631 * ONGC v. State of Bihar - (1976) 38 STC 435 (SC) = AIR 1976 SC 2478 = (1977) 1 SCR 34.

MAHESH (SERVICE) (42 Points)
Replied 13 December 2007

U/s 6 of CST Act, liability to pay CST arises as soon as an inter-state sale is made. An inter-state-sale as per sec 3 is a sale which occasions the movement of goods from one state to another.Further as per sec 2(g) sale means transfer of ownership in goods for a consideration. Thus CST is payable when the sale is complete, in the instant case on delivery.

However for administrative convenience CST is paid on raising of the invoice which is normally done on despatch.If the goods are not accepted by the customer in a FOR detination contract,, there is no sale and hence no question of payment of CST.If CST is paid in such cases on despatch, the time limit of 6 months does not apply as per the decision of Kolkata high court in Metal Box case as this is a case of rejection and not return.