Vinayak Patkar,

Querist ..... XYZ

My client has received a supply order for ` 20,67,20,000 from a customer in Gujarat for supply of certain equipments. Accordingly he had purchased the same from various vendors, one of them being at Mumbai. He had instructed the Mumbai-Vendor to despatch the items purchased by him directly from their works in Mumbai to Gujarat, where the customer is located. No one has disputed that there is an inter-State movement of goods. Mumbai-Vendor despatched the goods as instructed and sent the L/R to my client at Navi Mumbai. In turn he endorsed the L/R in Mumbai in favour of the customer and sent the same with his commercial invoice.

Thereafter my client approached the Mumbai-Vendor for issue of EI form against C form. We have obtained C form from the State of Maharashtra where we have declared our turnover, a copy of which has been provided to the Mumbai-Vendor. When we informed the Mumbai-Vendor to issue EI form they have refused to accept our Maharashtra C form on the ground that we must issue C form from the State of Gujarat since we are registered there. We had informed the Mumbai-Vendor that the said project is handled by our Projects Division which is based in Maharashtra and that our factory manufacturing other products which is located in Ankleshwar, Gujarat is in no way connected with the project handled from Mumbai.

Please opine on the correctness of the state from which the C form is to be issued


1. Your query regarding the appropriate State from which the C form is to be issued, is answered below.

2. You have informed that your client has endorsed the L/R at Navi Mumbai. He has endorsed the same with an intention to effect transfer of property in the goods represented by the L/R. He has evidence to that effect.

3. The customer from whom your client has purchased the goods, which were thereafter sold by endorsing the L/R [u/s. 6(2) of the C.S.T. Act ], has refused to accept the C form issued by your client from the State of Maharashtra, since according to him, such Form is required to be issued from the State of Gujarat wherein goods would be ultimately delivered and your client holds registration in that State in addition to the State of Maharashtra.

4. His view is probably based on Rule 12(6) of the C.S.T. (Registration and Turnover) Rules, 1957, which states that, in inter-State sales, the C form should be obtained by the purchasing dealer in the State in which the goods covered by such Form are delivered. The rule further states that such Form can be obtained from any other State only in cases wherein the Purchasing Dealer is not registered in the delivery State.

5. I do not subscribe to this view, though some Revenue authorities are also holding the same view. In my view, Rule 12(6) operates only in a case covered by section 3(a) of the Act. The moment section 3(b) applies to that transaction, section 3(a) ceases to operate. This is because u/s. 3(b), the physical delivery of the goods is not at all contemplated. The first purchaser, who transfers the L/R, does not take delivery of goods, but sells the goods without taking delivery. If he takes delivery, then there is no question of applying section 3(b).

6. This issue can be viewed also from another angle. Kindly see the following observations of the apex court in Tata Iron and Steel Co. Ltd. vs. S.R. Sarkar and Others reported in 11 STC 655 on Page 672 :

"…. under The Sale of Goods Act, if a document of title to goods is used in the ordinary course of business as proof of the possession or control of goods, endorsement or delivery thereof according to mercantile practice will amount to delivery of the goods thereby represented. The transfer of documents contemplated by section 3(b) is therefore, such transfer as in law amounts to delivery of the goods." (Emphasis supplied)

7. Thus, if your client has transferred the documents in Maharashtra, the delivery of goods in law to your client is in the State of Maharashtra and even applying the said Rule 12(6), your client is required to issue C form from the State of Maharashtra.

8. Now kindly see the proviso to section 9(1) of the C.S.T. Act, 1956 which reads as under :

"Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected –

(a) Where such subsequent sale has been effected by a registered dealer, in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed for the purpose of sub-section (4) of section 8 in connection with the purchase of such goods;"

9. Your client has obtained C form from the State of Maharashtra in connection with the purchase of goods from THE MUMBAI-VENDOR. They will have to give you E-I Form considering the legal position as explained hereinabove.

10. Your client’s sale u/s. 6(2), if fails due to the non-receipt of declaration/s, the State of Maharashtra will have jurisdiction to levy tax on the same.

11. Kindly now see the judgment of the Calcutta High Court in the case of State of West Bengal and Others vs. The Joshi Jute Corporation and Another reported in 100 STC 17. In this case, the subsequent sale was effected in the State of first purchase (West Bengal – Calcutta) and the Court directed the Department to issue C forms relating to such purchases. Also see the judgment of the Kerala High Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam vs. Indian Hardware Stores reported in 132 STC 431. In this case, the assessee registered under the Kerala State had issued C form to the Calcutta supplier for the purchase of goods to be sent to the buyer in Tamil Nadu. The goods were sent directly to the buyer in Tamil Nadu by the Calcutta supplier. The buyer in Tamil Nadu failed to issue C form. The Court held that the State of Kerala had jurisdiction to levy tax on such subsequent sale, because the assessee had obtained C form pertaining to the first purchase from the State of Kerala.