Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1941

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, P.V. Subba Rao, Technical Member
Kimberly Clark Lever Pvt. Ltd. – Appellant
Versus
State of Maharashtra – Respondent
CENTRAL SALES TAX APPEAL NO. 12 OF 2015|CENTRAL SALES TAX APPEAL NO. 13 OF 2015

Advocates:
For the Appellants/Petitioners: Naresh Thacker, Kumar Visalaksh, Supreme Kothari, Udit Jain, Vibhor Sharma
For the Respondents: Rama Ahluwalia, C. Kranthi Kumar, Misha Rohatgi, Madhumita Bhattacharjee, B. Jagat Nayan, M.L. Garg, Pritha Srikumar Iyer, Shubhaush Thakur, Soumyajit Pani, Aishwary Bajpai, Varun, Nishe Rajen Shonker, Devika A.L., Surjendu Sankar Das, Vishwajeet Singh Shekawat, Ankit Roya, Marinalini Ramesh, Vibhan Vyas, Syed Haider Shah

The movement of goods from a manufacturing facility to branch depots is a stock transfer rather than an inter-state sale when initial agreements lack specific quantities or prices and act as standing offers. Sales only occur upon the acceptance of individual purchase orders at the depot level.

Headnote:(A) Central Sales Tax Act, 1956 - Section 3(a) - Assessment of inter-state trade or commerce - Meaning of inter-state sale - Principle of just-in-time supply - Inter-state movement of goods from manufacturing unit to depots is not an inter-state sale unless it is a result of a prior contract of sale - Mere framework agreements or standing offers that do not specify quantity, date or price do not constitute a contract of sale that would occasion the movement of goods. (Paras 24, 25, 26, 27)

(B) Evidence and Documentation - Proof of stock transfer - Rejection of statutory declarations for minor procedural defects - Statutory declarations or documents providing evidence of dispatch should not be invalidated for missing details that are otherwise available on record, such as transport documents - Compliance with substantive requirements of law is paramount. (Para 36)

Facts of the case:
The appellant manufactures goods and distributes them through a network of buffer and satellite depots across various states. The revenue authorities treated the movement of goods from the manufacturing unit to these depots as inter-state sales, alleging these were prompted by pre-determined agreements with a distributor. The appellant contended these were mere stock transfers for inventory replenishment, as sales occurred only at the depot level upon receipt of specific, variable purchase orders. The appellate tribunal below had previously determined these to be inter-state sales.

Findings of Court:
The court found that the overarching agreements acted merely as a framework or standing offer without binding obligations regarding quantity or price. Actual sales occurred only when specific purchase orders were accepted at the depot level. Consequently, the initial transfer from the factory to the depots was a bona fide stock transfer.

Issues: Whether the movement of goods from the manufacturing entity's home state to its depots in other states constituted an inter-state sale under the relevant tax act or merely a stock transfer, and whether statutory declarations could be rejected for minor procedural omissions.

Ratio Decidendi: For a transaction to be an inter-state sale, the movement of goods must be occasioned by a prior contract of sale. Where agreements are merely standing offers (lacking specific quantity/price), the actual contract of sale arises only upon the issuance of purchase orders at the destination depot. Therefore, movement prior to such specific orders constitutes stock transfer, not an inter-state sale. Furthermore, procedural lapses in statutory forms should not lead to the rejection of genuine proof of dispatch.

Result: Appeals allowed.

Table of Content
1. distribution agreements without specified quantities are standing offers. (Para 7 , 8 , 9 , 10)
2. assessment of branch stock transfers requires verification of actual sales. (Para 11 , 12 , 13)
3. inter-state sale requires movement resulting from a binding contract. (Para 14 , 15 , 16 , 17 , 18)
4. stock transfer occurs when movement precedes specific purchase indent. (Para 19 , 20 , 21 , 22)
5. movement of unascertained goods to depots constitutes valid stock transfer. (Para 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35)
6. minor defects in statutory forms do not invalidate stock transfer claims. (Para 36 , 37 , 38)

JUSTICE DILIP GUPTA:

CST Appeal No. 12 of 2015 has been filed by M/s. Kimberly Clark Lever Pvt. Ltd.¹1. the appellant to assail the order dated 15.12.2014 passed by the Maharashtra Sales Tax Tribunal at Mumbai²2. the Maharashtra Sales Tax Tribunal in VAT Appeal No. 59 of 2011 relating to the assessment order dated 10.02.2011 passed by the Deputy Commissioner of Sales Tax, Large Tax Payers Unit-I, Pune³3. the Deputy Commissioner for the assessment year 2005-06.

2. The operative part of the order is reproduced below:

“The Vat Appeal bearing no. 59 of 2011 is partly allowed. The goods transferred outside Maharashtra State from factory for handing over to Hindustan Lever Ltd. company are nothing but interstate sale liable for levy of C.S.T. at appropriate rate for which the matter is remanded back to the Assessing authority with a direction that he should ascertain the goods transferred for effecting sale Canteen Store Department and other retailers as per list submitted by appellant and agreements made with them if the appellant is able to furnish duly filled in F Forms and other relevant details. The Assessing authority is also directed to refer the D.D.Q. order bearing No. 11-2010/Adm-3/10/B-1 dated 07-12-2010.”

3. The relief claimed is to treat the movement of goods from the State of Maharashtra to other States as stock transfer. It is reproduced below:

“i) the order of MS Tribunal dated 16.12.2014 (Exhibit-A read with Exhibit-A-1) and the order of the Assessing Officer dated 10.02.2011 (Exhibit-B) are bad in law and the same may be quashed and set aside.

ii) both the Lower Authorities erred in law and on facts while disallowing the stock transfer of Rs. 105,42,61,155/- duly supported by ‘F’ Forms produced and available on record and treating the same as a pre-determined inter-State sale and imposing a tax on the same, total amounting to Rs. 10,94,25,133/- under the CST Act. Therefore on facts, the transactions be allowed as OMS Stock Transfers and the tax levied be deleted in the present appeal.”

4. CST Appeal No. 13 of 2015 has been filed by the appellant to assail the order dated 15.12.2014 passed by the Maharashtra Sales Tax Tribunal in VAT Appeal No. 423 of 2013 relating to the assessment order dated 29.06.2013 passed by the Deputy Commissioner for the assessment year 2008-09.

5. The operative part of the order is reproduced below:

“The Vat Appeal bearing No. 423/2013 is partly allowed and the goods transferred outside the Maharashtra State from factory for handing over to Hindustan Lever Ltd. company are nothing interstate sale liable for levy of C.S.T. at appropriate rate for which the matter is remanded back to the Assessing authority with a direction that he should ascertain the goods transferred for effecting sale to Canteen Store Department and other retailers as per list submitted by appellant and the agreements made with them if the appellant is able to furnish duly filled in F Forms and other relevant details. Appellant is also directed the referred D.D.Q. mentioned herein above.”

6. The relief claimed is to treat the movement of goods from the State of Maharashtra to other States as stock transfer. It is reproduced below:

“i) the order of MS Tribunal dated 16.12.2014 (Exhibit-A read with Exhibit-A-1) and the order of the Assessing Officer dated 29.06.2013 (Exhibit-B)

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2026 Supreme(Online)(CESTAT) 1941

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNALDilip Gupta, President, P.V. Subba Rao, Technical MemberKimberly Clark Lever Pvt. Ltd. – AppellantVersusState of Maharashtra – RespondentCENTRAL SALES TAX APPEAL NO. 12 OF 2015|CENTRAL SALES TAX APPEAL NO. 13 OF 2015

The movement of goods from a manufacturing facility to branch depots is a stock transfer rather than an inter-state sale when initial agreements lack specific quantities or prices and act as standing offers. Sales only occur upon the acceptance of individual purchase orders at the depot level.

Cases Referred (1)

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, P.V. Subba Rao, Technical Member
Kimberly Clark Lever Pvt. Ltd. – Appellant
Versus
State of Maharashtra – Respondent
CENTRAL SALES TAX APPEAL NO. 12 OF 2015|CENTRAL SALES TAX APPEAL NO. 13 OF 2015