The judgment established that sales in transit under Section 6(2) of the CST Act are not subject to VAT if the conditions of inter-State movement and documentation are met, emphasizing the legitimacy of endorsed transfers without requiring actual delivery.

O R D E R

Dated this 18th day of March, 2021 S.V.BHATTI,J.

Revenue is the petitioner. The petitioner assails the order of Kerala Value Added Tax Appellate Tribunal, Ernakulam in T.A(VAT) No.52/2014 dated 04.12.2015. The issue arises pursuant to the order of Intelligence Officer No.OR-I-550/10-11 Dated 17.12.2010. The Intelligence Officer, Ernakulam through the order in Annexure-A rejected the claim of assessee/respondent for exemption under Sec.6(2) of the Central Sales Tax Act, 1956 (for short, the CST Act) and imposed penalty of Rs.15,27,625/- on the respondent. The respondent questioned the order of penalty in Annexure-A before the Assistant Commissioner(Appeals), Ernakulam, the decision thereon resulted in order in Annexure B, setting aside the penalty and allowing the appeal filed by the respondent. The revenue filed T.A(VAT)No.52/2014 and through Annexure-C, the appeal filed by the revenue was dismissed.

Hence, the O.T. Revision.

2. The circumstances leading to the imposition of fine in Annexure-A, are considered in sufficient detail by all the three authorities. By choice and also to avoid burdening the judgment, the detailed narrative of circumstances leading to the issue of order in Annexure-A is not undertaken, but the following few circumstances are stated to understand the controversy that has arisen under Sec.6(2) of CST Act.

3. The respondent is a registered dealer and an assessee under the Kerala Value Added Tax Act, 2003 (for short, the KVAT Act). The Intelligence Officer, Kollam, on 18.04.2010, intercepted a vehicle bearing No.KL7 BK 2525 and on verification of documents, the Intelligence Officer found that the consignment in transit consists of hydraulic excavator and hydraulic rock breaker purchased by M/s.Sree Venkiteshwara Heavy Equipments, Tripunithura, Kochi/assessee from the manufacturer i.e., M/s. Hyundai Constructions Equipments, Pune, Maharashtra against the C Form as per invoice No.1110100386 dated 12.06.2010 and 90006602 dated 11.08.2010. The sale invoice No.361 dated 14.08.2010 in Form No.8A prescribed under Rule 58(10) of the KVAT Rules 2005, issued by the assessee shows that the subject consignment was sold to M/s.Charuvila Metal Crusher, Kuttikkad P.O, Kadakkal, Kollam.

4. The case of Department is that the sale by assessee/respondent in favour of M/s.Charuvila Metal Crusher is an intra-State sale and liable to tax under KVAT Act. The case of respondent is that the consignment was despatched from the factory premises on 12.08.2010. The invoice dated 12.08.2010 shows that the respondent is the purchaser. The subject consignment was meant for M/s.Charuvila Metal Crusher and the assessee transferred goods in transit under an endorsement in favour of M/s.Charuvila Metal Crusher. Therefore, the transfer endorsement is covered by Sec.6(2) of CST Act and the transfer cannot be treated as occasioning sale or transfer falling under KVAT Act, 2003. The subject matter of enquiry included change of vehicle for transportation from No.KL 7 BK 2525 to TN-28 AB-

1344.

5. The case of respondent/assessee is that the place where M/s. Charuvila Metal Crusher is located in a remote hilly area and commensurate to the road conditions, the equipment had been shifted/changed from Vehicle No.KL 7 BK 2525 to vehicle No.TN-28 AB-1344. The Intelligence Officer rejected the case of assessee and levied penalty of Rs.15,27,625/-. The First Appellate Authority and the Tribunal are consistent in their view that imposition of penalty, in the facts and circumstances of the case, is unsustainable, incorrect and illegal. Hence the revision.

6. Senior Government Pleader, Mr.Shamshudeen argues that from the explanation given by the assessee, it is evident that the purchase of subject equipment by the respondent/assessee is pursuant to a per-purchase order or arrangement between the assessee and M/s. Charuvila Metal Crusher. In such cases, Sec.6(2) of the CST Act is unavailable and need to pay tax. According to him, it is an essential eleme