CENTRAL SALES TAX ACT, 1956
(1) This Act may be called the Central Sales Tax Act, 1956.
(2) It extends to the whole of India 1[***]
(3) It shall come into force on such date2 as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act.
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1. The words “except the State of Jammu and Kashmir” omitted by Act 5 of 1958, sec. 2 (w.e.f. 13-3-1958).
2. Came into force on 5-1-1957, all sections except section 15, vide S.R.O. 78, dated 4th January, 1957, published in the Gazette of India, Extra., 1957, Pt. II, Sec. 3, p. 57. Section 15 came into force on 1-10-1958, vide G.S.R. 897, dated 23rd
In this Act, unless the context otherwise requires,—
(a) “appropriate State” means—
(i) in relation to a dealer who has one or more places of business situated in the same State, that State;
(ii) in relation to a dealer who has 1[***] places of business situated in different States, every such State with respect to the place or places of business situated within its territory;
2[***]
3[(aa) “business” includes—
(i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carri
A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase—
(a) occasions the movement of goods from one State to another; or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.
Explanation 1.—Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2.—Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State t
(1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all
other States.
(2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State—
(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and
(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.
Explanation.—Where
(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
1[(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deeme
[(1)] Subject to the other provisions contained in this Act, every dealer shall, with effect from such date2 as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales 3[of goods other than electrical energy] effected by him in the course of inter-State trade or commerce during any year on and from the date so notified:
4[Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5 is a sale in the course of export of those goods out of the territory of India.]
5[(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or comm
(1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods 2[and if the dealer fails to furn
(1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.
1[(2) Any dealer liable to pay tax under the sales tax law of the appropriate State, or where there is no such law in force in the appropriate State or any part thereof, any dealer having a place of business in that State or part, as the case may be, may, notwithstanding that he is not liable to pay tax under this Act, apply for registration under this Act to the authority referred to in sub-section (1), and every such application shall contain such particulars as may be prescribed.
Expla
1[(1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be three per cent. of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower:
Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section.]
2[(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the
(1) In determining the turnover of a dealer for the purpose of this Act, the following deductions shall be made from the aggregate of the sale prices, namely:—
(a) the amount arrived at by applying the following formula—
rate of tax × aggregate of sale prices `
_____________________________
100 + rate of tax
Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.
&
The amount of tax, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act shall be rounded off to the nearest rupees and, for the purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise, it shall be ignored:
Provided that nothing in this section shall apply for the purpose of collection by a dealer of any amount by way of tax under this Act in respect of any sale by him of goods in the course of inter-State trade or commerce.]
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1.Ins. by Act 61 of 1972, sec. 7 (w.e.f. 1-4-1973).
No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of inter-State trade or commerce any amount by way of tax under this Act, and no registered dealer shall make any such collection except in accordance with this Act and the rules made thereunder.]
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1. Ins. by Act 31 of 1958, sec. 6 (w.e.f. 1-10-1958).
(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provision of sub-section (2), in the State from which the movement of the goods commenced:
2[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 th
Section 9 of the Central Sales Tax (CST) Act, 1956, forms the core statutory provision governing the levy and collection of central sales tax on inter-state sales of goods. It provides the machinery for assessing, levying, and recovering tax and penalties, aligning with the broader constitutional framework and state laws. The section is pivotal in defining the scope of CST, the procedural aspects of assessment, and the legal boundaries within which tax authorities operate.
Section 9 primarily prescribes:- The levy of tax on sales in the course of inter-state trade or commerce.- The machinery for assessment, reassessment, collection, and enforcement of tax.- The applicability of state law provisions for assessment and penalties, with certain validations and exclusions.- The procedural safeguards, including notices, appeals, and penalties, for dealers involved in interstate transactions.
"Scope of Assessment Machinery" - Section 9 adopts state law machinery for assessment, and courts have upheld its validity, clarifying that penalties cannot be levied unless explicitly provided—penalties for delay or default require specific provisions. [Section 9, ]
"Assessment Validity" - Courts have confirmed that assessments made under Section 9 are valid when based on proper procedures, and re-assessment within four years from the relevant year is permissible, as per Rule 6(7) of CST Rules. [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes]
"Assessment Limitations" - The period for re-assessment is generally four years from the expiry of the assessment year, and any assessment beyond this is barred by limitation, as clarified in judicial pronouncements. [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes]
"Penalty Imposition" - Penalties under Section 9 are only valid if the machinery of state laws provides for such penalties; otherwise, penalties imposed without statutory backing are invalid, as held in various judgments. [Man Industrial Corporation Ltd. VS State of Rajasthan]
"Interest on Delayed Payment" - Courts have held that interest cannot be levied under Section 9 where the Act does not explicitly provide for it; the levy of interest without statutory authority is illegal. [DALHOUSIE JUTE COMPANY VS COMMERCIAL TAX OFFICER, CENTRAL SECTION, ASSESSMENT WING]
"Validity of State Laws" - Incorporation of state laws under Section 9 has been upheld, provided they are not ultra vires the Constitution, and courts have validated the machinery for assessment and penalties accordingly. [Man Industrial Corporation Ltd. VS State of Rajasthan], [MOHANLAL CHOKHANY VS COMMERCIAL TAX OFFICER]
"Penalties and Quasi-Criminal Nature" - Penalties under Section 9 are not quasi-criminal unless explicitly linked to offences; penalties for default or delay are essentially civil liabilities, and penalties for offences require specific statutory provisions. [Man Industrial Corporation Ltd. VS State of Rajasthan], [JAVER JIVAN MEHTA VS ASSISTANT COMMISSIONER OF SALES TAX (APPEALS), VIII CIRCLE]
"Assessment of Export and Import Transactions" - Courts have clarified that assessment based on contractual or factual analysis, such as export or import transactions, is within the scope of Section 9, provided procedures are followed. [Tata Steel Limited VS State of Jharkhand], [Kumar Enterprise VS State of Assam, Through the Commissioner and Secretary]
"Reassessment and Time-Bar" - Re-assessment beyond four years from the relevant year is illegal, and any attempt to do so by misquoting or misapplying rules is invalid, as confirmed by courts. [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes], [Lakshmi Lavanya Cottons VS Commercial Tax Officer, Guntur District]
"Validity of Penalties for Delay" - The levy of penalties for delay in submission or payment without express statutory provision is invalid; penalties must be expressly provided under the law, as seen in judgments striking down such penalties. [Man Industrial Corporation Ltd. VS State of Rajasthan], [Lokesh Machines Ltd. VS State of Telangana, Rep. by its Secretary (Revenue)]
"Assessment on Branch Transfers" - The courts have held that branch transfers are not necessarily inter-state sales unless the facts establish such, and assessments based on mistaken classification or transfer status are liable to be quashed. [State of Tamil Nadu VS Koodal Industries], [Centum Electronics Limited VS State of Karnataka]
"Refunds and Exemptions" - Refund claims and exemptions under Section 9 are subject to strict compliance with procedural requirements, and courts have upheld forfeiture or denial of refund when the law or notifications are contravened. [Centum Electronics Limited VS State of Karnataka], [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes]
"Judicial Review of Assessment Orders" - Courts have exercised jurisdiction under Article 226 to quash assessment orders passed without proper notices, hearing, or in violation of principles of natural justice. [Sai Raghavendra Trading Corporation VS Honble A P Vat Appellate Tribunal], [City Tex Private Limited, A2, Bharati Apartments, P&T Colony, Vijayawada, Krishna District, represented by its Managing Director M. Surendra Babu VS Commercial Tax Officer, Auto Nagar, Vijayawada, Krishna District]
"Assessment of Penalties for Offences" - Penalties for offences under Section 9 require clear statutory backing; imposing penalties for procedural defaults without such backing is invalid. [Man Industrial Corporation Ltd. VS State of Rajasthan], [JAVER JIVAN MEHTA VS ASSISTANT COMMISSIONER OF SALES TAX (APPEALS), VIII CIRCLE]
"Constitutional Validity" - The validity of Section 9 and its machinery has been upheld, with courts emphasizing that it does not violate constitutional provisions when properly enacted and applied. [MOHANLAL CHOKHANY VS COMMERCIAL TAX OFFICER], [Linde India Limited VS Assistant Commissioner, Anti Evasion-Rajasthan]
"Assessment of Branch Transfers" - Courts have clarified that branch transfers are not automatically inter-state sales unless supported by facts, and assessments based on mistaken classification are liable to be set aside. [State of Tamil Nadu VS Koodal Industries], [Centum Electronics Limited VS State of Karnataka]
"Assessment of Exports" - Exports under Section 9 are to be assessed based on proper documentation and principles of natural justice; denial of exemption without proper consideration is invalid. [State of Tamil Nadu VS R. Periyalwar Naidu], [Bikaner Woolen Mills Pvt. Ltd. VS Assistant Commissioner, Commercial Taxes, Special Circle, Bikaner]
"Legal Validity of Machinery" - The adoption of state laws for assessment and penalties under Section 9 has been validated, provided the procedures are followed and the laws are within constitutional bounds. [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes], [MOHANLAL CHOKHANY VS COMMERCIAL TAX OFFICER]
"Penalty for Non-Disclosure" - Penalties for non-disclosure of turnover are valid only if the law explicitly provides for such penalties; otherwise, penalties are invalid. [State of Tamil Nadu VS R. Periyalwar Naidu], [Lakshmi Lavanya Cottons VS Commercial Tax Officer, Guntur District]
"Assessment for Reassessment" - Reassessments after the statutory period (generally four years) are invalid, and any attempt to extend this period without proper legal basis is null. [A. M. Abdulla VS The Commercial Tax Officer, Department of Commercial Taxes], [Lakshmi Lavanya Cottons VS Commercial Tax Officer, Guntur District]
This concise legal commentary synthesizes judicial interpretations, statutory provisions, and procedural safeguards relating to Section 9 of the CST Act, 1956, highlighting the scope, limitations, and judicial validation of assessment, penalties, and collection machinery.
[(1)] If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times 3[the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section]:
Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section.]
4[(2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the G
If any person—
1[(a) furnishes a 2[***] declaration under sub-section (2) of section 6 or sub-section (1) of section 6A or sub-section (4) 3[or sub-section (8)] of section 8, which he knows, or has reason to believe, to be false; or
(aa) fails to get himself registered as required by section 7 or fails to comply with an order under sub-section (3A) or with the requirements of sub-section 3(C) or sub-section (3E) of that section;]
(b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration; or
(c) not being a registered dealer, falsely represents when purchasing goods in the course of inter-State trade or commerce that he i
(1) No court shall take cognizance of any offence punishable under this Act or the rules made thereunder except with the previous sanction of the Government within the local limits of whose jurisdiction the offence has been committed or of such officer of that Government as it may, by general or special order, specify in this behalf; and no court inferior to that of a presidency magistrate or a magistrate of the first class shall try any such offence.
(2) All offences punishable under this Act shall be cognizable and bailable.
No suit, prosecution or other legal proceeding shall lie against any officer of Government for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.
(1) The Central Government may, by notification in the Official Gazette, make rules providing for—
(a) the manner in which application for registration may be made under this Act, the particulars to be contained therein, the procedure for the grant of such registration, the circumstances in which registration may be refused and the form in which the certificate of registration may be given;
1[(aa) the manner of determination of the sale price and the deductions from the total consideration for a works contract under the proviso to clause (h) of section 2;]
2[[3(ab)] the form and the manner for furnishing declaration under sub-section (8) of section 8;]
(b) the period of turnover, the manner in which the turnover in relation to
It is hereby declared that the following goods are of special importance in inter-State trade or commerce:—
1[(i) cereals, that is to say,—
(i) paddy (Oryza sativa L.);
(ii) rice (Oryza sativa L.);
(iii) wheat (Triticum vulgar, T. compactum, T. sphaerococcum, T. durum, T. aestivum L. T. dicoccum);
(iv) jowar or milo (Sorghum vulgare Pers);
(v) bajra (Pennisetum typhoideum L.);
(vi) maize (Zea mays D.);
(vii) ragi (eleusine coracana Gaertn.);
&
Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:—
(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed 2[four per cent.] of the sale or purchase price thereof 3[***];
(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, 4[and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law] 5[shall be reimbursed to the person making such sale in the course of inter-State trade or com
In this Chapter,—
(a) “appropriate authority”, in relation to a company, means the authority competent to assess tax on the company;
(b) “company” and “private company” have the meanings respectively assigned to them by clauses (i) and (iii) of sub-section (1) of section 3 of the Companies Act, 1956 (1 of 1956).
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*. Sections 16 ins. by Act 61 of 1972, sec. 13 (w.e.f. 1-4-1973).
(1) Every person—
(a) who is the liquidator of any company which is being wound up, whether under the orders of a court or otherwise; or
(b) who has been appointed the receiver of any assets of a company, (hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the appropriate authority.
(2) The appropriate authority shall, after making such inquiry or calling for such information as it may deem fit, notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the appropriate authority would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by th
Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), when any private company is wound up after the commencement of this Act, and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then, every person who was a director of the private company at any time during the period for which the tax is due shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.
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*. Sections 18 ins. by Act 61 of 1972, sec. 13 (w.e.f. 1-4-1973).
(1) The Central Government shall constitute, by notification in the Official Gazette, an Authority to settle inter-State disputes falling under 1[section 6A read with section 9] of this Act, to be known as “the Central Sales Tax Appellate Authority (hereinafter referred to as the Authority)”.
(2) The Authority shall consist of the following Members appointed by the Central Government, namely:—
(a) a Chairman, who is a retired Judge of the Supreme Court, or a retired Chief Justice of a High Court;
(b) an officer of the Indian Legal Service who is, or is qualified to be, an Additional Secretary to the Government of India; and
(c) an officer of a State Government not below the rank of Secretary or an officer of the Central Gover
No proceeding before the Authority shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.]
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1. Ins. by Act 3 of 2006, sec. 3 (w.e.f. 1-3-2006).
(1) The provisions of this Chapter shall apply to appeals filed by any aggrieved person against any order of the highest appellate authority of a State, made under section 6A read with section 9.
Explanation.—For the purposes of this section and sections 21, 22 and 25 “highest appellate authority of a State” means any authority or tribunal or court (except the High Court) established or constituted under the general sales tax law of a State, by whatever name called.
(2) Notwithstanding anything contained in the general sales tax law of a State, the Authority shall adjudicate an appeal filed under sub-section (1).
(3) An appeal under sub-section (1) may be filed within ninety days from the date on which the order referred to in that sub-section is served on any aggrieved person:
(1) On receipt of an appeal, the Authority shall cause a copy thereof to be forwarded to the 1[assessing authority concerned as well as to each State Governmet concerned with the appeal and to call upon them to furnish the relevant records:
Provided that such records shall, as soon as possible, be returned to the assessing authority or such State Government concerned, as the case may be.]
(2) The Authority shall adjudicate and decide upon the appeal filed against an order of the 2[highest appellate authority].
(3) The Authority, after examining the appeal and the records called for, by order, either allow or reject the appeal:
3[Provided that no appeal shall be rejected unless an opportunity has been given to the appellant of being heard in person o
(1) The Authority shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:—
(a) enforcing the attendance of any person, examining him on oath or affirmation;
(b) compelling the production of accounts and documents;
(c) issuing commission for the examination of witnesses;
(d) the reception of evidence on affidavits;
(e) any other matter which may be prescribed.
1[(1A) The Authority may grant stay of the operation of the order of the highest appellate authority against which the appeal is filed before it or order
The Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure 1[in all matters including stay of recovery of any demand] arising out of the exercise of powers under this Act.
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1. Subs. by Act 32 of 2003, sec. 165, for “in all matters” (w.e.f. 14-5-2003).
(1) Notwithstanding anything contained in any other law for the time being in force and in section 19 of this Act, the Authority for Advance Rulings constituted under section 245-O of the Income-tax Act, 1961(43 of 1961 shall be notified by the Central Government in the Official Gazette, with such modifications as many be necessary, to make its composition in conformity with section 19 of this Act, as the Authority under this Act till such time an Authority is constituted under that section.
(2) On and from the date of the constitution of the Authority in accordance with the provisions of section 19 of this Act, the proceedings pending with the Authority for Advance Rulings shall stand transferred to the Authority constituted under that section from the stage at which such proceedings stood before the date of constitution of the said Authority.
(1) On and from the commencement of the Central Sales Tax (Amendment) Act, 2005, all appeals (except appeals against orders of the highest appellate authority of the State) pending before the Authority notified under sub-section (1) of section 24 shall stand transferred together with the records thereof to the highest appellate authority of the concerned State.
(2) Such highest appellate authority of the State to which such appeal has been transferred under sub-section (1) on receipt of such records shall proceed to deal with such appeal so far as may be in the same manner as in the case of an appeal filed before such highest appellate authority of the State according to the general sales tax law of the appropriate State, from the stage which was reached before such transfer or from any earlier stage or de novo as such highest appellate authority of the State may deem fit:
An order passed by the Authority under this Chapter shall be binding on 1[each state Government concerned, the assessing authorities] and other authorities created by or under any law relating to general sales tax, in force for the time being in any State 2[***].
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1. Subs. by Act 23 of 2004, sec. 119, for “the assessing authorities” (w.e.f. 10-9-2004).
2. The words “or Union territory” omitted by Act 3 of 2006, sec. 8 (w.e.f. 1-3-2006).
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