Elvina Pharmaceuticals Limited vs The Additional Commissioner of Commercial Taxes, Zone-1

N. Kumar, J.—This appeal is preferred by the assessee against the order passed by the Revisional Authority, which has set aside the order of the Appellate Authority. In the assessment order, the Assessing Authority levied Central Cess Tax on stock transfer of medicine without a form. The case of the assessee is that, they are in the business of manufacturing medicinal products on job work for other dealers at its manufacturing plant located at Kotur, Dharwad on Poona-Bangalore Road. The assessee had entered into an agreement dated 6-11-1997 with M/s. Cosme Pharma Limited, Goa for manufacture of pharmaceutical products such as Diaformin 500 mg., Diaformin 850 mg. Mazarol tablets 14''s etc. This agreement is reduced into writing. For the period of 2003-2004 and 2004-2005, the assessee filed its return on turnover claiming exemption in respect of the manufactured goods on job work basis. As there was no element of sale involved in the job work under taken by them, they are claiming exemption of payment of Central Cess Tax. However, the Deputy Commissioner of Commercial Taxes (Transition), Dharwad passed an order u/s 12-C of the Karnataka Sales Tax Act, 1957 in terms of the notification dated 31-3-2006 determining the tax liability under the Central Sales Tax Act, 1956 on the ground that the assessee has effected the stock transfer of medicine without "F" declaration form. Aggrieved by the said order passed by the Assessing Authority, the appellant preferred appeal before the Joint Commissioner of Commercial Taxes (Appeals). The Appellate Authority held that it is not a case of stock transfer as contemplated under the provisions of Central Sales Tax Act, 1956. So far as the production of "F" declaration form, it is a case of assessee undertaking job work and therefore, he was not liable to pay any tax. Accordingly, he set aside the order of the Assessing Authority. The Additional Commissioner of Commercial Taxes by virtue of the power conferred u/s 22-A(1) of the KST Act, 1957 initiated suo motu proceedings on the ground that the order of the Appellate Authority is illegal and prejudicial to the interest of the Revenue. The assessee appeared and filed its objections and argued the matter. However, he overruled the objections, set aside the order of the Appellate Authority and restored the original assessment order. It is against this order, the present appeal is filed.

The learned Counsel appearing for the appellant, assailing the impugned order, contends that there is no stock transfer involved in this case, which attracts filing of Form F. It is a case of undertaking job work. In support of their case, they have produced the agreement entered into between the parties and also the payment particulars, which shows that there was no transfer of stock and therefore, he submits that the impugned order requires to be set aside.

Per contra, the learned Government Advocate supported the impugned order.

In the light of the aforesaid facts and rival contention, the point that arise for our consideration is as under:

Whether the Revisional Authority was justified in setting aside the order of the Appellate Authority holding that the transaction in question is a stock transfer?

The material on record discloses that, while filing the returns, by mistake the transaction in question was shown as stock transfer. It is on that basis, the Assessing Authority levied the tax, as admittedly Form F had not been filed. However, through out the case of the assessee as it is a case of job work and not a case of stock transfer. The Appellate Authority did accept the case of the assessee and set aside the order of assessment. The Revisional Authority has set aside the said order without proper foundation. In fact, he proceeds on the assumption that it is a case of stock transfer. Admittedly Form F is not filed and therefore, the Appellate Authority was in error in setting aside the order of the Assessing Authority.

Before us, the learned Counsel appearing for the assessee took us to the agreement entered into between them and the marketing agency. Though the agreement shows that the assessee is only in the business of manufacturing and they are not selling any products, what is curious is, the said agreement no consideration is mentioned for the services to be rendered by the assessee to marketing agent. At the same time, they have not produced any records to show how the payment is made, when the payment is made, how much is paid and on what basis. But one thing is certain, there is no material on record to show that it is a stock transfer also. We are satisfied that all the three authorities have not applied their mind to the real issue, which is involved in this case viz., whether the transaction in question is a case of stock transfer attracting Section 6-A of the CST Act or is a case of job work. It is based on a finding on this issue, the law is to be applied. In those circumstances, we deem it proper to set aside all three orders and remand the matter back to the Assessing Authority to adjudicate the aforesaid issue after giving full opportunity to both the parties. That would meet the ends of justice. Hence, we pass the following:

ORDER

(i) The orders passed by the Revisional Authority, Appellate Authority and the Original Authority are hereby set aside.

(ii) The Assessing Authority shall proceed to reassess and adjudicate the aforesaid issue and then pass appropriate orders after giving reasonable opportunity to both the parties to adduce evidence and to argue the matter.

(iii) Ordered accordingly.