Page 64 - GSTL_14th May 2020_Vol 36_Part 2

166 GST LAW TIMES [ Vol. 36
tains physical delivery of goods from the carrier, after arrival of these goods
at the destination. This argument is based on the incorrect notion that “de-
livery” in the Explanation means only “physical delivery”. This argument
can be countered on the basis of the well settled proposition of “construc-
tive delivery”.
The material fact to be looked into by the assessing authorities while grant-
ing benefit of Section 6(2) of the CST Act relate to the termination of the
movement of goods in the inter-State transactions. If after arrival of the
goods at the destination, the consignee asks the transporter expressly or
impliedly, to retain the goods at his godown until further directions, then
the carrier ceases to hold the goods as transporter, and in the eyes of law,
the goods are as much in possession of the consignee as if he had taken
them into his own godown. As per the settled legal concept this sequence of
events tantamounts to constructive delivery of the goods by transporter to
the consignee and transit ends. Any sale by the consignee thereafter will be
local sale and benefit of Section 6(2) will not be available.
The transporters, whether Railways or Roadways, impose condition of de-
livery of goods transported through them at the destination usually within
ten days and the consignee is required to check up with such transporting
agency as to the arrival of the goods. In these circumstances, if the carrier
retains the goods for an extended period, then there is a clear inference that
the consignee was aware of the arrival of his goods and the transporter is
holding the goods on his behalf as a bailee for the consignee. These factual
matrix leads to the conclusion that there is a local sale and not sale under
said Section 6(2). Payment of warehouse rent/demurrage charges by the
consignee to the transporter is conclusive evidence that transporters have
assumed the role of bailee and transit having ended. It may be observed
that bailment can be either gratuitous or for remuneration or partially both.
In law, there can also be bailment without contract.
As per legal position, ‘transit’ gets over as soon as a reasonable time elapses
for the consignee to elect whether he would take the goods away or leave
them in the transporters premises, because at the conclusion of reasonable
time there is deemed to be a constructive delivery of goods from the trans-
porters to the consignee. If a dealer claims that [he] had not obtained the
delivery of goods, the burden of proving that the goods really remained
with the carrier from the date of their arrival till the date of their clearance
is on the dealer. If the dealer fails to furnish this proof, then the assessing
authority would be justified in concluding that the dealer had himself taken
physical delivery of the goods from the carrier and thereby disallowing his
claim of exemption under Section 6(2), CST Act.
The decision of the Delhi High Court in Arjun Dass Gupta and Bros. v. Com-
missioner of Sales Tax, New Delhi, reported in (1980) 45 STC 52, lays down the
basic guidelines regarding exemption of sales under Section 6(2), CST Act.
The Delhi High Court had held that Explanation I to Section 3(b) of the CST
Act, 1956 did not permit the dealer to expand the movement of goods be-
yond the time of physical landing of the goods in the Union Territory of
Delhi. As to the knowledge except this there are no other directly relevant
or contra judgment reported from any other High Court. It is understood
that Special Leave Petition is pending in the Supreme Court on the issue
but there is no stay. As such Delhi High Court judgment holds the field.
It is therefore, enjoined upon the assessing authorities that in future they
should not grant the benefit of exemption under Section 6(2), CST Act,
simply on furnishing of the Form E-I/E-II and C Form. If on the contrary it
GST LAW TIMES  14th May 2020  64