Punjab & Haryana High Court Denies Consignment Sale Benefit Where ‘F’ Forms Found Invalid, Restores VAT Assessments

The Punjab and Haryana High Court has held that dealers cannot claim the benefit of consignment sales under the Central Sales Tax (CST) regime when the issuing authority itself denies the validity of ‘F’ Forms. The bench of Justice Ashwani Kumar Mishra and Justice Rohit Kapoor set aside a common order of the Punjab VAT Tribunal and restored tax, interest, and penalty demands raised by the State authorities in a batch of connected appeals involving grain traders from Samrala, Ludhiana. Six appeals were filed by the State of Punjab under Section 68 of the Punjab Value Added Tax Act, 2005. The appeals arose from a common tribunal order dated December 20, 2019, which had allowed the assessees’ claims of consignment sales and had quashed the assessment orders passed by the designated officer and affirmed by the first appellate authority. The assessees, including M/s Kamal Enterprises and its sister concerns, were engaged in trading of karyana items, pulses, and groundnuts. For the relevant assessment years, they declared substantial turnover, part of which was claimed as consignment sales to registered dealers in Delhi. To support these claims, the assessees furnished statutory ‘F’ Forms, asserting that the movement of goods was otherwise than by way of sale and therefore not liable to CST. However, following an inter-departmental inquiry initiated by the Punjab tax authorities, the VAT Department in Delhi informed that the alleged Delhi dealers had denied receiving any goods from the assessees during the relevant years. Crucially, the Delhi authorities also stated that the ‘F’ Forms relied upon by the assessees had never been issued from their office records. Based on this information, the Punjab authorities treated the transactions as taxable sales and raised demands along with interest and penalties. The VAT Tribunal had earlier allowed the assessees’ appeals, holding that the inquiry conducted by the department was a “farce” and tainted by over-zealousness. It questioned the promptness of the Delhi authorities’ responses and found violations of principles of natural justice, particularly on the ground that cross-examination of the Delhi dealers was not permitted. The tribunal also relied on various documents produced by the assessees, such as ledgers and delivery details, to conclude that the burden of proof stood discharged. The High Court, however, found these conclusions unsustainable. It held that the tribunal’s reasoning was based on conjectures, surmises, and assumptions, especially regarding alleged collusion between tax officials of different states. The Court noted that there was no material on record to substantiate such allegations and that official inter-departmental communications carry a presumption of correctness. Emphasising the statutory scheme under Section 6A of the CST Act and Rule 12 of the CST Rules, the Court reiterated that the burden of proving that a transaction is a consignment transfer and not a sale squarely lies on the dealer. A genuine ‘F’ Form, the Court observed, is not a mere procedural requirement but a substantive condition for availing exemption from CST. Once the issuing authority denies having issued such forms, the dealer cannot rely on alternative documents to claim the benefit. The Bench also rejected the argument that denial of cross-examination alone vitiated the proceedings. It held that since all relevant material had been supplied to the assessees and they had participated in prolonged proceedings, the assessment orders could not be set aside on this ground alone. The High Court ruled that the benefit of consignment sales could not be allowed where the validity of ‘F’ Forms was denied by the issuing authority. It allowed the State’s appeals, set aside the VAT Tribunal’s order dated December 20, 2019, and restored the assessment orders passed by the designated officer and upheld by the first appellate authority. Pending applications, if any, were also disposed of. Case Details Case Title: State of Punjab Versus Kamal Enterprises Case No.: VATAP-15-2021 (O&M) Date: 07.11.2025 Counsel For Petitioner: Saurabh Kapoor, Additional Advocate General Counsel For Respondent: J.S. Bedi, Advocate Click Here To Read Order Read More: How Much Silver Can You Keep at Home Without Tax in India?

Punjab & Haryana High Court Denies Consignment Sale Benefit Where ‘F’ Forms Found Invalid, Restores VAT Assessments

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