The article titled “CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift under Finance Act, 2023” is authored by Mr. Prakash Chilamkuri, GST Practitioner & previously worked as Superintendent of CGST (Retd-VRS).
Even in the post-GST era, the Central Sales Tax Act, 1956 continues to retain its significance, particularly for petroleum products such as crude oil, high-speed diesel (HSD), motor spirit (petrol), aviation turbine fuel (ATF), natural gas. These goods remain outside GST and continue under State Value Added Tax laws.
Consequently, inter-State transactions of these attract Central Sales Tax (CST) and disputes under the CST Act persist.
Table of Contents
Petroleum Products and continuing CST relevance
The exclusion of petroleum products and alcohol from GST ensures the continued applicability of CST. Inter-State transactions attract CST, while intra-State transactions are governed by VAT. Given the scale of such transactions, disputes relating to concessional rates, classification, and stock transfers remain frequent. The petroleum sector, therefore, continues to drive CST litigation.
Pre-2023 Position: Statute vs Practice.
Though CST is a central levy, its administration rested with State authorities under Section 9.
Sections 19 and 24 of the Central Sales Tax Act envisaged a Central Authority and even permitted the Authority for Advance Rulings under the Income-tax law to discharge such functions. In theory, a centralised appellate forum existed; in practice, it never functioned meaningfully.
Appeals were not pursued before the designated authority. Instead, assessees and the Department approached High Courts against orders of State VAT Tribunals. Consequently, CST litigation effectively culminated in High Courts, increasing the burden on constitutional courts.
Section 19 as Substituted.
Section 168 of the Finance Act, 2023 substitutes Section 19 of the CST Act with effect from 31 March 2023. The substituted provision reads as under:
“19. Notwithstanding anything to the contrary contained in this Act or in any other law for the time being in force, the Customs, Excise and Service Tax Appellate Tribunal constituted under section 129 of the Customs Act, 1962 shall be the Authority under this Act to settle inter-State disputes falling under sections 6A and 9.”
This marks a fundamental shift by designating the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) as the central authority for resolving specified CST disputes. The conferment of jurisdiction is statutory and self-executing.
Sections 6A and 9: Core Areas of Dispute.
Section 6A governs claims that inter-State movement of goods is otherwise than by way of sale, placing the burden of proof on the dealer, typically discharged through Form F and supporting evidence. However, tax authorities often scrutinise such claims by examining transport documents, stock records, and surrounding circumstances. Judicial precedents have consistently held that Form F is not conclusive, making Section 6A a major source of litigation.
Section 9 provides that Central Sales Tax, though a Central levy, is administered by the originating State using its VAT machinery. While administratively convenient, this has resulted in divergent interpretations across States, with similar transactions receiving different treatment. The designation of a central appellate authority is intended to address this inconsistency.
Appeals from State VAT Tribunals.
Section 20 provides that appeals lie against orders of the highest appellate authority of a State in matters arising under Sections 6A and 9, which in practice is the State VAT Tribunal. In light of the substituted Section 19, such disputes are now intended to be settled by CESTAT.
Shift to a Specialised Tribunal.
The substitution of Section 19 replaces an ineffective framework with a structured appellate mechanism by vesting jurisdiction in a specialised indirect tax tribunal. CESTAT, with its domain expertise, is well-positioned to ensure consistency and coherent development of CST jurisprudence. The reform is also expected to lessen the burden on High Courts by introducing an effective intermediate forum.
Procedural Framework
Sections 20 to 22 prescribes the appellate procedure.
Appeals are to be filed within ninety days, extendable to one hundred and fifty days. The appellate authority is empowered to grant hearings, call for records, and pass reasoned orders, with powers akin to a civil court. Proceedings are deemed judicial, and stay may be granted subject to conditions.
Binding Nature
Under Section 26, orders of the appellate authority are binding on all State Governments and their tax authorities. Vesting such authority in CESTAT is expected to ensure uniform interpretation and application of CST law across the country.
Conclusion
The substitution of Section 19 by the Finance Act, 2023 represents a significant reform in the CST appellate framework. The earlier mechanism, though statutorily envisaged, remained ineffective in practice, with litigation ultimately reaching High Courts.
The amended provision now clearly vests jurisdiction in CESTAT for disputes under Sections 6A and 9 of the Central Sales Tax Act, 1956. The shift from a High Court-centric litigation model to a tribunal-based system is thus legally complete.
Given the continuing relevance of petroleum products and the volume of disputes under Sections 6A and 9, this reform has the potential to bring much-needed consistency, certainty, and efficiency to CST jurisprudence.
