sale in transit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 August 2010 ONE OF THE MY CLIENT USE TO PURCHASE FROM DAMAN AGAINST E 1 FORM & MATERIAL RECD. IN HIS GODOWN THEN HE USE TO PREPARE HIS CHALLAN AND DELIVERED AS IT TO HIS CLIENT WHEATHE IT IS RIGHT WAY

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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22 August 2010 please mention which is your state?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Your question is about **“sale in transit” under Section 6(2) of the CST Act**, and whether your client’s method qualifies for **CST exemption** as a **transit sale**.

Let’s analyze it step by step.

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### 📌 **Your Client’s Method (as per your message):**

1. Your client **purchases goods from Daman**, against **Form C**, and receives **Form E1** from the Daman seller.
2. **Goods are delivered to your client’s godown** (i.e., physical possession is taken).
3. After that, **your client prepares his own delivery challan and sends goods to his customer.**

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### ❌ **Is this a valid “Transit Sale” under CST Act (Section 6(2))?**

**No. This is *not* a valid transit sale.**

Why?

👉 **A transit sale must happen *during the movement of goods*** — that is, **before the goods are delivered** to the buyer or before they come to rest at any place.

✅ **To claim transit sale exemption**:

* First sale (Daman seller → your client) must be **CST sale** (Form C + Form E1)
* Second sale (your client → his buyer) must be **by transfer of documents of title (like LR/RR) *while the goods are in transit*** — **not after receipt in godown**

**But in your case**:

* Goods are received at your client’s **godown** → **movement ends**
* Your client then **starts a fresh movement** with a new challan → this becomes a **new, separate sale**, not a transit sale

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### ✅ **Correct Way to Do a Transit Sale:**

If your client wants to do a valid **transit sale**:

1. Daman seller dispatches goods directly to **your client’s customer** (not to your client’s godown)
2. Your client **does not take physical delivery**
3. Your client **endorses the LR / GR / document of title** in favour of the customer
4. Your client collects **Form C** from his customer
5. Your client gives:

* **Form C** to Daman seller
* **Form E1** from Daman seller to the customer

Then it qualifies as a **second sale during transit**, and is **exempt from CST** under Section 6(2).

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### 📌 Conclusion:

| Situation | Transit Sale Allowed? | Reason |
| ------------------------------------------------------- | --------------------- | ----------------------------------------- |
| Goods received in godown, then delivered by own challan | ❌ No | Movement ended. Not a sale during transit |
| Goods directly sent to customer; LR endorsed | ✅ Yes | Fulfills Section 6(2) conditions |

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Let me know if you need a sample flow with forms (C/E1) or how to structure proper documentation.

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