Gauhati High Court
WP(C)/4359/2019 on 31 August, 2024
Author: Soumitra Saikia
Bench: Soumitra Saikia
GAHC010144922019
IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
W.P(C) NO.4359/2019
Dharampal Satyapal Ltd.,
Industrial Estate, Bamunimaidam,
Guwahati-781021, A Company
incorporated under the provisions of
the Companies Act, 1956 and having
its Registered Office at 98, Okhla
Industrial Estate, Phase-III, New
Delhi-110020 and in the present
proceedings represented by Sri
Shantanu Kumar Sarma, the Deputy
General Manager of the petitioner
company
........Petitioner
-Versus-
1. The State of Assam,
Represented by the Commissioner and Secretary to the
Government of Assam, Finance (Taxation) Department,
Dispur, Guwahati-781006
2. The Commissioner of State Taxes, (earlier known
as The Commissioner of Taxes), Kar Bhawan,
Dispur, Guwahati-781006
W.P(C) No. 4359/2019 Page 1 of 46
3. Assistant Commissioner of State Taxes (earlier
known as Assistant Commissioner of Taxes), unit
A, Guwahati, New Kar Bhawan, Dispur, Guwahati
........Respondents
-BEFORE-
HON’BLE MR. JUSTICE SOUMITRA SAIKIA
Advocate for the petitioner :Dr. A. Saraf, Senior Counsel assisted by
Mr. P. Baruah, Advocate
Advocate for the respondents :Mr. B. Gogoi, Standing Counsel,
Finance & Taxation Department.
Judgment Reserved on :11.06.2024
Date of Judgment & Order : 31.08.2024
JUDGMENT AND ORDER (CAV)
This Writ Petition has been filed praying for quashing /
recall of the Notice dated 03/07/2018 and the subsequent Reminder
Notice dated 27/11/2018 issued by the Office of the Assistant
Commissioner of Taxes, Unit-A, Guwahati directing the Petitioner to
deposit the balance payable amount against the transaction
mentioned in Form ‘C’ bearing No.OGC33242316909 received from
M/s Om Traders, Gurugram, Haryana, which was subsequently
cancelled by the Haryana VAT Authority.
W.P(C) No. 4359/2019 Page 2 of 46
2. The Petitioner is a company incorporated under the provisions of
the Companies Act, 1956 and is having its Registered Office at 98,
Okhla Industrial Estate, Phase-III, New Delhi-110020. The Petitioner,
in the year 2015-16, sold Pan Masala amounting to Rs.62.60 Crore
including tax from it’smanufacturing units located at Guwahati to M/s
Om Traders, Gurugram on concessional rate of tax under the
applicable provisions of Central Sales Tax Act.M/s Om Traders was a
registered dealer and carried a valid ‘Registration Certificate’ under
section 11 of the Haryana Value Added Tax Act, 2003 with the Tax
Identification Number (TIN) 06691950815 and was issued a
‘Certificate of Registration’ as a dealer under Section 7(1) / 7(2) of
the Central Sales Tax Act, 1956.
3. The Petitioner transacted with M/s Om Traders , Gurugram by
selling them its finished product ‘Pan Masala’ from its manufacturing
units located at Guwahati (Assam) for the period starting from
29/01/2016 to 29/03/2016 for a total taxable value of Rs.
61,37,43,561/- and paid Central Sales Tax of Rs. 1,22,74,871/- at
prescribed concessional rate of 2% of value of goods to Assam VAT
Authority in accordance with the Section 8(1) read with Section 8(4)
of the Central Sales Tax Act, 1956 and the Rule 12(1) of the Central
Sales Tax (Registration and Turnover) Rules, 1957.
W.P(C) No. 4359/2019 Page 3 of 46
4. As required under the provisions of law, petitioner obtained
statutory Form-C declaration from M/s Om Traders issued on
09.05.2017 in favour of the petitioner for the period 01.01.2016 to
31.03.2016.
5. This Form ‘C’ covers entirely the above mentioned inter-State sale
to M/s Om Traders by the petitioner, and therefore, the tax liability
under the applicable CST Act on the petitioner is determinable at
concessional rate of 2%. All the goods were sold by petitioner to M/s
Om Traders, Gurugram under the proper excisable sale invoices and
there is no dispute in this regard.
6. However, the Assistant Commissioner of Taxes, Unit-A, Guwahati,
vide the impugned Notice dated 03.07.2018 directed the petitioner to
deposit the balance amount of tax against the above mentioned
inter-State sale to M/s Om Traders on the ground of the Form ‘C’
issued to the petitioner by the M/s Om Traders, being declared
obsolete by the Haryana Government.
7. The petitioner, in reply to the above notice, sent a letter dated
27.08.2018 to the respondent No. 3 noting that both the parties, i.e.
the petitioner and M/s Om Traders, were registered dealers in their
respective states and made inter-State sale transaction on principal
to principal basis, with genuine and valid documents. Therefore,
W.P(C) No. 4359/2019 Page 4 of 46
there was no reason to treat the transaction undertaken against the
subject From ‘C’ as obsolete. The petitioner, as a proof of compliance
with the applicable Central Sales Tax laws, also enclosed with the
above letter the VAT and CST registration certificate of M/s Om
Traders, copies of all the Sale Invoices under which goods were sold
to M/s Om Traders, copy of From-63 issued by VAT Department of
Assam and other necessary documents.
8. The respondent No. 3 however, without taking into consideration
the above reply of the petitioner, sent the impugned reminder Notice
dated 27.11.2018 to the petitioner reiterating that the Form ‘C’ of M/s
Om Traders, Gurugram has been declared obsolete by the Haryana
Government and therefore directed the petitioner to deposit the
balance amount of tax i.e. the applicable tax in case of local sale
(sale within the state of Assam) less central sales tax already paid by
the petitioner on such goods.
9. Being aggrieved, the present writ petition has been filed assailing
the impugned Notices issued by the respondent No. 3 treating the
same conducted by the petitioner outside the State to be a sale
within the State.
10. Referring to Section 8 (1) of the Central Sales Tax Act, 1956
(hereinafter referred to as the Act), it is submitted that every dealer,
W.P(C) No. 4359/2019 Page 5 of 46
who in the course of the inter-State trade or commerce, sells to a
registered dealer goods of the description referred to in sub-section
(3), shall be liable to pay tax under this Act, which shall be 2%(two
percent) of his turnover or at the rate applicable to the sale or
purchase of such goods inside the appropriate State under the sales
tax law of that State, whichever is lower.
11. He submits that under Section 8(4) of the Act, it is provided
that the provisions of sub-section (1) shall not apply to any sale in
the course of inter-State trade or commerce unless the dealer selling
the goods furnishes to the prescribed authority in the prescribed
manner a declaration duly filled and signed by the registered dealer
to whom the goods are sold containing the prescribed particulars in a
particular form obtained from the prescribed authority.
12. Referring to Rule 12(1) of the CST Rules, it is submitted that
the said Rule provides that the declaration and the Certificate
referred to in sub-section (4) of section 8 shall be in Forms C and D
respectively. It is further provided thereunder that a single
declaration may cover all transactions of sale, which take place in a
quarter of a financial year between the same two dealers.
13. The learned Senior Counsel referring to these provisions of
the CST Act as well as CST Rules submits that from a plain reading of
W.P(C) No. 4359/2019 Page 6 of 46
the Rule 8 (1) and 8(4) of the Central Sales Tax Act, 1956 and Rule
12(1) of the Central Sales Tax (Regulation and Turnover) Rules, 1957
it will be clear that in order to get the benefit of the rate of tax in
respect of the sales of the goods to the registered dealer in course of
trade or commerce, the selling dealer has to produce a declaration
form in Form C issued by the purchasing dealer and the petitioner in
compliance of the above provisions obtained the statutory Form C
declaration issued by M/s Om Traders on 09.05.2017 in favour of the
petitioner for the period 29.01.2016 to 29.03.2016.
14. It is submitted that the Form ‘C’ covered the above
mentioned inter-State sale to M/s Om Traders by the Petitioner, and
therefore, the tax liability under the applicable CST Act on the
Petitioner was determinable at concessional rate of 2%. All the goods
were sold by Petitioner to M/s Om Traders, Gurugram under the
proper sale invoices along with Form 63 duly recorded at check post
of Assam and there is no dispute in this regard.
15. The further submission of the learned Senior counsel is that
the Assistant Commissioner of Taxes, Unit-A, Guwahati, vide the
Impugned Notice dated 03/07/2018 directed the Petitioner to deposit
the balance amount of tax against the above-mentioned inter-State
sale to M/s Om Traders on the ground that the Form ‘C’ issued to the
W.P(C) No. 4359/2019 Page 7 of 46
Petitioner by the M/s Om Traders, being declared obsolete by the
Haryana Government. However, in the Affidavit-in-Opposition filed a
communication made by the Excise and Taxation Officer-cum-
Assessing Authority, Gurgaon, Haryana to the Deputy Commissioner
of Tax, Guwahati Zone – A, Assam has been annexed which clearly
reflects that the ‘C’ Form was only cancelled and that the department
was in the process of declaring the forms as obsolete.Even today
Haryana VAT portal does not show that the said “C” Form has been
declared obsolete. Thereby the impugned notice dated 03.07.2018
issued by the respondents is absolutely illegal and without jurisdiction
inasmuch as the same has been issued on the ground that the ‘C’
Forms in question was declared obsolete by the concerned authorities
whereas the said ‘C’ Form was only cancelled and was not declared
obsolete by the Haryana Taxation Authority.
16. It is submitted on behalf of the Petitioner that in reply to the
above notice, the petitioner sent a letter dated 27/08/2018 to the
Respondent No. 3 pointing outthat both the parties, i.e. the Petitioner
and M/s Om Traders, were registered dealers in their respective
states and the inter-State sale was made on principal to principal
basis, with genuine and valid documents. Therefore, there was no
reason to treat the transaction undertaken against the subject Form
‘C’ as obsolete whereas the said ‘C’ Form was only said to have been
W.P(C) No. 4359/2019 Page 8 of 46
cancelled by the Excise and Taxation Officer – cum – Assessing
Authority, Gurgaon, Haryana and the said ‘C’ Form was not declared
to be obsolete. The Petitioner, as a proof of compliance with the
applicable Central Sales Tax laws, also enclosed with the above letter
the VAT and CST registration certificate of M/s Om Traders, copies of
all the sell Invoices under which goods were sold to M/s Om Traders,
Copy of Form-63 issued by VAT Department of Assam and other
necessary documents.
17. The learned Senior counsel therefore submits that the
Respondent No. 3, however, without taking into consideration the
above reply of the Petitioner, sent the Impugned Reminder Notice
dated 27/11/2018 to the Petitioner reiterating that the Form ‘C’ of
M/s Om Traders, Gurugram has been declared obsolete by the
Haryana Government, and therefore, directing the Petitioner to
deposit the balance amount of tax that is applicable tax in case of
local sale (sale within the state of Assam) less central sales tax
already paid by the Petitioner on such goods. Since the ‘C’ Form was
never declared obsolete by the Haryana Government and was only
cancelled, which will be apparent from the communication dated
19.02.2015 (Annexure – B to the Affidavit-in-Opposition), the
impugned Notice is absolutely illegal and without jurisdiction.
W.P(C) No. 4359/2019 Page 9 of 46
18. It is further submitted that in the instant case, the Petitioner
effected an inter-State sale of ‘Pan Masala’ worth Rs. 62.60 Cr
(including CST) to M/s Om Traders on applicable concessional tax
rate as prescribed under the provisions of Central Sales Tax Act,
1956 for the period starting from 29/01/2016 to 29/03/2016, on
which Central Sale Tax amounting to Rs. 1,22,74,871.22/- was
undisputedly paid by the Petitioner to Assam VAT Authority.
The said goods moved from the State of Assam under
prescribed Form-63 issued under Rule 41(9) of the Assam VAT Rules,
2005 and considered as valid ‘Dispatch Note’ under Rule 4A of the
Central Sales Tax (Assam) Rules to be produced before the officer-in-
charge at the last check post for dispatching the taxable goods
outside the State of Assam.
19. He submits that copies of Form-63 issued under Rule 41(9)
of the Assam VAT Rules is considered as valid ‘Dispatch Note’ under
Rule 4A of the Central Sales Tax (Assam) Rules which are to be
produced before the Officer In-charge of the last check post for
dispatch the goods outside the State of Assam along with the copies
of the receipts showing proof of delivery to M/s Om Traders and
copies of the extract of the Ledger account of the manufacturer as
per the books of accounts of the respective units from where the
W.P(C) No. 4359/2019 Page 10 of 46
goods were sold to M/s Om Traders reflecting the sales made and the
payments received are all enclosed to the writ petition.
20. It is submitted that the purchasing dealer i.e. M/s Om
Traders duly provided the statutory Form C’ to the Petitioner for
obtaining the benefit under Section 8 of CST Act. Section 8(1) of the
CST Act provides that every dealer, engaged in inter-State sale, is
liable to pay tax at the rate of two percent of his turnover or at the
rate applicable under the sales tax law of that State, whichever is
lower. However, Section 8(4) provides that the provisions of Section
8(1) shall not apply unless the dealer selling the goods furnishes a
declaration in the prescribed form as per the Rules. Rule 12(1) of the
CST (R&T) Rules provides that for the purpose of Section 8(4), the
declarations shall be in Forms C. Thus, until the dealer furnishes a
declaration by way of Form ‘C’, it shall not be entitled to the benefit
of concessional rate of tax provided under Section 8(1).
The Petitioner after having obtained the prescribed Form C,
from the M/s Om Traders for the period starting from 01/01/2016 to
31/03/2016, duly furnished, the said Form ‘C’ declaration to the
Respondent No. 3. Therefore, the Petitioner, having complied with all
the requirements stipulated under the CST Act, is entitled to the
benefits of the concessional rate of tax under Section 8(1).
W.P(C) No. 4359/2019 Page 11 of 46
21. The learned Senior counsel submits that the Impugned
Notices have been issued without appreciation of complete facts and
the reply sent by the Petitioner vide its letter dated 27/08/2018. This
can be seen from a bare perusal of the Impugned Notices itself. Both
the Impugned Notices are identical. It is submitted that despite the
reply by the Petitioner on 27/08/2018, enclosing the necessary
documents, the Respondent authority has sent the same Impugned
Notice dated 27/11/2018 reminding the Petitioner again to deposit
the balance amount of tax payable without addressing the
submissions stated in the reply by the Petitioner. The Petitioner
further submitted its reply to Notice dated 21/11/2018 on 19.01.2019
along with relevant documents. It issubmitted that the Impugned
Notices stated that the Form ‘C’ issued by the M/s Om Traders has
been declared obsolete,therefore, the balance amount of tax against
the inter-State sale transaction undertaken by the Petitioner is
payable. It is submitted that the Impugned Notices do not mention
the provision of law under which it is issued. It is further submitted
that the Impugned Notices do not provide the reasons as to how the
Form ‘C’ validity issued to the Petitioner initiallyand subsequently
declared obsolete will affect the tax liability of the Petitioner who
under bona fide belief effected inter-State sale transaction with the
M/s Om Traders.
W.P(C) No. 4359/2019 Page 12 of 46
22. It is submitted that since the impugned notice has been
issued on grounds, which do not exist inasmuch as the ‘C’ Form was
never declared to be obsolete but was only said to have been
cancelled, whereas the impugned notices have been issued on the
ground that the said ‘C’ Form was declared to be obsolete and the
impugned notices are absolutely illegal, without jurisdiction & the
same is liable to be set aside and/or quashed. Further, the impugned
notices directing the petitioner to make payment of tax is also illegal
and without jurisdiction inasmuch as the same has been issued
without any adjudication of the issue by the assessing officer and
thereby the impugned notices being absolutely illegal and without
jurisdiction, the present writ application is maintainable.
23. The further submission of the learned Senior counsel is that
the Petitioner submits that it is a settled law that when the statutory
functionary makes an order passed on certain grounds its validity
must be judged by the reasons so mentioned and cannot be
supplemented by fresh reason and cannot be supplemented by fresh
reason by the affidavit or otherwise.
24. In support of his contentions, the learned Senior counsel
relies upon the following Judgments:
W.P(C) No. 4359/2019 Page 13 of 46
“(i) Mohinder Singh Gill & Anr. Vs. The Chief Election Commissioner, New
Delhi & Ors, reported in (1978) 1 SCC 405;
(ii) State of Madras Vs. Radio and Electricals Ltd., reported in AIR 1967
SC 234;
(iii) A.D.M. Stores Vs. CST, reported in (1966) 18 STC 305, 310 (Punj);
(iv) State of Orissa Vs. Santosh Kumar, reported in (1983) 54 STC 322
(Orissa);
(v) State of Maharashtra Vs. Suresh Trading Company, reported in (1998)
109 STC 439 (SC);
(vi) Shanti Kiran India Pvt. Ltd. Vs. Commissioner Trade & Tax
Department, reported in (2013) 57 VST 405 (Delhi);
(vii) Balabhagas hulaschand Vs. State of Orrisa, reported in (1976) 2 SCC
41;
(viii) Jain Manufacturing Vs. The Commissioner VAT, reported in (2016)
93 VST 326;
(ix) Agfa-Gavert India Ltd. Vs. State of Tamil Nadu, reported in (2001)
123 STC 108;
(x) Emami Agrotech Ltd Vs. The Commission, VAT [W.P.(C) No.
6749/2016]
(xi) Combined Traders Vs. State of Rajasthan, [W.P(C) No. 1158/2018]”
25. Relying on these Judgments, the learned Senior counsel
submits that the only obligation on the petitioner is that he has to
satisfy himself that the purchaser namely M/s Om Traders is a
registered dealer and the goods are to be specified in the certificate
of registration. He submits that once that satisfaction is arrived at by
the petitioner, the duty iscast upon the petitioner to make the
enquiry and verify the particulars does not extend beyond.
W.P(C) No. 4359/2019 Page 14 of 46
26. The learned senior counsel submits that the Form ‘C’ which
was issued to the petitioner was generated and downloaded from the
Haryana VAT website and was issued against with the above
mentioned transaction on 09.05.2017. Referring to the said Form ‘C’,
he submits that it had all details including the TIN details of the
petitioner and the purchaser namely M/s Om Traders the period of ‘C’
form, the transactions against which the form was issued, the details
of the place of business are all clearly specified. Therefore, the
declaration on the Form ‘C’ on the day it was issued was valid under
the law and the petitioner relying on the same had availed the
concessional benefit of Tax under Section 8(1) read with Section 8(4)
of the CST Act. He therefore submits that a subsequent declaration
that the ‘C’ Form has become obsolete will not affect the rights which
has already accrued to the writ petitioner during the relevant period
in question. It is further submitted that these impugned notices were
issued arbitrarily and without any application of mind and that apart
these notices were issued without completion of the assessment
proceedings. Such action on the part of the petitioner is contrary to
the provisions of law and wholly without jurisdiction. The learned
Senior counsel submits that the impugned notice is contrary to the
provisions of law and cannot be permitted to stand as the demand of
tax raised in respect of the writ petitioner was without making any
W.P(C) No. 4359/2019 Page 15 of 46
assessment. He submits that the notice for recovery of demand can
only be issued after completion of the assessment. He relies on the
Judgment rendered in Whitney Vs. Commissioner of Inland Revenue,
reported in (1926) A.C. 37 at Page-52. He also refers to and relies
upon the Judgment of the Apex Court rendered in C.C.E. Vs. national
Tobacco 28 Co. of India Ltd. reported in (1972) 2 SCC 560 in support
of his contention that there is distinction between the term “levy” and
the term “assessment”. He submits that the Apex Court distinguished
between the term “levy” and “collection”. He is also relied on the
Judgment of the Apex Court rendered in Somaiya Organics (India)
Ltd. Vs. State of U.P., reported in (2001) 5 SCC 519 in support of his
contention. It is further submitted that issuance of notice of demand
is a condition precedent to the treatment of the tax as an arrear. He
submits that there has to be proof of actual steps which constitute an
assessment prior to imposition of a levy. In support of his contention,
he has referred to the Judgment rendered in Assistant Collector of
General, Kolkata Division Vs. National Tobacco Co. of India Ltd.,
reported in (1972) 2 SCC 560. He therefore submits that no
assessments have been completed for the period in question. There
is no occasion to issue a notice of demand and therefore the
impugned notice dated 03.07.2018 as well as the reminder dated
27.11.2018 cannot be treated to be notices of demand and the same
W.P(C) No. 4359/2019 Page 16 of 46
are therefore illegal without jurisdiction and are liable to be set aside
and quashed.
27. Mr. B. Gogoi, learned Standing Counsel, Finance submits
that the department has filed an affidavit-in-opposition disputing the
contentions of the writ petitioner. He submits that the notices
impugned in the present writ petition are required to be issued by the
Department in view of the communication dated 19.02.2018 received
from the Excise and Taxation Officer-Cum-Assessing Officer in the
State of Haryana. Referring to the said communication, the learned
counsel for the respondents submits that the said communication
which was enclosed to the affidavit in opposition as annexure-B has
intimated the Deputy Commissioner of Tax, Guwahati Zone-A, Assam
that some unknown person fraudulently has obtained ‘C’ Forms from
the Office showing purchaser as M/s Om Traders holding TIN No.
18560016909. The said Forms have been stated to have been
obtained for the period 01.01.2016 to 31.03.2016. The letter
therefore intimates the competent department in the State of Assam
that the Haryana State Tax Department is in the process of declaring
the ‘C’ forms obsolete and therefore, the competent authorities of the
State of Assam are required to not give the benefit of concessional
sales to the dealer in the State of Assam as no purchases have been
made by the Haryana dealer and the ‘C’ Form issued for these
W.P(C) No. 4359/2019 Page 17 of 46
transactions cancelled. Mr. Gogoi submits that in view of this letter,
the department is bound to issue consequential orders and therefore
the notices impugned in the writ petition were issued. It is submitted
that the said intimation was received by E-mail from the Excise &
Taxation officer-Cum-Assessing Authority, Haryana. It is submitted
that on receipt of this letter, it is apparent that the ‘C’ Forms which
were issued and presented before the State authorities are fake and
therefore the petitioner is not entitled to the concessional rate of tax
and therefore the authorities were within their rights to require the
petitioner to pay the balance amount of Tax. It is further submitted
that there is an efficacious alternative remedy prescribed under the
Act under Section 79 for an appeal to be preferred before the
prescribed higher authority.
28. The learned Standing Counsel further questions the
maintainability of the writ petition on the ground of non-joinder of
proper parties. He submits that the contention of the petitioner
cannot be verified without the presence of the purchaser namely M/s
Om Traders in the State of Haryana as well as the Haryana Tax
Department which has intimated the Department of Finance,
Government of Assam that pursuant to which the notices which are
impugned in the present writ petition have been issued. He however,
fairly submits on instructions that no assessment proceedings were
W.P(C) No. 4359/2019 Page 18 of 46
undertaken prior to issuance of the notice. These notices were issued
on the communication received from the State of Haryana requesting
the petitioner to voluntarily deposit the Tax amount which he had
unauthorizedly availed of at the concessional rate.
29. The learned counsel for the parties have been heard.
Pleadings on records have been carefully perused. Upon due
consideration of the rival arguments, the following questions fall for
consideration before this Court.
(i) The responsibility cast upon the selling dealer towards the Form-C
issued by the purchasing dealer in the State of Haryana;
(ii) The effect of subsequent cancellation of Form ‘C’ declaration on
the selling dealer;
(iii) Whether the impugned notices can be construed to be demand
notices and whether the same can be issued without initiation or
completion of any assessment proceedings and whether the
respondent authority is competent to issue such demand.
(iv) Consequently whether the impugned notices were issued
arbitrarily and required interference by this Court.
30. In order to appreciate the import of Form ‘C’ under the
Sales Tax Laws, it is necessary to refer to the relevant Section and
Rules.
W.P(C) No. 4359/2019 Page 19 of 46
Section 8(1) prescribes the rate of tax in respect of an inter-State
Trade or Commerce where the sale is effected to a registered dealer
of the goods of the description referred to in Sub-section 3.
Sub-section 3 of Section 8 prescribes forthe goods referred to in
clause (b) of sub-section(1) –
[***].
[b] [* * * ] are goods of the class or classes specified
in the certificate of registration of the registered
dealer purchasing the goods as being intended for re-
sale by him or subject to any rules made by the
Central Government in this behalf, for use by him in
the manufacture or processing of goods for sale or in
mining or in generation or distribution of electricity or
any other form of power;
(c) are containers or other materials specified in the
certificate of registration of the registered dealer
purchasing the goods, being containers or materials
intended for being used for the packing of goods for
sale;
(d) are containers or other materials used for the
packing of any goods or classes of goods specified in
the certificate of registration referred to in [***]
clause (b) or for the packing of any containers or
other materials specified in the certificate of
registration referred to in clause (c).
W.P(C) No. 4359/2019 Page 20 of 46
Under Section 8(4), it is provided that the provisions of Sub-
section 1 of Section 8 shall not apply to any sale in the course of
inter-State Trade or Commerce unless the dealer selling the goods
furnishes to the prescribed authority in the manner prescribed, a
declaration duly filled and signed by the registered dealer to whom
the goods are sold containing the prescribed particulars in the
particular form from the prescribed authority.
The prescribed form is found to be described under Rule 12(c)
of the CST (Regulation and Turnover) Rules, 1957.
Under Rule 12(c), the declaration and the certificate which is
referred to in Section 8(4) of the CST Act shall be Form-‘C’ and Form
‘D’ respectively.
The relevant provisions of the Section 8 as well as the Rule 12
of the CST Rules are extracted below:
8. Rates of tax on sales in the course of inter-State trade or
commerce.– [(1) Every dealer, who in the course of inter-State trade
or commerce, sells to a registered dealer goods of the description
referred to in sub-section (3), shall be liable to pay tax under this Act,
which shall be three per cent of his turnover or at the rate applicable to
the sale or purchase of such goods inside the appropriate State under
the sales tax law of that State, whichever is lower :
Provided that the Central Government may, by notification in the
Official Gazette, reduce the rate of tax under this sub-section.
W.P(C) No. 4359/2019 Page 21 of 46
(2) The tax payable by any dealer on his turnover in so far as the
turnover or any part thereof relates to the sale of goods in the course
of inter-State trade or commerce not falling within sub-section (1),
shall be at the rate applicable to the sale or purchase of such goods
inside the appropriate State under the sales tax law of that State.
(2-A) [* * *]
(3) [The goods referred to in sub-section (1),–]
(a) [Omitted].
[(b) are goods of the class or classes specified in the certificate of
registration of the registered dealer purchasing the goods as being
intended for re-sale by him or subject to any rules made by the Central
Government in this behalf, for use by him in the manufacture or
processing for sale of goods specified under clause (d) of Section 2;]
(c) are containers or other materials specified in the certificate of
registration of the registered dealer purchasing the goods, being
containers or materials intended for being used for the packing of
goods for sale;
(d) are containers or other materials used for the packing of any goods or
classes of goods specified in the certificate of registration referred to in
*** clause (b) or for the packing of any containers or other materials
specified in the certificate of registration referred to in clause (c).
[(4) The provisions of sub-section (1) shall not apply to any sale in
the course of inter-State trade or commerce unless the dealer selling
the goods furnishes to the prescribed authority in the prescribed
manner a declaration duly filled and signed by the registered dealer to
whom the goods are sold containing the prescribed particulars in a
prescribed form obtained from the prescribed authority:
Provided that the declaration is furnished within the prescribed time
or within such further time as that authority may, for sufficient cause,
permit.]W.P(C) No. 4359/2019 Page 22 of 46
(5) Notwithstanding anything contained in this section, the State
Government may [on the fulfilment of the requirements laid down in
sub-section (4) by the dealer,] if it is satisfied that it is necessary so to
do in the public interest, by notification in the official Gazette, and
subject to such conditions as may be specified therein, direct,–
(a) that no tax under this Act shall be payable by any dealer having his
place of business in the State in respect of the sales by him, in the
course of inter-State trade or commerce [to a registered dealer [* * *]],
from any such place of business of any such goods or classes of goods
as may be specified in the notification, or that the tax on such sales
shall be calculated at such lower rates than those specified in the
notification, or that the tax on such sales shall be calculated at such
lower rates than those specified in sub-section (1) [* * *] as may be
mentioned in the notification;
(b) that in respect of all sales of goods or sales of such classes of goods as
may be specified in the notification, which are made, in the course of
inter-State trade or commerce [to a registered dealer [* * *]], by any
dealer having his place of business in the State or by any class of such
dealers as may be specified in the notification to any person or to such
class of persons as may be specified in the notification, no tax under
this Act shall be payable or the tax on such sales shall be calculated at
such lower rates than those specified in sub-section (1) [* * *] as may
be mentioned in the notification.
[(6) Notwithstanding anything contained in this section, no tax
under this Act shall be payable by any dealer in respect of sale of any
goods made by such dealer, in the course of inter-State trade or
commerce to a registered dealer for the purpose of setting up,
operation, maintenance, manufacture, trading, production, processing,
assembling, repairing, reconditioning, re-engineering, packaging or for
use as packing material or packing accessories in an unit located in any
special economic zone or for development, operation and maintenance
of special economic zone by the developer of the special economic
zone, if such registered dealer has been authorised to establish such
W.P(C) No. 4359/2019 Page 23 of 46
unit or to develop, operate and maintain such special economic zone by
the authority specified by the Central Government in this behalf.]
(7) The goods referred to in sub-section (6) shall be the goods of
such class or classes of goods as specified in the certificate of
registration of the registered dealer referred to in that sub-section.
(8) The provisions of sub-sections (6) and (7) shall not apply to any
sale of goods made in the course of inter-State trade or commerce
unless the dealer selling such goods furnishes to the [prescribed
authority referred to in sub-section (4) a declaration in the prescribed
manner on the prescribed form obtained from the authority specified
by the Central Government under sub-section (6)], duly filled in and
signed by the registered dealer to whom such goods are sold.
Rule 12 (1) The declaration and the certificate referred to in sub-
section (4) of section 8 shall be in Forms ‘C’ and ‘D’ respectively:
[Provided that Form ‘C’ in force before the commencement of the
Central Sales Tax (Registration and Turnover) (Amendment) Rules,
1974 or before the commencement of the Central Sales Tax
(Registration and Turnover) (Amendment) Rules, 1976, may also be
used upto the 31st December, 1980, with suitable modifications:][Provided further that a single declaration may cover all transactions of
sale, which take place in a quarter of a financial year between the
same two dealers.
Provided also that where, in the case of any transaction of sale, the
delivery of goods is spread over to different quarters in a financial year
or of different financial years, it shall be necessary to furnish a
separate declaration or certificate in respect of goods delivered in each
quarter of a financial year.](2) Where a blank or duly completed form of declaration is lost,
whether such loss occurs while it is in the custody of the purchasing
dealer or in transit to the selling dealer, the purchasing dealer shall
furnish in respect of every such form so lost, an indemnity bond [in
Form G] to the notified authority from whom the said form wasW.P(C) No. 4359/2019 Page 24 of 46
obtained, for such sum as the said authority may, having regard to the
circumstances of the case, fix. Such indemnity bond shall be furnished
by the selling dealer to the notified authority of his State if a duly
completed form of declaration received by him is lost, whether such
loss occurs while it is in his custody or while it is in transit to the
notified authority of his State:
[Provided that where more than one form of declaration is lost, the
purchasing dealer or the selling dealer, as the case may be, may
furnish one such indemnity bond to cover all the forms of declarations
so lost.](3) Where a declaration form furnished by the dealer purchasing the
goods or the certificate furnished by the Government has been lost, the
dealer selling the goods may demand from the dealer who purchased
the goods or, as the case may be, from the Government which
purchased the goods, a duplicate of such form or certificate, and the
same shall be furnished with the following declaration recorded in red
ink and signed by the dealer or authorised officer of the Government,
as the case may be, on all the three portions of such form or
certificate,–
“I hereby declare that this is the duplicate of the declaration form/
certificate No. ………… signed on …….. and issued to …………… who is
a registered dealer of ………………………. (State) and whose registration
certificate number is …………….”
(4) The certificate referred to in sub-section (2) of section 6 shall be in
Form ‘E-I’ or Form ‘E-II’ as the case may be.
(5) The declaration referred to in sub-section (1) of section 6-A shall be
in Form ‘F’:
[Provided that a single declaration may cover transfer of goods, by a
dealer, to any other place of his business or to his agent or principal,
as the case may be, effected during a period of one calendar month:
Provided further that if the space provided in Form ‘F’ is not sufficient
for making the entries, the particulars specified in Form ‘F’ may beW.P(C) No. 4359/2019 Page 25 of 46
given in separate annexure attached to that form so long as it is
indicated in the form that the annexures form part thereof and every
such annexure is also signed by the person signing the declaration in
Form ‘F’:
Provided further that Form ‘F’ in force before the commencement of
the Central Sales Tax (Registration and Turnover) (Second Amendment)
Rules, 1973, may continue to be used up to 3 [31st day of December,
1980] with suitable modifications.](6) Form ‘C’ referred to in sub-rule (1), or as the case may be, Form ‘F’
referred to in sub-rule (5), shall be the one obtained by the purchasing
dealer or, as the case may be, the transferee in the State in which the
goods covered by such form are delivered.
[(7) The declaration in Form C or Form F or the certificate in Form E-I
or Form E-II shall be furnished to the prescribed authority within three
months after the end of the period to which the declaration or the
certificate relates:
Provided that if the prescribed authority is satisfied that the person
concerned was prevented by sufficient cause from furnishing such
declaration or certificate within the aforesaid time, the authority may
allow such declaration or certificate to be furnished within such further
time as that authority may permit.](8) (a) The person referred to in clause (a) of sub-rule (1) of rule 3
shall alone be competent to sign the declaration in Form ‘C’ or Form ‘F’
or the certificate in Form ‘E-I’ or Form ‘E-II’:
[Provided that where such person is a proprietor of any business or a
partner of a firm or a karta or manager of a Hindu undivided family,
any other person authorised by him in writing may also sign such
declaration or certificate :][Provided further that in the case of a company, such declaration or
certificate can also be signed by any other officer of the company
authorised under the Memorandum or Articles of Association of the
company or under any other special or general resolution of theW.P(C) No. 4359/2019 Page 26 of 46
company or under a resolution passed by the Board of Directors of the
company, to authenticate any document on behalf of such company.]
(b) Such person shall signify on such declaration or certificate his
status and shall make a verification in the manner provided in such
declaration or certificate.
(9) (a) The provisions of 3 [***] sub-rule (2) and sub-rule (3) shall,
with necessary modifications, apply to the declaration in Form ‘F’ or the
certificate in Form ‘E-I’ or Form ‘E-II’.
[(b) The provisions of the second and third provisos to sub-rule (1)
shall, with necessary modifications, apply to certificates in Form ‘E-I’ or
Form ‘E-II’.]
[(10)(a) the declaration referred to in sub-section (4) of section 5 shall
be in Form H and shall be furnished to the prescribed authority upto
the time of assessment by the first assessing authority.]
[(b) The provisions of the rules framed by the respective State
Government under sub-sections (3), (4) and (5) of section 13 relating
to the authority from whom and the conditions subject to which any
form of certificate in Form ‘H’ may be obtained, the manner in which
such form shall be kept in custody and records relating thereto
maintained and the manner in which any such forms may be used and
any such certificate may be furnished in so far as they apply to
declaration in Form ‘C’ prescribed under these rules shall mutatis
mutandis apply to certificate in Form ‘H’.]
[(11) The declaration referred to in sub-section (8) of section 8 of the
Act, shall be in Form I.]
(11A) The certificate referred to in sub-section (4) of section 6 shall be
in Form J and shall be furnished to the prescribed authority upto the
time of assessment by the first assessing authority.]
31. Reference to Section 43 of the Assam Value Added Tax Act,
2003 which is also applicable in respect of Central Sales Tax Act,
W.P(C) No. 4359/2019 Page 27 of 46
1956 by virtue of Section 9(2) of the CST Act, 1956 is very relevant.
The said provision of the Assam VAT Act provides for payment and
recovery of tax, penalty and interest. The said Section is extracted
below:
43. Payment and recovery of tax, penalty and interest. – (1)
Tax shall be paid in the manner hereinafter provided and at such
intervals as may be prescribed.
(2) A dealer furnishing returns under section 29 shall pay into
Government account, in such manner an date such intervals may be
prescribed, the amount of tax due from him for the period covered
under the return alongwith the amount of interest, penalty or any
other sum payable by him and shall furnish a receipt showing the
payment of such amount into the Government account.
(3) A dealer furnishing a revised return in accordance with the sub-
section (4) of section 29, which shows that a greater amount of tax
is due than was paid or payable in accordance with te original return,
shall furnish along with the return a receipt showing payment of the
differential amount in the manner provided in sub-section (2).
(4) (a) The amount of tax, –
(i) due where return have been filed without full payment of tax due; or
(ii) assessed under this Act less the sum already paid in respect of such
period together with interest, if any; or
(b) the amount of penalty imposed under any provision of this Act; or
(c) any other dues under this Act, shall be paid by the person or dealer
or the person liable therefore into the Government account within
thirty days from the date of service of the notice issued by the
Prescribed Authority in respect thereof;
W.P(C) No. 4359/2019 Page 28 of 46
Provided that the Prescribed Authority may, in respect of
any particular dealer or person, and for reasons to be recorded in
writing, allow him to pay the tax, penalty, interest or the sum
forfeited, by instalments but grant of instalments to pay tax shall be
without prejudice to the other provisions of this Act including levy of
penalty and interest.
(5) Where a dealer fails to make payment of the tax assessed or
interest levied or penalty imposed on him or any other amount due
from him under this Act within thirty days of the date of service of
the notice of demand, the Prescribed Authority may, after giving the
dealer a reasonable opportunity of being heard, direct that such
dealer shall, in addition to the amount due pay, by way of penalty, a
sum not exceeding two percent of such amount of tax, penalty,
interest or any other amount due, for every month, for the period for
which payment has been delayed by him after the date on which
such amount was due to be paid.
(6) The amount that remains unpaid after the due date of payment
in pursuance of the notice issued under sub-section (4) and sub-
section (5 shall be recoverable as arrears of land revenue.
(7) Where in pursuance of sub-section (6), any proceedings for the
recovery as an arrears on land revenue of any tax, penalty, interest
or part thereof or any other amount remaining unpaid, has been
commenced and the amount of tax, penalty, interest or any other
amount is subsequently enhanced or reduced as a result of any
assessment made or order passed in the appeal revision or
rectification under this Act, the Prescribed Authority may, in such
manner and within such period as may be prescribed, inform the
dealer and the authority by whom or under whose order the recovery
is to be made and thereupon such proceedings may be continued as
if the amount of tax, penalty, interest or any other amount as
modified, enhanced or reduced, had been substituted for the tax,
W.P(C) No. 4359/2019 Page 29 of 46
penalty, interest or any other amount which was to be covered under
sub-section (6).
(8) Where the amount paid falls short of the aggregate of the tax or
any other amount due and interest payable, the amount so paid shall
first be adjusted towards interest payable and the balance, if any,
shall be adjusted towards the tax or any other amount due.
32. From a perusal of the said provisions extracted above, it is
clear that in order to get a benefit of concessional rate of tax in
respect of sale of goods to a registered dealer in the course of inter-
state trade or commerce, the selling dealer shall produce a
declaration in Form ‘C’ issued by the purchasing dealer with all
particulars being duly filled up.
33. Under the CST Act, 1956 read with the Rules, there is no
procedure prescribed as to how the ‘C’ Form submitted by the buying
dealer is required to be verified and to what extent.
In that context, reference to a Judgment of the Apex Court
rendered in State of Madras Vs. Radio and Electricals Ltd., reported in
AIR 1967 SC 234 will be helpful. The Apex Court in this case held
that the seller in inter-State transactions have no control over the
purchaser. He has to refer to the representations made to him and
he has to satisfy himself that the purchaser is a registered dealer,
and the goods purchased are specified in the certificate. Beyond that
W.P(C) No. 4359/2019 Page 30 of 46
no further duty is caste on the selling dealer. The relevant paragraph
of the Apex Court is extracted below:
“Indisputably the seller can have in these transactions no control over
the purchaser. He has to rely upon the representations made to him.
He must satisfy himself that the purchaser is a registered dealer, and
the goods purchased are specified in his certificate; but his duty
extends no further. If he is satisfied on these two matters, on a
representation made to him in the manner prescribed by the Rules and
the representation is recorded in the certificate in form “C” the selling
dealer is under no further obligation to see to the application of the
goods for the purpose for which it was represented that the goods were
intended to be used. If the purchasing dealer misapplies the goods he
incurs a penalty under Section 10. That penalty is incurred by the
purchasing dealer and cannot be visited upon the selling dealer.”
(emphasis supplied)
34. In so far as the question relating to the power of
cancellation of Form ‘C’ declaration under the CST Act, 1956 is
concerned, a reference to the Judgment of the Apex Court rendered
in State of Maharashtra Vs. Suresh Trading Company, reported in
(1997) 11 SCC 378 would be relevant. The Judgment of the Bombay
High Court was assailed before the Supreme Court. The issue before
the Bombay High Court was the disallowance of the claim of
deduction, turnover or sales by the assessee. In the facts of the case,
the assessee before the Bombay High Court purchased goods from
one Sulekha Enterprise between 1st January and 31st January, 1967
and the said Enterprise had held a valid registration. The same
W.P(C) No. 4359/2019 Page 31 of 46
although was not disputed, however, the deduction in the turnover of
the sales claimed by the petitioner therein was disallowed on the
ground that the registration of the selling dealer stood cancelled on
20.08.1967 w.e.f. 01.01.1967. This decision of the sales tax officer
was reversed by the Bombay High Court. The matter travelled to the
Apex Court, the Apex Court upheld the decision of the Bombay High
Court. It was held by the Apex Court that a purchasing dealer is
entitled under law to rely upon the certificate of registration of the
selling dealer and to act upon it. Whatever may be the effect of a
retrospective cancellation upon the selling dealer, it can have no
effect upon any person who has acted upon the strength of a
registration certificate when the registration was current. The
argument on behalf of the department that it was the duty of
persons dealing with registered dealers to find out whether a state of
facts exists which would justify the cancellation of registration must
be rejected. It was held that to accept that argument it would be to
nullify the provisions of the statute which entitle persons dealing with
registered dealers to act upon the strength of registration certificates.
35. Following the Judgment of the Apex Court, several High
Courts have also held that benefits once granted, will accrue and
cannot be taken away by subsequent cancellation of registration. The
Delhi High Court in Shanti Kiran India Pvt. Ltd. Vs. Commissioner
W.P(C) No. 4359/2019 Page 32 of 46
Trade & Tax Department, reported in (2013) 57 VST 405 (Delhi) held
that in the absence of any mechanism enabling a purchasing dealer
to verify if the selling dealer deposited tax, for the period in question,
and in the absence of notification in a manner that can be
ascertained by men in business that a dealer’s registration is
cancelled (as has happened in this case) the benefit of input credit,
under Section 9(1) cannot be denied. Furthermore, this Court notices
that the cancellation of both selling dealers’ registration occurred
after the transactions with the appellant. The VAT authorities
observed that the scanty amounts deposited by the selling dealers
was incommensurate with the transactions recorded, and
straightaway proceeded to hold that they colluded with the appellant.
Such prior conclusions were held to be based on no material, or
without inquiry, and accordingly were considered to be unworthy of
acceptance.
The Orissa High Court in State of Orissa Vs. Santosh Kumar,
reported in (1983) 54 STC 322 held that once a certificate of
registration is issued to a person and he becomes a registered dealer,
he is entitled to certain benefits under the Act. Certificates granted by
the public officers have their value and people in the commercial field
would in normal course accept such certificates to be genuine. Where
the registration has been granted, yet if the person holding the
W.P(C) No. 4359/2019 Page 33 of 46
certificate is treated to be a fictitious, it will appear contradictory to
the terms prescribed under the statute. A certificate of registration
can be granted only when the dealer, apart from being a
businessman, satisfies the other requirements prescribed by law. A
registration certificate cannot be granted to a non-existent person.
36. A similar issue was also dealt with by the Delhi High Court in
Jain Manufacturing (Supra). In that case, the petitioner therein was
aggrieved by the cancellation of the Form ‘C’ issued with regard to
the purchases made by the petitioner from one Keshav Corporation.
The Delhi High Court upon examining the matter held as under:
“The central issue in the present case is whether there exists a power
in the Commissioner VAT, Delhi under the CST Act and the Rules
thereunder to cancel a C-Form and further if such power exists then
whether in the facts and circumstances of the present case such power
was rightly exercised. No provision in the CST Act has been brought to
the notice of the Court which enables an authority issuing a C-Form to
cancel the C-Form. Rule 5(4) of the Central Sales Tax (Delhi) Rules,
2005 enables the authority which has to issue a C-Form to “withhold”
the C-Form. The contingencies under which a C Form may be withheld
are set out in Rule 5(4). For instance, Rule 5 (4) (v) envisages that
some adverse material has been found by the Commissioner
“suggesting any concealment of sale or purchase or furnishing
inaccurate particulars in the returns.” The Commissioner could, in terms
of the proviso to Rule 5(4), instead of withholding the C-Form, issue to
the applicant such forms in such numbers and subject to such
conditions and restrictions, as he may consider necessary. However,
there is no specific provision even under the aforementioned Rules
which enables the Commissioner to cancel the C-Form that has already
W.P(C) No. 4359/2019 Page 34 of 46
been issued. There is merit in the contention that one of the primary
requirements for issuance of a C-Form is that the dealer to whom the
C-Form is issued has to have a valid CST registration on the date that
the C Form is issued. If the purchasing dealer does not possess a valid
CST registration on the date of the transaction of sale, then the selling
dealer cannot insist on being issued a ‘C ‘Form. In the present case, on
the date of the transaction i.e. 10th March, 2015 the purchasing dealer
viz., Respondent No. 2 did posses a valid CST registration. The name of
the purchasing dealer as shown in the invoices, and the name and
address of the (18 of 28) [CW-11580/2018] registered purchasing
dealer as reflected in the C-Forms issued by the DT&T matched. The
cancellation of the CST registration of Respondent No. 2 took place
subsequently on 4th August 2015. Therefore , there was no means for
the Petitioner as the selling dealer to suspect as of the date of sale or
soon thereafter that the payments made to it RTGS was not by
Respondent No.2 but by some other entity with the same name. It is
not possible, therefore, to straightaway infer any collusion between the
Petitioner and Respondent No. 2 or for that matter the other entity of
the same name spoken of by the DT&T. In any event, from the point of
view of the Petitioner, the requirement of Section 8(1) of the CST stood
fully satisfied. The purchasing dealer had a valid CST registration on the
date of purchase of goods by the Respondent No. 2 from the Petitioner.
The C-Form issued by the DT&T confirmed the registration of
Respondent No.2 under the CST Act.”
37. The question of cancellation of a declaration in form ‘C’ once
validly issued came up before the Rajasthan High Court while dealing
with a challenge relating to the vires of the Rules framed by the State
conferred power on the authority to cancel the ‘C’ Forms already
issued. The power under the Rajasthan Rules framed for cancellation
of ‘C’ Forms once the validly issued was held to be ultra vires the
W.P(C) No. 4359/2019 Page 35 of 46
provision under Sections 8 (4), 12 (1)(d), 13(3) and 13(4) E of the
Central Sales Tax Act, 1956. In the context of the facts of the present
proceedings, the findings of the Rajasthan High Court have relevance
and therefore, the same is discussed. The relevant paragraphs are
extracted below::
“The obligation of a registered dealer selling the goods to another
registered dealer to avail the benefit of tax provided under Section
8(1) is only confined to furnish to the prescribed authority in the
prescribed manner a declaration duly filled and signed by the
registered dealer to whom he sells the goods. Such declaration
should contain the prescribed particulars in the prescribed form
and manner. Proviso to Section 8(4) stipulates that the selling
dealer has to furnish such declaration within the prescribed time
or within such further time as the authority may, for sufficient
reason, extend. Rule 12 of the Central Rules provides a form of
declaration, the particulars to be contained therein, the period
within which it has to be furnished, consequence of loss of the
declaration form, and the course to be adopted in that event.
However, this provision does not provide for cancellation of Form
C issued. No doubt, Section 13(3) of the CST Act empowers the
State to make the Rules but with the rider that such Rules should
not be inconsistent with the provisions of the CST Act and the
Rules made by the Central Government under Section 13(1), to
make the Rules to carry out the purpose of the Act. Section 13(4)
of the CST Act inter-alia provides that in particular and without
prejudice to the powers conferred by sub-section (3), the State
Government may make rules for all or any of the purposes listed
therein from Clauses (a) to (g). Clause (e) provides that the State
Government may make rules prescribing “the authority from
whom, the conditions subject to which and fees, subject toW.P(C) No. 4359/2019 Page 36 of 46
payment of which, any form of certificate prescribed under clause
(a) of the first proviso to sub-section (2) of section 6 or of
declaration prescribed under sub-section (1) of section 6A or
subsection (4) of section 8, may be obtained, the manner in which
such forms shall be kept in custody and records relating thereto
maintained and the manner in which any such form may be used
and any such certificate or declaration may be furnished;” Beyond
and in addition to that, no authority has been conferred on the
States and therefore it can be safely deduced therefrom that no
power has been conferred on the States to frame any Rule for
cancellation of the declaration once validly issued. Rule 17(20) of
the Rajasthan Rules is thus marred by lack of legislative
competence and does not conform to the CST Act, having
exceeded the authority conferred on the State Government under
which it is purported to have been made.
In view of what we have held above, we are inclined to
hold that State has no authority to frame a rule providing for
cancellation of validly issued declaration form/form-C.
In the result, the writ petition deserves to succeed and is
hereby allowed. Rule 17(20) of the Rajasthan Rules is declared
ultra vires Section 8(4), 13(1)(d), 13(3) and 13(4)(e) of the CST
Act. The communications dated 20.11.2017 and 30.11.2017 sent
by the respondent no.3 to the VATO Ward-17, New Delhi, with
regard to cancellation of ‘C’ Form, are declared illegal and
consequently quashed and set aside. The cancellation of ‘C’ Forms
made vide order dated 07.12.2017 is also quashed and set aside.
The petitioner is held entitled to avail benefit of rates of tax under
Section 8 of the CST Act.”
38. In so far as the subsequent declaration of Form ‘C’ as
obsolete not affecting the liability of the petitioner under CST Act is
concerned, the contention before this Court is that under the
W.P(C) No. 4359/2019 Page 37 of 46
provision of the CST Act, declaration of Form ‘C’ as obsolete will not
affect the liability of the petitioner in respect of the transaction
undertaken prior to such declaration.
39. As have been held by the Apex Court in State of
Maharashtra Vs. Suresh Trading Company, reported in (1998) 109
STC 439 (SC)that whatever may be the effect of a retrospective
cancellation upon the selling dealer, it can have no effect upon any
person who has acted upon the strength of a registration certificate
when the registration was current. The argument on behalf of the
department that it was the duty of persons dealing with registered
dealers to find out whether a state of facts exists which would justify
the cancellation of registration was rejected. To accept it would be to
nullify the provisions of the statute which entitle persons dealing with
registered dealers to act upon the strength of registration certificates.
40. Under the scheme of the CST Act read with the Rules prior
to a recovery being made, there has to be an assessment. Admittedly
in the facts of this case, no assessment prior to issuance of the
recovery/demand notice was made.
41. In Whitney Vs. Commissioners of Inland Revenue (1926)
A.C. 37at page 52:
W.P(C) No. 4359/2019 Page 38 of 46
“Now, there are three stages in the imposition of a tax: there is the
declaration of liability, that is, the part of the statute which determines
what persons in respect of what property are liable. Next, there is the
assessment. Liability does not depend on assessment. That, ex
hypothesi, has already been fixed. But assessment particularizes the
exact sum which a person liable has to pay. Lastly comes the methods
of recovery, if the person taxes does not voluntarily pay.”
Following the above observation Lord Hanworth, M.R. in W.H.
Cockerline & Co. V. Commissioners of Inland Revenue (1930) 16 Tax
Case 1 observed at page 19:
“………..but the charge is made in consequence of the Act, upon
the subject; the assessment is only for the purpose of quantifying it.”
42. The Apex Court in the case of in the case of CCE Vs.
National Tobacco 28 Co. of India Ltd. reported in (1972)2 SCC 560 in
paragraph 19 held as under:
“19. The term ‘levy’ appears to us to be wider in its import than
the term ‘assessment’. It may include both ‘imposition’ of a tax as
well as ‘assessment’. The term ‘imposition’ is gene rally used for
the, levy of a tax or duty by legislative provision indicating the
subject matter of the tax and the rates at which it has to be taxed.
The term ‘assessment’, on the other hand, is generally used in this
country for the actual procedure adopted in fixing the liability to
pay a tax on account of particular goods or property or whatever
may be the object of the tax in a particular case and determining
its amount. The Division Bench appeared to equate ‘levy’ with an
‘assessment’ as well as with the collection of a tax when it. held
that ‘when the payment of tax is enforced, there is a levy’. We
think that, although the connotation of the term ‘levy’ seems widerW.P(C) No. 4359/2019 Page 39 of 46
than that of ‘assessment’, which it includes, yet, it does not seem
to us to extend to ‘collection’. Article 265 of the Constitution
makes a distinction between “levy” and “collection”.
43. Again in the case of Somaiya Organics (India) Ltd. Vs. State
of U.P., reported in (2001)5 SCC 519, the Apex Court held as under:
“29. The words used in Article 265 are ‘levy’ and ‘collect’. In taxing
statute the words ‘levy’ and ‘collect’ are not synonymous terms while
‘levy’ would mean the assessment or charging or imposing tax,
‘collect’ in Article 265 would mean the physical realization of the tax
which is levied or imposed. Collection of tax is normally a stage
subsequent to the levy of the same”
44. In Income-Tax Officer &Anr. Vs. Seghu Buchiah Setty,
(1964) ITR 538, the ratio laid down by the Apex Court in respect of a
notice of demand is very relevant. The Apex Court held that the
notice of demand is a vital document in many respects. Disobedience
to it makes the assessee a defaulter. It is a condition precedent to
the treatment of the tax as an arrear of land revenue. It is the
starting point of limitation in two ways and the breach of obedience
to the notice of demand draws a heavy penalty. The notice of
demand which is issued must be in a form prescribed by Rule 20 and
the form includes the following particulars – the amount which has to
be paid and indicates the person to whom, the place where and the
time within which it has to be so paid
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45. Mere mechanical adjustments or ostensible settlement of
accounts will not be treated to be an assessment. The assessment if
required to be made has to be scrupulously undertaken in terms of
the provisions of the Act. In Assistant Collector General, Kolkata
Division Vs. National Tobacco Co. of India Ltd, reported in (1972) 2
SCC 560, the Apex Court observed that a mechanical adjustment and
ostensible settlement of accounts, by making debit entries, was
undertaken by the Department. But that could not be equated with
an assessment which is a quasi-judicial process which involves due
application of mind to the facts as well as to the requirements of law.
an accordingly it held that unless the Court is bound by law to give
such an unusual interpretation to the term “assessment”, it do not
find any such definition of assessment or any compelling reason to
hold that what could at most be a mechanical provisional collection,
which would become a “levy” in the eye of law only after an
“assessment”, was itself a levy or an “assessment”.
46. In the facts of the case, the selling dealer namely the writ
petitioner herein, is a registered dealer within the State of Assam. It
had sold its goods namely, Pan Masala to a registered dealer in the
State of Haryana. This sale according to the writ petitioner is a sale
undertaken in the course of inter-State trade and commerce and not
W.P(C) No. 4359/2019 Page 41 of 46
a sell within the Assam. Consequently, upon the Form ‘C’ declaration
being furnished by the selling dealer namely the writ petitioner for
the period indicated, the petitioner had availed the benefit of
concessional sales tax as prescribed under Section 8 of the CST read
with Rule 12 of the CST Rules. The dispute between the State and
the writ petitioner has arisen pursuant to a communication which was
issued by the competent department of Tax & Excise from the State
of Haryana informing the competent authorities in the State of Assam
that the ‘C’ Form which was issued in favour of the writ petitioner
were found to be fraudulently obtained and that the Department is in
the process of declaring the Forms as obsolete.
47. It was further intimated that the said ‘C’ Forms for these
transactions have been cancelled and the concerned authorities of
the State of Assam are not to give the benefit of concessional sales
to the dealer of the State namely the writ petitioner as no such
purchases have been made by the Haryana Dealer.
48. The respondent authorities on the basis of this
communication intimated the petitioner by the impugned notices
dated 03.07.2018 and 27.11.2018 requiring the petitioner to deposit
the balance amount payable against the transaction mentioned in the
Form ‘C’ declaration during the period 01.01.2016 to 31.03.2016 in
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respect of M/s Om Traders, Gurugram, Haryana for an amount of Rs.
626018432.00.
49. After careful examination of the Judgments of the Apex
Court as well as the various provisions of the Act and the Rules, it is
seen that once the selling dealer verifies that the purchasing dealer is
also a registered dealer and the particulars of the goods purchased
and the period of trading along with the other particulars as may be
prescribed under the Form are duly filled with, there is no scope for
the selling dealer to go beyond such particulars provided/furnished by
the purchasing dealer to find out the authenticity of the background
of such a dealer. Therefore in the absence of any such provisions to
the contrary under the Act and the Rules, no such burden is cast
upon the selling dealer. Therefore, where the selling dealer furnishes
a duly filled up Form ‘C’ declaration with all relevant particulars, he is
entitled to be granted the benefit under Statute 8 by the competent
authorities. In the event such Form ‘C’ declarations furnished by the
buying dealer are found to be incorrect or contrary to the provisions
of law, the benefits which are enjoyed by the selling dealer under the
provisions of CST read with the Rules cannot be denied to the selling
dealer on that ground, without there being any proper investigation
and enquiry as may be prescribed under the provisions of the law.
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50. From the pleadings, it is seen that the transactions took
place between the periods 29.01.2016 to 29.03.2016. And the
communication received from the Excise and Taxation Officer-cum-
Assessing Officer, Gurgaon, Haryana was received by the respondent
department on 19.02.2018. From the communication although it is
seen that the ‘C’ Forms have been declared obsolete but since no
specific date from which the ‘C’ Forms have been declared obsolete is
mentioned, as such it will have to be accepted that the effective date
for declaration of the ‘C’ Forms will be from the date of knowledge
which is the date of communication dated 19.02.2018 issued by the
Excise and Taxation-cum-Assessing Authority-cum-Officer. Such a
declaration unless otherwise specified cannot be made effective
retrospectively.
51. As such it has to be held that declaration that the ‘C’ Forms
are obsolete by the Haryana Taxation Department can only be
accepted to be effective from the date of the communication which is
19.02.2018. That apart the Haryana Taxation Department did not
undertake any proceedings to cancel the said ‘C’ Forms. No
information to that effect is placed before this Court by the
respondents. It will therefore not take away any benefit that had
accrued to the assessee well prior to the date of the communication.
Where the mandate of the Statute is clear, the benefits that accrue to
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a dealer must be conferred to the full extent as permitted under the
Statute without any restrictions unless by way of resorting to any
procedure prescribed by the Statute. It has to be therefore held that
the petitioner cannot be denied the benefit available under the
Statute, merely on the pretext of the communication dated
19.02.2018 received from the Haryana Taxation Department which
by any latitude cannot be treated to any order passed by the said
Department as per the procedure prescribed under the Statute.
52. As is the mandate of Section 43 of the Assam VAT Act, 2003,
that if the dealer fails to make payment of the tax assessed or
interest levied or penalty imposed under the Act within a period of 30
days from the date of service of the notice, the prescribed authority
may after giving the dealer a reasonable opportunity of being heard
direct that such a dealer shall in addition to the amount due pay by
way of penalty, a sum not exceeding 2% of such amount of tax,
penalty, interest and any other amount due for every month for the
period for which the payment has been delayed after the date on
which the amount was due to be paid.
53. In the facts of the present case, no assessment admittedly
was carried out by the Assessing Officer and therefore, Section
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43(A)(ii) is not attracted in the facts of the present case requiring the
respondents to raise any such demand on the assessee/petitioner.
54. From the provisions of Section 43, it is clear that the liability
of payment arises only after expiry of 30 days from the date of
service of the notice on demand. The notice of demand can be issued
only after completion of the assessment. However, no assessment
was undertaken by the respondents in the present case.
55. Since no assessment was completed, there can be no
demand made. Under such circumstances, the petitioner cannot be
treated to be a defaulter and consequently no notice of demand
could have been issued. Since the impugned notices have been
issued without there being a proper assessment and in terms of the
provisions of Assam VAT Act, 2003 it reveals that there was complete
no application of mind by the respondent authority. The impugned
notices dated 03.07.2018 as well as 27.11.2018 are therefore bad in
law and the same are therefore set aside and quashed.
56. The writ petition is accordingly, allowed in terms of the
above. No order as to cost.
JUDGE
Comparing Assistant
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