1996 (4) TMI 405 - SC - VAT and Sales Tax

Interpretation of Section 8 of the Central Sales Tax Act - Held that - Appeal allowed. One must first satisfy the condition in section 8(4) to become eligible for the concessional rate in section 8(1). It is only thereafter that he can claim the benefit of the said notifications, for which purpose again he has to satisfy the conditions prescribed in the notifications. It is therefore wrong to think that section 8(5) or the notifications are self-contained and operate de hors the other provisions of the Act/Rules. The Division Bench has unfortunately failed to appreciate the notifications in their correct perspective. We are of the opinion that the judgment under appeal is unsustainable in law and it is accordingly set aside. The proviso to sub-section (4) of section 8 has been interpreted and explained by this Court in State of Andhra Pradesh v. Hyderabad Asbestos Cement Production Ltd. 1994 (4) TMI 302 - SUPREME COURT OF INDIA . It is obvious that the said decision shall guide the authorities in the matter.

Issues Involved:
1. Validity and genuineness of C forms.
2. Applicability of exemption notifications under Section 8(5) of the Central Sales Tax Act, 1956.
3. Interpretation of Section 8(4) and its requirement for availing concessional tax rates.
4. Conditions for availing reduced tax rates under exemption notifications.

Issue-wise Detailed Analysis:

1. Validity and Genuineness of C Forms:
The respondents-assessees, who are manufacturers and/or dealers in edible oils and stainless steel sheets, submitted C forms obtained from purchasing dealers during their assessment proceedings. Upon survey and inquiry, it was found that many of these C forms were either invalid or not genuine. Some forms were issued to dealers other than the respondents. Consequently, anti-evasion proceedings were initiated, and notices were issued for additional tax and penalties. The High Court's Division Bench did not address the merits of the validity and genuineness of the C forms, leaving this matter to be determined by the appropriate authorities under the Act.

2. Applicability of Exemption Notifications under Section 8(5):
The respondents contended that their inter-State sales were covered by exemption notifications dated December 26, 1986, and April 17, 1990, which did not require the production of C forms for availing the exemption. They argued that the responsibility for invalid or spurious C forms lies with the purchasing dealers. The Division Bench accepted this contention, but the Supreme Court disagreed, emphasizing that Section 8(5) is an integral part of the Act and must be consistent with its provisions. The exemption notifications merely reduce the tax rate and do not eliminate the levy altogether. The conditions for availing the reduced rate under the notifications are separate and additional to those under Section 8(4).

3. Interpretation of Section 8(4) and its Requirement for Availing Concessional Tax Rates:
Section 8(4) mandates that for a dealer to avail of the concessional tax rate under Section 8(1), they must furnish a declaration (C form) duly filled and signed by the purchasing registered dealer. The Supreme Court clarified that the condition in Section 8(4) is essential for availing the concessional rate in Section 8(1). The notifications under Section 8(5) do not operate independently of the Act and cannot be seen as self-contained. The dealer must satisfy the condition in Section 8(4) to be eligible for the concessional rate before claiming the further reduced rate under the notifications.

4. Conditions for Availing Reduced Tax Rates under Exemption Notifications:
The exemption notifications dated December 26, 1986, and April 17, 1990, provided for reduced tax rates of 1.5% or 2.5% (as applicable) instead of the standard 4% under Section 8(1). The notifications required the dealer to prove that the oil-seeds used in manufacturing the edible oil had already been taxed within Rajasthan. The Supreme Court emphasized that these notifications are not self-contained and must be read in conjunction with Section 8(1) and (4). The conditions in the notifications are additional to those in Section 8(4), and both sets of conditions must be satisfied to avail the reduced tax rates.

Conclusion:
The Supreme Court set aside the Division Bench's judgment, affirming that Section 8(4) is integral to availing the concessional rates under Section 8(1) and must be satisfied before claiming further reductions under the exemption notifications. The validity and genuineness of the C forms are to be determined by the appropriate authorities. The appeals were allowed, and the respondents were directed to bear the costs quantified at Rs. 5,000 per appeal.

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