2008 (8) TMI 813 - HC - VAT and Sales Tax

Refusal to issue declaration forms C - dealer failed to pay entry tax on the goods purchased from outside State - Held that - The action of the authority should be fair and transparent. Needless to say that action of the authority should not be such that it will hamper the free-flow of the inter-State trade. When exercising power under rule 6 of the CST (O) Rules in the matter of issuing C form it would not be appropriate for the authority to delve into the aspect whether entry tax is payable on the goods brought from outside the State. The authorities are not competent to cancel the registration certificate of the petitioner. However order-sheet entry dated May 21 2008 reveals that the STO has made enquiry into the business premises of the petitioner and noted that the major goods dealt with by the dealer are manufactured inside the State of Orissa whereas the dealer s stand is that the goods dealt with by it are neither produced nor manufactured inside the State. These are purely disputed questions of fact. Such factual disputed questions cannot be adjudicated by this court in exercise of its writ jurisdiction. Hence the Revenue authorities may proceed with the assessment after affording reasonable opportunity of hearing to the petitioner and confronting it with the materials collected against it that the goods dealt with by it are manufactured in the State of Orissa. The petitioner shall also have right to adduce evidence in support of its contention that goods dealt with by him are neither produced nor manufactured inside the State of Orissa. However it is made clear that the Revenue authorities in the circumstances of the case cannot suspend the registration certificate of the petitioner. Applications of the petitioner for supply of declaration in forms C be considered and dispose of in accordance with law without any delay.

Summary

Issues Involved:
1. Entitlement to "C" forms under the CST Act.
2. Binding nature of the High Court's judgment while an SLP is pending in the Supreme Court.
3. Authority of Revenue authorities to cancel registration and proceed with provisional assessment for non-payment of entry tax.

Issue-wise Detailed Analysis:

1. Entitlement to "C" Forms:
The petitioner, a registered dealer under the CST Act, applied for "C" forms to purchase goods at a concessional rate. The Revenue authorities refused to issue the forms due to non-payment of entry tax under the Orissa Entry Tax Act. The court examined Section 8 of the CST Act, Rule 12 of the CST (R&T) Rules, and Rule 6 of the CST (O) Rules. It concluded that once a dealer satisfies the conditions of being registered, paying the required fees, and submitting the account of last supplied forms, the authorities are bound to issue "C" forms. The refusal on the ground of non-payment of entry tax was deemed invalid. The court cited precedents from the Kerala and Madras High Courts, emphasizing that withholding "C" forms can disrupt trade and is impermissible under the law. The court stressed that the authorities must act fairly and transparently, issuing "C" forms without delay unless there are valid reasons recorded in writing.

2. Binding Nature of High Court's Judgment:
The petitioner relied on a previous judgment of the Orissa High Court (Reliance Industries v. State of Orissa) which held that entry tax is not leviable on goods not manufactured within the state. The court reaffirmed that judgments of the High Court are binding on all parties, even if an SLP is pending in the Supreme Court, unless stayed. The court cited the Supreme Court's decisions in East India Commercial Co. Ltd. and Kamlakshi Finance Corporation Ltd., which emphasized the binding nature of higher judicial authorities' decisions on subordinate authorities. Thus, the Revenue authorities were bound to follow the High Court's judgment.

3. Authority to Cancel Registration and Provisional Assessment:
The Revenue authorities attempted to cancel the petitioner's registration and proceed with provisional assessment for non-payment of entry tax. The court found that the petitioner's stand, supported by the High Court's judgment, was that the goods were not manufactured within the state, and thus, no entry tax was payable. The court noted that the STO's inquiry into the petitioner's premises revealed a factual dispute about whether the goods were manufactured in Orissa. Such disputes cannot be resolved in writ jurisdiction and should be addressed during regular assessment proceedings. The court directed that the Revenue authorities could not suspend the petitioner's registration and must consider the application for "C" forms in accordance with the law.

Conclusion:
The writ petition was disposed of with directions to the Revenue authorities to issue "C" forms without delay, not to suspend the petitioner's registration, and to proceed with the assessment after providing a fair hearing. The judgment emphasized the need for fair and transparent actions by the authorities to facilitate trade and commerce.