2008 (5) TMI 626 - HC - VAT and Sales Tax

Summary

Issues: Tax liability change from multi-point to single point, differential tax payment, refusal to issue statutory form D-III, legal obligation to furnish form, court's decision on the matter.

The judgment addresses the issue of tax liability transformation from a multi-point to a single-point system. Before November 10, 2006, the tax rate was 41%, which later increased to 50%. The State Beverage Corporation Limited purchased Indian-made foreign liquor from manufacturers and sold it to various entities, including the petitioner. The Corporation added its profit to the acquisition cost and charged 41% tax to the petitioner. However, after the tax system changed, the Corporation demanded the petitioner to pay the difference between 41% and 50% for sales made between November 10-14, 2006, to issue statutory form D-III for sales from November 15, 2006. The Corporation argued it had paid the differential tax to the Sales Tax Department, but its liability was to the manufacturer, not the Department.

The Court held that despite the tax dispute, the Corporation could not withhold the statutory form D-III that the petitioner was entitled to receive. Citing a prior Division Bench decision, the Court emphasized that when there is a legal obligation to provide a form for a sale, withholding it to force the recipient to comply with demands is impermissible. Consequently, the Court directed the State Beverage Corporation Limited to issue form D-III to the petitioner for sales from November 15, 2006, without requiring payment of the differential tax for earlier transactions.

The writ petition was allowed in favor of the petitioner, and the Corporation was instructed to provide the necessary forms promptly, within two months of the court order's service. However, the judgment clarified that the Corporation retained the right to pursue legal avenues to recover any outstanding amounts from the petitioner, including the disputed tax differentials, if deemed payable under the law.