2010 (4) TMI 1010 - HC - VAT and Sales Tax

Whether the concessional rate of tax is subject to furnishing of C forms, which had to be obtained by the petitioner from the various persons who are registered dealers in other States to whom the goods are sold and on furnishing of the said C forms, concessional rate of tax at four per cent is levied instead of 15 per cent? Held that - The petitioner has utilized the C forms issued by the registered dealer who is a purchaser based on the fact that the said purchaser has been in existence and has validly issued the said forms. Therefore the authorities could not have been held that the petitioner had utilized the invalid C forms in order to claim concessional rate of tax. Moreover, in the absence of there being any proof that the purchasing dealer had ceased to exist on July 1, 2002 and that the said fact was within the knowledge of the petitioner herein in the absence of such circumstances, the authorities had to levy tax at the concessional rate of four per cent on the basis of the C forms relied upon by the assessee and further the proceedings initiated with regard to the levy of penalty is also not in accordance with law. For the aforesaid reasons, the orders passed in the instant case are set aside and the petition is allowed.

Summary

Issues:
Challenge to order dated July 22, 2008 passed in S.T.A. No. 509 of 2007 by Karnataka Appellate Tribunal regarding concessional rate of tax under CST Act, 1956.

Analysis:
The petitioner, a company engaged in the sale of ceramic tiles, challenged an order regarding the concessional rate of tax under the CST Act, 1956. The petitioner sold goods to a registered dealer in Tirupati at a concessional rate subject to furnishing C forms. The assessing authority granted the concessional rate up to June 30, 2002, but levied full tax at 15% for subsequent sales, claiming the buyer had cancelled registration. The petitioner appealed, but both the Joint Commissioner and the Appellate Tribunal upheld the decision. The petitioner argued that they should not be penalized for using C forms issued by a dealer who cancelled registration without their knowledge. The Government Pleader contended that the forms were invalid post-cancellation. The High Court found that the petitioner had no obligation to verify the dealer's registration status and should not be penalized for utilizing valid C forms. There was no proof that the dealer ceased to exist on July 1, 2002, and the penalty proceedings were deemed unlawful. Consequently, the High Court set aside the previous orders and allowed the petition.