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2015 (1) TMI 1330 - HC - VAT and Sales TaxLevy of CST instead of Jharkhand VAT - petitioner s case is that petitioner is e-auction purchaser of coal within the State of Jharkhand. He is a registered dealer within the State of Jharkhand. The seller and purchaser of the goods are within the State of Jharkhand. The whole transaction of sale has been completed within the State of Jharkhand and therefore the Annexure 4 as CST Invoice cannot be issued. In fact it should have been VAT and respondent No.6 is at no loss at all because the VAT is also at the rate of 5% and the CST is at the rate of 5% but it would make a difference for this petitioner for getting input tax credit. Held that - even if the movement of goods have taken place out of one State to another State by per se CST is not leviable. One has to draw his attention whether the movement of goods from one State to another has taken place due to e-auction or not. If answer is negative the CST is not leviable. There may be second sale. Subsequent purchaser may purchase the same goods. Now if due to subsequent sale if the very same goods are moving from one State to another therefore seller of goods of first transaction cannot levy CST but he can levy only VAT - the CST levied at the rate of 5% by respondent no.6 is impermissible in the eyes of law. Instead of that it should have been VAT under the Jharkhand Value Added Tax Act 2005 - petition allowed - decided in favor of petitioner.
Issues Involved:
1. Applicability of Central Sales Tax (CST) vs. Value Added Tax (VAT) for intra-state transactions. 2. Impact of incorrect tax invoicing on input tax credit and subsequent sales. 3. Interpretation and application of Section 3(a) of the Central Sales Tax Act, 1956. Detailed Analysis: 1. Applicability of CST vs. VAT for Intra-State Transactions: The petitioner, a registered dealer within Jharkhand, contested the imposition of CST at 5% by respondent No. 6 for a coal sale transaction conducted within Jharkhand. The petitioner argued that VAT should have been levied instead, as the transaction was intra-state. The court noted that both the seller and the purchaser were within the state, and the sale transaction was completed within Jharkhand. Therefore, the imposition of CST was incorrect, and VAT should have been applied as per the Jharkhand Value Added Tax Act, 2005. 2. Impact of Incorrect Tax Invoicing on Input Tax Credit and Subsequent Sales: The petitioner highlighted that the incorrect imposition of CST instead of VAT affected their ability to claim input tax credit under Section 18 of the Jharkhand Value Added Tax Act, 2005, and Rule 26 of the VAT Rules, 2006. Additionally, the subsequent purchaser of coal in Uttarakhand would be impacted, as they would have to pay CST at 2% on the second sale. The court acknowledged that while the tax rate (5%) remained the same for both CST and VAT, the nature of the tax had significant implications for the petitioner and the subsequent purchaser. 3. Interpretation and Application of Section 3(a) of the Central Sales Tax Act, 1956: Respondent No. 6 justified the imposition of CST based on Section 3(a) of the Central Sales Tax Act, 1956, which applies when the movement of goods occurs from one state to another. The court clarified that Section 3(a) pertains to a single transaction causing interstate movement. In this case, the initial sale between the petitioner and respondent No. 6 was intra-state, and the subsequent interstate movement occurred due to a different transaction between the petitioner and the purchaser in Uttarakhand. Therefore, Section 3(a) did not apply, and CST was not justifiable. Conclusion and Directions: The court concluded that respondent No. 6 erred in levying CST instead of VAT. It directed respondent No. 6 to amend the Tax Cum Excise Invoice (Annexure 4) to reflect VAT at 5% instead of CST. This correction was to be made within four weeks, ensuring the petitioner could claim the appropriate input tax credit and benefit from the correct tax treatment for subsequent sales. The court also ordered the issuance of form JVAT-404 under the Jharkhand Value Added Tax Act, 2005, within the same timeframe. The writ petition was allowed without imposing costs on the respondents.
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