2014 (8) TMI 894 - HC - VAT and Sales Tax

Issuance of Form C - Issue of writ of mandamus - Imposition of tax liability at enhanced rate - Held that - When an Act provides a mechanism for payment at concessional rate of tax, a registered dealer would be entitled to avail this facility provided Form-C is given to him by the purchaser. Rule 8 of the Central Sales Tax Rules as applicable in the State of U.P. provides that Form-C can be issued by the department to a registered dealer. We find that the stand of the State that the Managing Director, PVVNL is only registered under the U.P. Trade Tax Act and is not registered under the Central Sales Tax Act has not been denied by the petitioner. Since the contract was entered between the petitioner and the Managing Director of PVVNL, Form-C could only be issued by the said Managing Director of PVVNL. The trade tax department was justified in restraining the Executive Engineer from issuing Form-C to the petitioner, who had nothing to do with the execution of the contract Under the contract, the petitioner was entitled to receive Form-C from the purchaser, namely, from the Managing Director of PVVNL. The said respondent was obliged to issue Form-C to the petitioner to enable the petitioner avail concessional rate of tax in his assessment proceedings. Since the petitioner did not receive Form-C from PVVNL the petitioner became liable to pay tax at a higher rate. We are of the opinion that the petitioner is entitled to recover the differential rate of tax etc. from PVVNL as per the contract. However, the writ jurisdiction is not the appropriate proceedings for recovery of the tax. We find that there is a contract between the petitioner and PVVNL in which there is a clause relating to arbitration for settlement of a dispute. We, are accordingly, of the opinion that no mandamus could be issued to PVVNL-respondent no.5 for issuance of Form-C. - Decided against assessee.

Summary

Issues:
1. Imposition of tax at an enhanced rate of 10% due to non-filing of Form-C as required under the U.P. Trade Tax Act.
2. Restraining order issued by Deputy Commissioner preventing the issuance of Form-C by PVVNL to the petitioner.
3. Petitioner's contention regarding entitlement to Form-C under the contract and liability to pay tax at a higher rate.
4. Legal implications of the registration status of PVVNL under the Central Sales Tax Act.
5. Applicability of mandamus for the issuance of Form-C and recovery of tax differential.
6. Consideration of arbitration clause for dispute settlement between the petitioner and PVVNL.

Analysis:
1. The petitioner, a registered dealer under U.P. Trade Tax Act and Central Sales Tax Act, faced an enhanced tax rate of 10% due to non-filing of Form-C as required by Section 8(4)(a) of the U.P. Trade Tax Act. The Assessing Officer imposed this tax liability, prompting the petitioner to challenge the imposition.
2. The petitioner contested a restraining order issued by the Deputy Commissioner, which prevented PVVNL from issuing Form-C, leading to the petitioner's tax liability escalation. The petitioner sought to quash this order and obtain a mandamus for Form-C issuance.
3. The petitioner argued that PVVNL, under the contract, was obligated to provide Form-C, enabling the petitioner to avail concessional tax rates. The absence of Form-C resulted in the petitioner's higher tax liability, emphasizing the need for recovery from PVVNL as per the contract terms.
4. The legal status of PVVNL's registration under the Central Sales Tax Act was crucial. The court noted that since the Managing Director of PVVNL was not registered under this Act, mandamus for Form-C issuance to avail concessional tax rates was not applicable.
5. The court referenced a Supreme Court decision emphasizing reimbursement for tax differences in cases of non-issuance of declaration forms. While acknowledging the petitioner's entitlement to recover tax differentials from PVVNL per the contract, the court deemed arbitration as the appropriate avenue for dispute resolution, rather than mandamus.
6. Ultimately, the court dismissed the writ petition, granting the petitioner liberty to invoke the arbitration clause for resolving the tax recovery dispute with PVVNL, highlighting the contractual provision for arbitration as the suitable mechanism for dispute resolution.