2018 (7) TMI 1861 - HC - VAT and Sales Tax

Power to cancel the registration of C-Forms - Central Sales Tax (Registration & Turnover) Rules, 1957 - Central Sales Tax Act, 1956 - Held that - The issue is covered in the case of JAIN MANUFACTURING (INDIA) PVT. LTD. VERSUS THE COMMISSIONER VALUE ADDED TAX & ANR. 2016 (6) TMI 304 - DELHI HIGH COURT , where it was held that Where the cancellation of the registration and, consequently of the C-Form is sought to be done retrospectively, it would adversely affect the rights of bonafide sellers in other states who proceeded on the basis of the existence of valid CST registration of the purchasing dealer on the date of the inter-se sale. That outcome is not contemplated by the CST Act and the Rules thereunder. The orders cancelling C-forms retrospectively are hereby quashed and set aside - petition allowed in part.

Summary

Issues involved:
Challenge to retrospective cancellation of C-Forms under Central Sales Tax Act and Rules.

Analysis:
The judgment by the Delhi High Court addresses the issue of retrospective cancellation of C-Forms under the Central Sales Tax Act and Rules. The petitioner sought directions to the respondents to honor the C-Forms used by them, arguing that there is no statutory power allowing for retrospective cancellation of C-Forms. The petitioner relied on a previous Division Bench judgment that emphasized the need for a valid registration of the purchasing dealer and the C-Form at the time of issuance, highlighting that retrospective cancellation is not permitted unless there was fraudulent means involved. The Court also discussed the practical difficulties faced by selling dealers if retrospective cancellations were allowed, emphasizing the importance of diligent inquiries by selling dealers to verify the validity of CST registrations and C-Forms.

The Court further emphasized that the best course of action would be for authorities to cancel CST registrations prospectively and immediately update such information on their websites to avoid adverse effects on bonafide sellers in other states. Retrospective cancellations were deemed to go against the provisions of the CST Act and Rules. Consequently, the Court set aside the order cancelling the C-Form issued to the petitioner and directed the petitioner to continue treating the C-Form as valid. The respondents, represented by the VAT Department, did not dispute that the claim fell within the purview of the previous judgment, leading to the partial allowance of the writ petition. The Court quashed and set aside the orders retrospectively canceling C-Forms and directed the validation of said C-Forms on the respondents' website within four weeks in line with the previous judgment.