2018 (11) TMI 1622 - HC - VAT and Sales Tax

Rejection of C-Forms - Territorial Jurisdiction - Revenue s argument that since it did not pass an order cancelling the C Form, but rather that a third party, outside the jurisdiction of this court, did so, is unpersuasive - HELD THAT - As long as the Central enactment is interpreted in a particular manner, by a High Court empowered to do so, the question of the authority, wherever it is located, possessing the power to wit, the authority to cancel the C Form retrospectively does not arise. The declaration of the court that the provisions of law i.e. the Central Sales Tax Act or the Rules do not authorize the concerned authority (or the form issuing authority) to resort to cancellation retrospectively, is one in rem. If the Delhi VAT authorities are permitted to hair split and distinguish the source of its power as one exercised by an authority outside Delhi or that the C Form in the decision was issued by a purchasing dealer and not a selling dealer, the import of the decision would be completely undermined. The submission of the counsel for the Delhi VAT authorities that the Haryana authorities had the power or somehow could retrospectively cancel the C Forms, is rejected. If it is stated that no power exists to cancel a C Form retrospectively, no authority at least in Delhi can give effect to such order. The respondents are hereby directed to grant an opportunity to the petitioner and complete the assessment in accordance with law having regard to the circumstances of this case, i.e. the supervening event of cancellation of C Form - Petition allowed.

Summary

Issues involved:
Challenge to rejection of C Forms leading to increased tax burden, fairness of cancellation of C Forms without notice or opportunity, authority's power for retrospective cancellation of C Forms.

Analysis:
The petitioner, a selling dealer, challenged the rejection of C Forms, resulting in an increased tax liability. The C Forms in question were issued by a purchasing dealer from Haryana, covering specific transactions. The impugned orders rejected the C Form transactions and imposed a substantial amount as payment, along with a penalty. The petitioner contended that the cancellation of C Forms without fair notice or opportunity, and the subsequent assessment without considering the C Forms, were unlawful. Reference was made to a previous court judgment highlighting the need for a fair process in such matters.

The respondents argued that the cancellation of C Forms was done by Haryana authorities, not Delhi VAT Authorities, and Delhi merely implemented the cancellation. They claimed that without involving Haryana authorities in the proceedings, adverse orders should not be passed. However, it was observed that the petitioner was not given a fair hearing before the adverse order was implemented. The court emphasized the necessity of providing a minimum opportunity of hearing and passing a reasoned order before canceling C Forms.

The court analyzed the power of authorities to retrospectively cancel C Forms. It was noted that a validly issued C Form cannot be retrospectively canceled unless there is fraudulent intent or violation of specific statutory provisions. The court highlighted the practical difficulties faced by selling dealers if C Forms are retrospectively canceled without proper notification. The judgment emphasized the importance of diligent verification by selling dealers regarding the validity of the purchasing dealer's registration and C Form.

The court rejected the argument that the source of authority for canceling C Forms was outside Delhi, emphasizing that the interpretation of Central enactments by a High Court prevails. It was clarified that no authority, including Delhi VAT authorities, can give effect to a retrospective cancellation of C Forms if the law does not permit it. Consequently, the impugned orders were set aside, and the respondents were directed to reassess the case considering the cancellation of C Forms and ensuring a fair process for the petitioner.