2016 (6) TMI 504 - HC - VAT and Sales Tax

Non-production of C -Forms - Demanding a higher rate of tax under the CST Act 1956 due to the non production of C Forms - Dealers were refused to issue C Forms in the Union Territory of Puducherry - Held that - Once it is found that the Prescribed Authority is the Authority of the State Government and once it is found that under Section 13(4)(e) a power is conferred upon the State Government to make rules prescribing the conditions subject to which a declaration under Section 8(4) could be obtained it is futile to contend that one cannot look beyond Section 8(1) of the Act. The entitlement of a person to a C-Declaration Form cannot be determined solely on the basis of the provisions of Sub-Sections (1) and (4) of Section 8. The entire scheme of the Act including the provisions of Section 9(2) and Section 13(4)(e) have to be looked into. The availability of different modes for the recovery of a tax due is actually for the benefit of the State and not intended to benefit the assessee. Neither the assessee, nor the person to whom the assessee owes an obligation can dictate to the State the mode of recovery to be chosen by them. The power available to the State for the cancellation of the registration of a defaulting dealer is actually in addition to the several modes of recovery available to the State. After all the cancellation of registration does not result in the automatic recovery of tax due. The recourse to the revenue recovery proceedings may or may not yield the desired result since it would depend upon whether the dealer has sufficient resources or not. There is also no impediment in law for the simultaneous adoption of more than one method of recovery. The appellants and petitioners are not entitled to the reliefs prayed for. Hence the writ appeals and writ petitions are dismissed - Decided against the petitioners / assessee.

Issues Involved:
1. Non-issuance of 'C' Forms due to default in local VAT payment.
2. Demand of higher tax rate under CST Act due to non-production of 'C' Forms.
3. Legal standing (locus) of Oil Corporations to challenge the refusal of 'C' Forms.
4. Interpretation of Section 43 of the Puducherry VAT Act, 2007.
5. Whether the refusal to issue 'C' Forms violates the CST Act, 1956.
6. Whether the mandate of a Parliamentary Enactment can be defeated by a State Enactment.
7. Availability of alternative remedies for tax recovery.

Issue-wise Detailed Analysis:

1. Non-issuance of 'C' Forms due to default in local VAT payment:
The judgment addresses the refusal of Puducherry authorities to issue 'C' Forms to dealers of Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL) due to the dealers' default in paying local VAT. Section 43 of the Puducherry VAT Act, 2007, empowers authorities to withhold statutory forms if any tax or penalty is due.

2. Demand of higher tax rate under CST Act due to non-production of 'C' Forms:
Due to the non-issuance of 'C' Forms, the assessing officers in Tamil Nadu demanded a higher tax rate of 30% instead of the concessional 2% under Section 8(1) of the CST Act. This resulted in BPCL and IOCL being financially impacted by the defaults of their dealers.

3. Legal standing (locus) of Oil Corporations to challenge the refusal of 'C' Forms:
The court overruled the preliminary objection regarding the locus of BPCL and IOCL, stating that the refusal to issue 'C' Forms directly affects these corporations financially. The CST Act operates at two levels, and the refusal of Puducherry authorities has a direct impact on the Oil Corporations, giving them the right to challenge the act.

4. Interpretation of Section 43 of the Puducherry VAT Act, 2007:
Section 43(1) allows the withholding of statutory or other declaration forms if any tax or penalty is due. The court rejected the contention that this section only applies to forms under the Puducherry VAT Act, stating that the language of Section 43(1) is broad and includes 'C' Forms under the CST Act.

5. Whether the refusal to issue 'C' Forms violates the CST Act, 1956:
The court held that the CST Act allows State Governments to prescribe conditions for the issuance of 'C' Forms. The refusal to issue 'C' Forms due to local VAT defaults is within the authority of the Puducherry VAT Act and does not violate the CST Act. The court cited various precedents to support this interpretation.

6. Whether the mandate of a Parliamentary Enactment can be defeated by a State Enactment:
The court discussed the interplay between Section 13(1)(d) and Section 13(4)(e) of the CST Act. It concluded that the State Government has the authority to prescribe conditions for the issuance of 'C' Forms, including withholding them for VAT defaults. This does not defeat the mandate of the CST Act but operates within the framework provided by it.

7. Availability of alternative remedies for tax recovery:
The court rejected the argument that alternative remedies, such as revenue recovery proceedings, should be used instead of withholding 'C' Forms. It stated that the availability of multiple recovery methods benefits the State and the withholding of 'C' Forms is a legitimate and effective measure to ensure tax compliance.

Conclusion:
The writ appeals and petitions filed by BPCL, IOCL, and their dealers were dismissed. The court upheld the authority of Puducherry to withhold 'C' Forms due to local VAT defaults, and the consequential higher tax demands under the CST Act were deemed valid. The judgment emphasized the statutory obligations and the interplay between central and state legislation in tax matters.

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