2017 (7) TMI 698 - HC - VAT and Sales Tax

Inter-State purchases of vehicles - C-Form - The petitioner having made local sales of the vehicles purchased from outside State, has not deposited the self assessed tax with the government authorities. On such ground, the department does not permit the petitioner to generate the C form. Since this is one of the requirements contained in the circular dated 16.11.2009, the short question is, Is it legally permissible? - Held that - the State Government requires that a dealer must have discharged all his self assessed tax liabilities before C forms can be obtained in connection with any of his dealings. Essentially, this amounts to a mode of tax recovery. Even if it is self assessed tax, the prescription of the circular does not lose its essential character of one being in the nature of tax collection. Unless and until such a condition is backed by any statutory provision, it would not be possible for the State Government to provide such a mode of tax recovery making it a pre-condition for generation of C forms. As noted, had such a condition been introduced by framing statutory rules in exercise of powers under sub-sections (3) and (4) of Section 13 of the CST Act, we would have examined the question further. However, the circular in the form of executive instructions cannot take shape of a statute. What is envisaged in sub-sections (3) and (4) of Section 13 is the power of delegated legislation vested in the State Government for carrying out the purposes of the CST Act. Such rule making power cannot be substituted by executive instructions. The circular in question is certainly not in exercise of the rule making powers exercised by the State Government. The action of the respondents in not allowing the petitioner to generate C form solely on the ground that the petitioner had not paid the self assessed tax for the relevant period under the VAT Act is illegal. The respondents shall allow the petitioner to generate C form subject to other conditions being fulfilled - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Refusal to issue C form for inter-State purchases.
2. Legality of the condition requiring payment of self-assessed tax before generating C form.
3. Validity of the circular dated 16.11.2009 imposing conditions for C form generation.

Issue-wise Detailed Analysis:

1. Refusal to issue C form for inter-State purchases:
The petitioner, an authorized dealer registered under the Gujarat Value Added Tax Act (VAT Act) and the Central Sales Tax Act (CST Act), challenged the respondent authorities' refusal to issue C form for inter-State purchases of vehicles. The petitioner argued that this refusal, based on unpaid VAT dues, was causing hardships for the petitioner and the selling dealers by preventing them from benefiting from the reduced tax rate on inter-State sales.

2. Legality of the condition requiring payment of self-assessed tax before generating C form:
The court examined whether it was legally permissible for the department to refuse the issuance of C form based on unpaid self-assessed tax dues. The petitioner had not deposited the collected VAT for the period between 01.04.2015 and 31.03.2016, amounting to more than ?6 crores. The department's system, based on a circular dated 16.11.2009, did not permit the generation of C forms if the dealer had not paid the self-assessed tax. The court noted that the VAT Act contains detailed provisions for the assessment, reassessment, and collection of tax, and there is no specific rule linking the issuance of C forms to the payment of VAT dues.

3. Validity of the circular dated 16.11.2009 imposing conditions for C form generation:
The court scrutinized the circular dated 16.11.2009, which mandated that dealers must have paid all self-assessed taxes as per their quarterly returns to generate C forms online. The court observed that this circular was an executive instruction and not a statutory provision. The rule-making powers under Section 13 of the CST Act allow the State Government to frame rules, but such rules must be consistent with the Act and cannot be substituted by executive instructions. The court held that the circular lacked the statutory backing required to enforce such a condition for C form issuance.

Conclusion:
The court concluded that the respondents' action of not allowing the petitioner to generate C forms solely on the ground of unpaid self-assessed tax under the VAT Act was illegal. The court directed the respondents to permit the petitioner to generate C forms, subject to the fulfillment of other conditions, by 31.08.2017. The petition was disposed of accordingly.