2018 (10) TMI 1529 - HC - VAT and Sales Tax

Denial of downloading and issuance of 'C' declaration forms - post GST situation - purchase of petroleum products at concessional rate - inter-state trade - Section 8(3)(b) of the CST Act, 1956 - Held that - A registered dealer, who is holding a valid Certificate of Registration, which is in force, if satisfies the requirement contemplated under sub clause (3)(b) of Section 8, is entitled to pay the concessional tax, as provided under sub clause (1) of Section 8. There is no dispute to the fact that even after the introduction of GST, though several drastic amendments were made to CST Act, 1956, this particular provision of law viz., Section 8(3)(b) has not undergone any change. On the other hand, it is admitted by both sides that the said provision still holds the field. The crux of the contentions raised by the respondents to deny the benefit under Section 8(3)(b) to these petitioners is that the purchasing goods and manufacturing or selling goods of the petitioners are not one and the same - Held that - It is very clear that though the goods as defined under Section 2(d), is purchased by the dealer by availing benefit of concessional rate of tax under Section 8(3)(b), it is not necessary that such dealer must be a person of manufacturing or processing only the same goods for sale to avail such benefit. On the other hand, if the said goods so purchased is put into use for the mining or for the telecommunication network or for the generation and captive consumption of electricity or distribution of the same or any other form of power as well, such of those dealers, who are engaged in those activities are also entitled to the benefit under Section 8(3)(b). The benefit that is being enjoyed by the dealer out of the unamended provision of Section 8(3)(b) should continue to flow till any change is made to the said provision. The respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Validity of the letter dated 31st May 2018 issued by the Commissioner of Commercial Taxes.
2. Eligibility of dealers to purchase goods at a concessional rate using 'C' Forms post-GST implementation.
3. Interpretation of Section 8(3)(b) of the CST Act, 1956.
4. Impact of the amended definition of "goods" under Section 2(d) of the CST Act, 1956.
5. Jurisdiction and authority of the respondents to deny 'C' Forms.
6. Compliance with principles of natural justice in the issuance of the impugned communications.

Detailed Analysis:

1. Validity of the letter dated 31st May 2018 issued by the Commissioner of Commercial Taxes:
The petitioners challenged the letter dated 31st May 2018, issued by the Commissioner of Commercial Taxes, which instructed Joint Commissioners that only dealers dealing in petroleum crude, high-speed diesel, motor spirit (petrol), aviation turbine fuel, natural gas, and liquor are entitled to effect purchases from other states at a concessional rate using 'C' Forms. This letter was deemed to affect the rights of the petitioners directly, as it prevented them from availing the concessional rate of tax for purchasing petroleum products used in their manufacturing activities. The court found that this letter, whether considered a circular or an internal communication, had a significant impact on the petitioners' rights and thus could be challenged.

2. Eligibility of dealers to purchase goods at a concessional rate using 'C' Forms post-GST implementation:
The petitioners argued that they were entitled to purchase high-speed diesel oil and other petroleum products at a concessional rate of tax using 'C' Forms, as they were used in their manufacturing processes. The court noted that the petitioners were registered dealers with valid Certificates of Registration under the CST Act, 1956, which entitled them to purchase petroleum products at a concessional rate. The court emphasized that the provision under Section 8(3)(b) of the CST Act, 1956, which allows such purchases, had not been amended post-GST implementation and thus remained applicable.

3. Interpretation of Section 8(3)(b) of the CST Act, 1956:
Section 8(3)(b) of the CST Act, 1956, allows registered dealers to purchase goods at a concessional rate if the goods are used in the manufacture or processing of goods for sale, in the telecommunication network, in mining, or in the generation or distribution of electricity or any other form of power. The court found that the petitioners met the criteria under Section 8(3)(b) as they used the petroleum products in their manufacturing processes or for captive power generation. The court rejected the respondents' contention that only dealers dealing in the six goods defined under Section 2(d) of the CST Act, 1956, post-amendment, were eligible for the concessional rate.

4. Impact of the amended definition of "goods" under Section 2(d) of the CST Act, 1956:
The definition of "goods" under Section 2(d) of the CST Act, 1956, was amended to include only six specific items: petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel, and alcoholic liquor for human consumption. The respondents argued that this amendment restricted the eligibility for concessional rates to dealers dealing in these six goods. However, the court found that Section 8(3)(b) remained unamended and continued to allow concessional purchases for use in manufacturing, mining, telecommunication, and power generation. The court held that the benefit of Section 8(3)(b) should continue to be available to the petitioners despite the amended definition of "goods."

5. Jurisdiction and authority of the respondents to deny 'C' Forms:
The court found that the respondents did not have the jurisdiction to deny the petitioners the ability to generate 'C' Forms for purchasing petroleum products at a concessional rate. The court emphasized that the respondents' actions effectively nullified the provision under Section 8(3)(b) of the CST Act, 1956, which was still in force and applicable to the petitioners. The court held that the respondents' actions were without jurisdiction and contrary to the provisions of the CST Act, 1956.

6. Compliance with principles of natural justice in the issuance of the impugned communications:
The court noted that the impugned communications dated 17.07.2018 were issued without giving the petitioners an opportunity to be heard, thus violating the principles of natural justice. The court found that the respondents had already concluded that the petitioners were not entitled to generate 'C' Forms for purchasing petroleum products without issuing any prior notice or proposal to the petitioners. The court held that the respondents' actions were not only against the principles of natural justice but also contrary to the provisions of the CST Act, 1956.

Conclusion:
The court allowed the writ petitions, set aside the impugned proceedings, and directed the respondents to permit the petitioners to download 'C' Forms for purchasing petroleum products at a concessional rate as per Section 8(3)(b) of the CST Act, 1956. The court emphasized that the petitioners were entitled to the benefit under Section 8(3)(b) as long as they met the criteria specified in the provision and held valid Certificates of Registration under the CST Act, 1956.

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