2018 (11) TMI 286 - HC - VAT and Sales Tax

Non-issuance of C Form under the Central Sales Tax Act, 1956 - natural gas purchased by the Petitioner from the supplier/ dealer in the State of Gujarat - concessional rate of Central Sales Tax at 2% - Held that - Where it is possible to bifurcate and/or measure the use of natural gas in generation of power, the benefit of C Form to the extent of its user in generation of electricity, is to be granted. This on facts has been found to be possible by the report submitted by Mr. Vitthal S. Marwade, Deputy Commissioner of Sales Tax. In fact, he has recommended/ proposed grant of C Form to the extent natural gas is used in generation of electricity - In case, a part of the inputs are used in items not entitled to its benefit respect of applications for C Form already made, Respondent will file an affidavit of its Managing Director of the extent of user of natural gas in generation of power with the Respondents in support of its pending applications. Whether at the stage of application for C Form made by Registered dealer, is adjudication called for? - Held that - Once, the Petitioner is registered as a dealer under the Act, then that registration permits/ allows the dealer to purchase the goods mentioned therein from outside the State and seek concessional rate of tax by applying for issue of C Form to the Respondent Nos.1 and 2. Prima facie, Respondent Nos. 1 and 2 are obliged to grant/issue the same - The natural gas obtained/ purchased from the dealer in the State of Gujarat are not used for the intended purposes namely generation of power to the extent declared by the Petitioner, then it would be open to the Respondent to invoke the provisions of the Act and the Rules framed thereunder for the purposes of imposing penalties. The grant of interim relief will not prohibit the Respondents from making enquiries to the extent of use of the natural gas for the stated purposes i.e. generation of electricity. Thereafter, if required, Respondent are at liberty to move this Court for variation of this order - till the final disposal of this Petition, there shall be adinterim relief in terms of prayer clause.

Summary

Issues:
Challenge to non-issue of 'C' Form under the Central Sales Tax Act, 1956 for natural gas purchased from Gujarat. Adjudication requirement for 'C' Form application by a registered dealer.

Analysis:

Issue 1: Challenge to non-issue of 'C' Form
The petitioner challenges the non-issuance of the 'C' Form under the Central Sales Tax Act for natural gas purchased from Gujarat, which would entitle them to a concessional tax rate of 2%. The petitioner contends that they are entitled to the lower tax rate as per the amended definition of goods in Section 2(d) of the Act. The natural gas purchased is used for manufacturing chemicals and electricity generation. The Revenue argues that the petitioner is not eligible for concessional tax as the natural gas is not exclusively used for electricity generation or goods as defined in the Act. However, a proposal by a Sales Tax Officer suggests that the 'C' Form could be issued for the portion of natural gas used for electricity generation. The court finds that if the usage of natural gas can be measured for electricity generation, the 'C' Form should be granted accordingly. The petitioner agrees to make separate purchases for electricity generation in the future.

Issue 2: Adjudication requirement for 'C' Form application
The court discusses the requirement for adjudication at the stage of 'C' Form application by a registered dealer. Once registered, a dealer can purchase goods from outside the state and apply for a concessional tax rate by seeking the 'C' Form. The court cites precedents supporting the obligation of tax authorities to issue the 'C' Form if the goods are used for the intended purpose declared by the dealer. However, if the usage is found to be different, penalties can be imposed. The court grants interim relief but allows authorities to investigate the usage of natural gas for electricity generation. The petitioner is required to undertake to compensate any loss if the petition is dismissed.

In conclusion, the court directs that the 'C' Form should be issued for the portion of natural gas used for electricity generation and emphasizes the need for accurate measurement and declaration of usage. The judgment clarifies the obligations of tax authorities in issuing the 'C' Form and highlights the consequences of misdeclaration or misuse of the concessional tax benefit.