2023 (4) TMI 759 - HC - VAT and Sales Tax

Validity of assessment order - benefit of C-forms denied - framing of default assessment on the basis that the C Forms relied upon by the petitioner, were subsequently cancelled by the Rajasthan Tax Authority - whether respondent No. 3 is justified in denying the benefit of C Forms to the petitioner that were issued by the Rajasthan Tax Authorities at the instance of the selling dealer located in the said State? - HELD THAT - Undisputedly, the selling dealer who had furnished the C Forms was registered with the Rajasthan Tax Authorities in respect of the goods purchased by the petitioner at the material time. In the present case, there is no dispute that the purchasing dealer was duly registered with the Rajasthan Tax Authorities in respect of the goods sold by the petitioner. There is also no dispute that the C Forms are genuine and had been issued by the concerned authority at the material time - the benefit of the C Forms cannot be denied to the petitioner. It is necessary to bear in mind that C Forms are an integral part of the consideration received by the selling dealer. The commercial bargain struck by dealers factors in the value of these forms. The effect of denying the benefit of the C Forms would amount to rewriting a commercial transaction that has been consummated. The cancellation of C Forms at a subsequent date would have a disruptive effect on the stream of commercial transactions, which is impermissible - the benefit of C Forms, on the ground that they have subsequently been cancelled, is not sustainable. Petition allowed.

Summary

Issues involved:
The denial of benefit of C Forms by the tax authority due to cancellation by Rajasthan Tax Authority.

Judgment Summary:

Issue 1: Denial of benefit of C Forms by the tax authority

The petitioner challenged the assessment order denying the benefit of C Forms due to their cancellation by the Rajasthan Tax Authority. The Court considered whether the tax authority was justified in denying the benefit of C Forms issued by the Rajasthan Tax Authorities. The Court referred to legal precedents, including the case of State of Madras v. Radio Electrical Ltd., emphasizing that the selling dealer could rely on the C Forms submitted by the purchasing dealer for claiming tax exemption. The Court reiterated that once a selling dealer verified the purchasing dealer's registration, they had no further obligations, except in cases of forged C Forms. The Court held that the benefit of C Forms could not be denied to the petitioner as the purchasing dealer was duly registered and the C Forms were genuine.

Issue 2: Jurisdiction over cancellation of C Forms

The respondents argued that the tax authorities in Delhi had no control over the cancellation of C Forms by the Rajasthan Tax Authorities. The Court rejected this argument, citing a previous case where it was held that as long as a High Court interpreted the Central enactment, the location of the authority canceling the C Form was irrelevant. The Court emphasized that if there was no power to cancel a C Form retrospectively, no authority could give effect to such an order. The Court set aside the impugned orders and directed the respondents to complete the assessment in accordance with the law, considering the cancellation of the C Form as a supervening event.

Conclusion:
The Court allowed the petition, setting aside the impugned order and directing the respondents to complete the assessment taking into account the cancellation of the C Form. The judgment highlighted the importance of upholding commercial transactions and the reliance placed on C Forms in such transactions.