2025 (1) TMI 135 - HC - VAT / Sales Tax

Entitlement to claim a concessional tax rate under the Central Sales Tax (CST) Act, 1956, without furnishing 'C' forms - It is submitted that in absence of specific notification issued under Section 8(5) of the CST Act, the petitioner cannot claim benefit of exemption under the above notification issued under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 for local clearance - HELD THAT - As per Sub-Section (5) to Section 8 of the CST Act, the State Government has to issue a notification which should specify the conditions - In this case, no notification has been issued under Sub-Section (5) to Section 8 of the CST Act which has been brought to the attention of the Court. Unless a specific notification has been issued under Sub-Section (5) to Section 8 of the CST Act, only General Notification issued under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 will apply to the interstate transactions by applying Sub-Section (2) to Section 8 of the CST Act. Conclusion - Since there is no notification issued under Section 8(5) of the CST Act, the conditions of Section 8(5) of the CST Act will not apply to the facts of the case. The petitioner is entitled to the benefit of exemption under Notification No.II(1)/CTR/30(a-2)/2007 - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the petitioner is entitled to claim a concessional tax rate under the Central Sales Tax (CST) Act, 1956, without furnishing 'C' forms.
• Whether the petitioner can claim an exemption from the CST under a notification issued under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006.
• Whether the Impugned Revision Order dated 22.04.2022 is justified and sustainable under the CST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Concessional Tax Rate under CST Act

• Relevant legal framework and precedents: The CST Act, 1956, particularly Section 8(2), requires 'C' forms for claiming a concessional tax rate on interstate sales.
• Court's interpretation and reasoning: The court noted that the petitioner failed to furnish 'C' forms for claiming the concessional rate of 2% and thus, the sales were treated under Section 8(2) as liable to tax at the rate applicable to sales inside the state, i.e., 14.5%.
• Key evidence and findings: The petitioner submitted 'C' forms for part of the sales, but a significant portion remained unsupported by such forms.
• Application of law to facts: Without 'C' forms, the concessional rate could not be applied, leading to the higher tax rate being applicable.
• Treatment of competing arguments: The respondent argued that the absence of 'C' forms justified the higher tax rate, which the court recognized as procedurally correct.
• Conclusions: The court upheld the application of the higher tax rate for sales not covered by 'C' forms.

Issue 2: Exemption under TNVAT Notification

• Relevant legal framework and precedents: The petitioner relied on Notification No.II(1)/CTR/30(a-2)/2007 under the TNVAT Act, claiming exemption for the sale of Gloriosa Superba.
• Court's interpretation and reasoning: The court examined whether this notification could apply to interstate sales under the CST Act.
• Key evidence and findings: The notification was intended to exempt local sales from VAT, not interstate sales under the CST Act.
• Application of law to facts: The court found that without a specific notification under Section 8(5) of the CST Act, the exemption could not apply to interstate sales.
• Treatment of competing arguments: The respondent argued that the TNVAT notification did not extend to CST exemptions, a position the court found legally sound.
• Conclusions: The court concluded that the petitioner could not claim CST exemption based on the TNVAT notification.

Issue 3: Justification of the Impugned Revision Order

• Relevant legal framework and precedents: The CST Act and relevant procedural requirements for tax assessments.
• Court's interpretation and reasoning: The court scrutinized the procedural correctness of the Impugned Revision Order.
• Key evidence and findings: The order was based on the absence of 'C' forms and the incorrect application of the TNVAT notification for CST purposes.
• Application of law to facts: The court found the order procedurally flawed due to the incorrect application of the TNVAT notification.
• Treatment of competing arguments: The court balanced the procedural correctness of tax assessments against the substantive rights claimed under the TNVAT notification.
• Conclusions: The court set aside the Impugned Revision Order as it lacked a legal basis under the CST Act.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "Therefore, there is no legal basis on which, the Impugned Demand can be sustained."
• Core principles established: The necessity of 'C' forms for concessional tax rates under the CST Act; the non-applicability of TNVAT exemptions to interstate sales without specific CST notifications.
• Final determinations on each issue: The higher tax rate was upheld for sales without 'C' forms; the TNVAT exemption was deemed inapplicable to CST; the Impugned Revision Order was set aside.

In conclusion, the court allowed the writ petition, set aside the Impugned Revision Order, and granted the petitioner the benefit of the TNVAT notification for local sales, but not for interstate sales under the CST Act.