2015 (4) TMI 776 - HC - VAT and Sales Tax

Rejection of application for issuance of Form-C filed electronically - Held that - The issuance of Form-C and Form-F is required under the provisions of the Central Sales Tax Act so that the dealer may be entitled to the benefit of the lower rate of tax with respect to sales made in the course of inter-State trade or commerce with regard to goods, which have been declared to be of special importance in the inter-State trade or commerce under the provisions of the Central Sales Tax Act. Under Section 8 (4) of the Central sales Tax Act as also Central Sales Tax (Bihar) Rules, the requirement was only to see that the dealer has filed all the returns and had paid the tax as admitted in the said returns filed. Tax payable would not be what the authorities of the Commercial Taxes Department considered to be fit. They have not prior to the said date exercised their powers of scrutiny in the matter under Section 25 of the VAT Act and demanded any additional tax to be paid by the petitioner. So far as the assessments made after the date of the application and the recovery of tax thereon are concerned, the same stand on entirely different footings and they cannot be used for the purpose of denying of issuance of Form-C and Form-F, as efficacious mode of recovery of tax is available to the respondent authorities under the provisions of the Central Sales Tax Act read with Bihar Value Added Act and Rules. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Quashing of orders rejecting Form-C application, Compliance with Central Sales Tax Act, Scrutiny of returns, Payment of tax, Authority's power to withhold Form-C, Interpretation of Rule 9 amendment, Issuance of Form-C and Form-F, Benefit of lower tax rate, Judicial precedents on withholding forms.

Analysis:
The petitioner sought to quash orders rejecting Form-C application for the period from 1.7.2013 to 31.12.2013. The petitioner, a registered dealer under Bihar VAT Act, purchased raw skin for business purposes, paid due taxes, and filed returns for purchases. Despite errors in past returns, no tax evasion occurred, and no additional tax was demanded under Section 25 of the Act. The petitioner's electronic Form-C application was rejected without valid reasons, leading to the present dispute.

The petitioner argued that under Section 8(4) of the Central Sales Tax Act, authorities must issue Form-C and Form-F for proper tax payment based on transaction nature. Citing a Mysore High Court case, the petitioner contended that errors in returns do not preclude challenging tax assessments. The State argued that the petitioner failed to pay taxes as per filed returns, leading to assessments for 2006-07 to 2012-13, claiming a significant tax amount was due. The State relied on Rule 9 amendment empowering the Commissioner to specify conditions for obtaining declarations under the Act.

The State emphasized that the petitioner must pay taxes based on filed returns. The petitioner, however, argued that post-amendment, the same tax payment rule applied, and authorities should notify any additional tax due for proper compliance. Citing a Karnataka High Court case, the petitioner contended that withholding Form-C due to tax arrears was unjustified, as separate recovery mechanisms existed under the law.

The Court found merit in the petitioner's arguments. It held that Form-C and Form-F issuance was essential for availing lower tax rates on inter-State sales of special goods. The Court noted that authorities failed to demand additional tax before rejecting the Form-C application. Assessments made post-application could not be used to deny Form issuance, as separate recovery mechanisms existed. Consequently, the Court quashed the rejection orders and directed the authorities to issue the requisite forms in compliance with the law.

In conclusion, the judgment focused on the petitioner's right to Form-C and Form-F issuance based on filed returns, emphasizing the need for authorities to follow due process before withholding forms. The Court upheld the petitioner's claim, highlighting the importance of adherence to statutory provisions and fair treatment in tax matters.