2018 (5) TMI 1494 - HC - GST

Inter-state trade - purchase of high speed diesel in the course of manufacturing of cement - C-Form - Chhattisgarh Value Added Tax Act, 2005 - situation post GST-implementation. Whether the petitioner is entitled to be issued C-Form under the Central Sales Tax Act, 1956 read with the Central Sales Tax (Registration and Turnover) Rules, 1957 in respect of high speed diesel purchased by it in the course of inter-State trade and used by it in the course of manufacturing of cement, after the promulgation of the Central Goods and Services Tax Act, 2017 with effect from 1-7-2017? Held that - the declaration (C Forms) are required by the registered dealer to purchase goods from other States at concessional tax rate under the CST Act, 1956. C Form is prescribed under Rule 12(1) of the Rules of 1957 as a declaration form for the purpose as specified under Section 8(4) of the CST Act, 1956 and if the registered dealer fails to procure C Form from the respondents / State and thereafter, do not provide C Form to the supplier/seller of another State, then the registered dealer is being exposed to high tax rate imposable on inter-State goods purchases which is much higher as compared to the 2% rate of tax prescribed under the CST. If the declaration C Form is not provided to the sellers of other States, this will lead to increase in the cost of goods being purchased. The CGST Act, 2017 and the Chhattisgarh GST Act, 2017, both have been introduced with effect from 1-7-2017 by the effect of which the statutes which were imposing indirect taxes were repealed and the only indirect taxes that prevailed are the Central GST and the State GST - Section 174 of the CGST Act, 2017 contains a provision pertaining to repeal and saving. It is pertinent to notice that Section 174 of the CGST Act, 2017 does not include the CST Act, 1956 for the purpose of repealing and as such, the operation of the CST Act, 1956 is kept intact even after the enactment of the CGST Act, 2017 with effect from 1-7-2017. The Chhattisgarh Value Added Tax Act, 2005 has not been repealed qua the items specified under the amended Entry 54 of the State List of the Seventh Schedule to the Constitution, whereby high speed diesel is included. After the promulgation of the CGST Act, 2017 and the State Act, the items mentioned in the amended Entry 54 of the State List of the Seventh Schedule to the Constitution are governed by the CST Act, 1956, as no notification has been issued even under Section 9(2) of the CGST Act, 2017 by the Central Government or by the State Government under Section 9(2) of the Chhattisgarh GST Act, 2017, on the recommendation of the GST Council, therefore, the inter- State trade of high speed diesel would be governed by the CST Act, 1956 and the petitioner is entitled to make inter-State purchases of high speed diesel from other States as before and his registration certificate under the CST Act, 1956 and the rules made thereunder still holds the field and is valid. The petitioner is a registered dealer under the provisions of the CST Act, 1956 read with the Rules of 1957 and his registration certificate under the CST Act, 1956 read with the Rules of 1957 continues to be valid for the purpose of inter-State sale and purchase of high speed diesel despite the petitioner having been migrated to the GST regime with effect from 1-7-2017, as the definition of goods as defined in Section 2(d) of the CST Act, 1956 has been amended prior to coming into force of the CGST Act, 2017 from 1-7-2017 which includes high speed diesel - the respondents shall be liable and are directed to issue C-Form to the petitioner in respect of high speed diesel to be purchased by the petitioner and used in the course of manufacture of cement and for that, it is further directed to rectify and remove the error on their official website and entertain the petitioner s application submitted on-line on the official website seeking issuance of C Form to the petitioner for said goods. Petition allowed.

Issues Involved:
1. Entitlement to C-Form under the CST Act, 1956 post-CGST Act, 2017.
2. Validity of registration under the CST Act, 1956 after migration to the GST regime.
3. Applicability of Section 9(2) of the CGST Act, 2017 to high speed diesel.
4. Automatic cancellation of CST registration upon GST migration.
5. Non-issuance of C-Form due to non-utilization prior to 1-7-2017.
6. Requirement of filing returns under the CST Act, 1956 post-GST.

Detailed Analysis:

1. Entitlement to C-Form under the CST Act, 1956 post-CGST Act, 2017:
The petitioner argued that it is entitled to C-Form under the CST Act, 1956 for high speed diesel used in manufacturing cement, as high speed diesel is excluded from the CGST Act, 2017 by Section 9(2). The court noted that the CST Act, 1956 was not repealed by the CGST Act, 2017, and high speed diesel is still governed by the CST Act, 1956. Therefore, the petitioner is entitled to C-Form for inter-State purchases of high speed diesel.

2. Validity of registration under the CST Act, 1956 after migration to the GST regime:
The petitioner contended that its CST registration remains valid as it has not been cancelled following the procedure under Section 7(3)(b) of the CST Act, 1956 read with Rule 9 of the Rules of 1957. The court held that the registration certificate under the CST Act, 1956 continues to be valid for goods defined in Section 2(d) of the CST Act, 1956, including high speed diesel, despite the petitioner’s migration to the GST regime.

3. Applicability of Section 9(2) of the CGST Act, 2017 to high speed diesel:
Section 9(2) of the CGST Act, 2017 excludes high speed diesel from the GST regime until notified by the Government on the GST Council's recommendation. Since no such notification has been issued, high speed diesel remains outside the CGST Act, 2017’s purview, and the inter-State trade of high speed diesel is governed by the CST Act, 1956.

4. Automatic cancellation of CST registration upon GST migration:
The respondents argued that the petitioner’s CST registration automatically stood cancelled upon GST registration. The court rejected this, stating that cancellation of CST registration requires a specific procedure under Section 7(4)(b) of the CST Act, 1956 and Rule 9 of the Rules of 1957, which was not followed. Thus, the petitioner’s CST registration remains valid for the defined goods.

5. Non-issuance of C-Form due to non-utilization prior to 1-7-2017:
The court dismissed the argument that the petitioner cannot be issued C-Form for high speed diesel because it was not utilized before 1-7-2017. It held that if the petitioner is lawfully entitled to C-Form, it cannot be denied based on non-utilization prior to the CGST Act, 2017’s implementation.

6. Requirement of filing returns under the CST Act, 1956 post-GST:
The respondents claimed that the petitioner did not file returns under the CST Act, 1956 post-GST. The court found this argument fallacious, noting that the petitioner’s inability to file returns was due to the non-issuance of C-Form, which the petitioner had requested but was denied.

Conclusion:
The court concluded that the petitioner is a registered dealer under the CST Act, 1956, and its registration remains valid for inter-State purchases of high speed diesel. The respondents are directed to issue C-Form to the petitioner for high speed diesel and rectify their official website to facilitate this. The writ petition was allowed, and each party was directed to bear its own costs.

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