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2019 (1) TMI 894 - HC - VAT and Sales TaxDenial of Issuance of statutory Form C - inter-state purchases of goods - transit purchases under Section 3(b) of the Central Sales Tax Act, 1956 - second sale - Section 6(2) of the Central Sales Tax Act, 1956 to be read with Central Sales Tax (Registration and Turnover) Rules 1957 - Held that - Very limited is the scope for denial of grant of Form-C to the assessees like this petitioner for the purchase of the goods, which are mentioned, in the certificate of the registration, especially, when such goods are being purchased, either directly or through dealer, from the other States of India - In the facts of the present case, this petitioner, who is engaged in the manufacturing activity of iron and steel, is a registered dealer within the State of Jharkhand and has also been issued a certificate of registration (under section 7 of the Central Sales Tax Act, 1956). Varieties of goods have been mentioned in the certificate of registration. Narration of goods given to the dealer or the description of the goods given to the dealer for the purchase from rest of the States of India is not a contract of sale at all between this petitioner and the dealer nor it can be labelled as an agreement to sale between the present petitioner and the dealer. This type of narration has to be given of the goods to be purchased by the dealer so that accurately the dealer can purchase those goods from rest of the States of the country. The respondent-State authorities have treated this information given by the petitioner to the dealer as a sale itself which is an error apparent on the face of the record. For this purpose grant of Form-C has been denied - This cannot be a reason for the State for denial of Form-C to this petitioner. There is a conceptual error committed by the respondent-State which needs to be clarified. The goods which are mentioned in the certificate of registration is required to be purchased by the dealer - Nonetheless, the fact remains that petitioner is not purchasing the goods directly from the other states, but, this petitioner is purchasing the goods which are mentioned in the certificate of registration through a dealer from other States. It may happen that sometimes the goods which are to be purchased by the dealer may not be in existence. Sometimes it may happen that the goods which are to be purchased through dealer is/are yet to be ascertained. Even if there is an agreement to sale between the petitioner and the dealer prior to the purchase of the goods by the dealer from the manufacturer who are situated in other States of the country and if the property in the goods are being transferred by the dealer to the petitioner after purchase of the goods through transit of those goods, such type of transaction is covered by Section 3(b) of the Central Sales Tax Act, 1956. The respondent-State has not properly appreciated the difference between sale and agreement to sale and therefore, they are denying the grant of Form-C to this petitioner which is not permissible in the eye of law. Agreement to sale is converted into sale in the facts of the present case when an endorsement is made by the dealer of the goods who has purchased those goods from the manufacturer of the other States during transit of the goods. Such type of transaction is covered under Section 3(b) of the Central Sales Tax Act, 1956 and hence, the petitioner is entitled to the benefit of exemption of tax under Section 6(1) to be read with Section 6(2) of the Act, 1956 and the procedure is to be followed by this petitioner which has been referred under Section 8(1) to be read with Section 8(3) to be read with Rule 12(1) of the Rules, 1957. If Form-C is/are being misused, the penalty can be levied in accordance with aforesaid provisions of the Central Sales Tax Act, but, at the time of grant of Form-C neither this type of enquiry is permissible nor the State can decide the nature of the transaction whether it is falling under Section 3(a) or 3(b) of the inter-State sale or it is an intra-State sale and Form-C is being denied. Neither of these things can be done by the State. The State has to wait till the assessment of annual return is filed by the applicant of Form-C. The grant of Form-C cannot be denied by pre-judging the issue of nature of transaction - Unnecessarily the respondent-State has entered into the question that as there was a pre-existing or pre-determined or pre-decided contract of sale between the petitioner and the dealer of the goods and hence, Form-C is not granted. In the facts of the present case, the transaction is covered by Section 3(b) and this petitioner is entitled to avail the benefit of concessional rate of tax provided under Section 6(2) of the Central Sales Tax Act, 1956 - In the facts of the present case, as stated hereinabove, we are at the stage of grant or refusal of Form-C. Annual assessment is yet to be done and hence, the nature of transaction whether it is falling under Section 3(a) or 3(b) of the Central Sales Tax Act, 1956 or whether there is any difference in the price under Sugam-G form (road transport permit) and in the invoice issued by the dealer of the goods to the petitioner cannot be appreciated at the stage of Form-C. The respondent-State are directed that the application of the petitioner for supply of declaration in Form-C be considered and disposed of in accordance with law - petition allowed by way of remand.
Issues Involved:
1. Denial of Form-C issuance for inter-state purchases. 2. Legality of pre-judging the nature of transactions by the respondent. 3. Discrepancy in invoice values affecting Form-C generation. 4. Misinterpretation of Section 3(a) and 3(b) of the Central Sales Tax Act. 5. Residence of dealer and purchaser affecting inter-state sale determination. Detailed Analysis: 1. Denial of Form-C Issuance for Inter-State Purchases: The petitioner, engaged in manufacturing iron and steel, sought Form-C for inter-state purchases under Section 3(b) of the Central Sales Tax Act, 1956. The respondent-State denied issuance, citing discrepancies and pre-determined contracts of sale. The court emphasized that Form-C is essential for availing tax exemptions under Section 8(1) read with Section 8(3), Section 8(4), and Section 6(2) of the Central Sales Tax Act, 1956. The denial was based on incorrect interpretations and programming errors in the e-portal system. 2. Legality of Pre-Judging the Nature of Transactions: The court noted that the respondent-State's pre-judging of transactions to determine if they fall under Section 3(a) or 3(b) of the Central Sales Tax Act was premature and not permissible. It was highlighted that such verification should be done at the time of assessment, not during the issuance of Form-C. The court cited several judgments, including those from the Supreme Court and various High Courts, emphasizing that the nature of transactions should not be pre-judged by the authorities at the stage of Form-C issuance. 3. Discrepancy in Invoice Values Affecting Form-C Generation: The petitioner faced issues with the e-portal system due to discrepancies between the values in the road permit (Sugam-G) and the invoice values. The court clarified that discrepancies in invoice values, due to the dealer's profit margin, should not be a ground for denial of Form-C. The programming error in the e-portal system, which required matching values, was identified as a significant issue. The court directed the respondent-State to correct the programming to avoid such discrepancies. 4. Misinterpretation of Section 3(a) and 3(b) of the Central Sales Tax Act: The court found that the respondent-State misinterpreted the judgment in A & G Projects & Technologies Ltd. vs. State of Karnataka, leading to the wrongful denial of Form-C. The court clarified that the sale between the petitioner and the dealer occurs during the transit of goods, covered under Section 3(b), and not pre-determined as per Section 3(a). The court emphasized that the endorsement during transit converts the agreement to sale into an actual sale, qualifying for tax exemption under Section 6(2). 5. Residence of Dealer and Purchaser Affecting Inter-State Sale Determination: The respondent-State's assertion that both the dealer and the purchaser being in the same State negates inter-state sale was rejected by the court. The court clarified that the residence or registered office location of the dealer and purchaser is irrelevant. What matters is the movement of goods and the endorsement during transit, which qualifies as an inter-state sale under Section 3(b). Conclusion: The court directed the respondent-State to reconsider the petitioner's application for Form-C issuance in light of the legal observations and judgments cited. The court mandated that the application be processed within two months, ensuring compliance with the Central Sales Tax Act, 1956, and the associated rules. The court emphasized that the denial of Form-C should be a rare exception, only under specific circumstances outlined in the judgment.
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