2004 (12) TMI 372 - SC - VAT and Sales Tax

Supreme Court affirms High Court ruling on concessional tax rate for inter-State sales based on C forms

The Supreme Court upheld the High Court's decision, dismissing the appellant's appeal regarding the concessional rate of tax on inter-State sales based on ... Whether the appellant is entitled to claim concessional rate of tax without complying with the requirement contemplated under rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957? Held that:- Appeal dismissed. A liberal construction was not justified having regard to the scheme of the Act and the Rules in this regard and if there was any hardship, it was for the Legislature to take appropriate action to make suitable provisions in that regard.It is also settled rule of interpretation that where the statute is penal in character, it must be strictly construed and followed. Thus the section and the rules as they stand may conceivably cause hardship to an honest dealer. He may have lost the declaration forms by a pure accident and yet he will be penalised for something for which he is not responsible but it is for the Legislature or for the rule-making authority to intervene soften the rigour of the provisions and it is not for this Court to do so where the provisions are clear, categoric and unambiguous. Issues Involved:1. Concessional rate of tax on inter-State sales based on duplicate C forms.2. Compliance with Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957.3. Mandatory nature of filing the original C forms.4. Interpretation of Section 8(4) of the Central Sales Tax Act, 1956.5. Hardship and bona fides in loss of original C forms.Detailed Analysis:1. Concessional Rate of Tax on Inter-State Sales Based on Duplicate C Forms:The appellant contested the rejection of their claim for a concessional rate of tax on inter-State sales, which was based on duplicate C forms and indemnity bonds instead of the original C forms. The Additional Commissioner of Commercial Taxes had disallowed this claim, which was upheld by the High Court of Karnataka. The appellant argued that the duplicate C forms should be accepted as they are primary evidence under Section 62 of the Evidence Act, 1872, and thus constitute compliance with Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957.2. Compliance with Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957:The appellant contended that the requirement to file the original portion of the C form is not mandatory but directory, and that the filing of the duplicate portion should suffice for the concessional rate of tax. They cited the case of Manganese Ore (India) Ltd. v. Commissioner of Sales Tax, Madhya Pradesh, where the duplicate portion of the C form was accepted as sufficient compliance. However, the Supreme Court emphasized that the rule must be strictly construed and that the original C form must be filed to claim the concessional rate of tax.3. Mandatory Nature of Filing the Original C Forms:The Court held that Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957, which requires the filing of the original C form, is consistent with the provisions of the Central Sales Tax Act and is mandatory. The rule is intended to prevent the misuse of C forms and fraud. Therefore, the appellant's failure to comply with this rule disqualified them from claiming the concessional rate of tax.4. Interpretation of Section 8(4) of the Central Sales Tax Act, 1956:Section 8(4) stipulates that the concessional rate of tax on inter-State sales is not applicable unless the dealer furnishes the prescribed declaration form. The Court reiterated that the original C form must be attached to the return as per Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957. The Court referenced previous judgments, including Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Calcutta, to assert that the exemption provisions must be strictly construed to prevent fraud and ensure administrative efficiency.5. Hardship and Bona Fides in Loss of Original C Forms:The appellant argued that the loss of the original C forms was bona fide and that they had made all possible efforts to comply with the rules, including lodging a police complaint and obtaining confirmations from purchasers. Despite recognizing potential hardship, the Court maintained that the statutory requirements must be strictly followed. The Court suggested that any relief for such hardship should come from legislative or rule-making authorities, not judicial interpretation.Conclusion:The Supreme Court dismissed the appeal, upholding the High Court's decision that the appellant was not entitled to the concessional rate of tax without complying with the mandatory requirement of filing the original C forms. The Court emphasized the importance of strict adherence to the statutory provisions to prevent misuse and ensure proper tax administration.