C Forms and concessional tax treatment: assessee need not verify cancelled registration absent proof of statutory invalidation

Inter-State sales supported by C forms could not be denied concessional tax treatment merely because the purchasing dealers' registrations had earlier been cancelled. The assessee, having received C forms in the ordinary course of business and produced them with the sales, discharged the initial burden of showing entitlement to the concessional rate. Cancellation of registration alone did not prove that the assessee knew, or should have known, that the forms were invalid, especially where there was no material showing surrender of the certificates and unused forms or public notification of invalidity. In these circumstances, further verification by the assessee was not required and revision of the assessments on that basis was unsustainable.

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Issues: Whether the assessee, in respect of inter-State sales supported by C forms issued by purchasing dealers, was bound to make further verification of the purchasing dealers' registration status before claiming concessional rate of tax, and whether the assessments could be revised on the footing that the C forms were invalid because the purchasing dealers' registrations had earlier been cancelled.

Analysis: The assessee had effected sales in the ordinary course of business and had filed C forms received from the purchasing dealers. Cancellation of registration by itself did not establish that the assessee was aware, or ought to have been aware, that the forms were invalid. Possession of the registration certificate and the issue of C forms by the purchasing dealer furnished prima facie support for the assessee's claim, and the rules governing cancellation contemplated surrender of the certificate and unused forms. In the absence of any material showing compliance with the rule requiring surrender or public notification of invalidity, the assessee was entitled to proceed on the basis that the purchasing dealers continued to hold valid forms. The initial burden of showing entitlement to concessional assessment was therefore discharged by the assessee.

Conclusion: The assessee was not required to conduct further investigation in the circumstances, and the denial of concessional tax treatment was unsustainable. The claim for assessment at the concessional rate was allowed.

Ratio Decidendi: Where an assessee in inter-State trade accepts C forms in the ordinary course of business, the forms and the purchasing dealer's apparent possession of registration material are prima facie sufficient unless the Revenue shows that the cancellation of registration had been brought home through the statutory mechanism for surrender and invalidation of the forms.

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