Statutory tax forms cannot be withheld as a recovery tool where returns were filed and admitted tax was paid.

Form-C and Form-F could not be withheld on the basis of alleged tax arrears where the dealer had filed returns and paid the admitted tax, and no additional demand had been raised after scrutiny under the VAT framework. The Court held that the Department could not use subsequent assessment or recovery proceedings as a substitute for exercising its scrutiny powers before rejecting the applications. Notifications issued after the amendment to Rule 9 did not create an independent recovery mechanism through denial of the statutory forms. The refusal to issue the forms was therefore unsustainable and the rejection orders were quashed.

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Issues: Whether the refusal to issue Form-C and Form-F on the ground of alleged tax arrears and subsequent assessment could be sustained when the dealer had filed returns and paid the admitted tax and no additional demand had been raised after scrutiny under the VAT law.

Analysis: Form-C and Form-F are statutory declarations linked to concessional treatment for inter-State transactions. The relevant framework required consideration of whether the dealer had filed the returns and paid the tax admitted therein. The Court held that the later assessments and recovery proceedings could not be used to deny the forms, because the respondents had not exercised scrutiny powers under the VAT Act to raise any additional demand before rejecting the application. The notifications issued after the amendment to Rule 9 did not authorise the Department to treat withholding of the forms as an independent recovery mechanism.

Conclusion: The refusal to issue Form-C and Form-F was unsustainable, and the rejection orders were liable to be quashed in favour of the petitioner.

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