2016 (12) TMI 465 - HC - VAT and Sales Tax

High Court reverses Tribunal decision on ST-1 forms and PVC resin deductions, citing retroactive circular invalidation.

DCW Ltd. Versus The Commissioner of Trade And Taxes, Delhi

The High Court reversed the Tribunal's decision, holding that the rejection of ST-1 forms and denial of deductions for PVC resins were incorrect. The ... Benefit of Form ST-1 - Did the Appellate Tribunal fall into error in holding that the ST-1 forms used by the assessee were invalid and therefore could not be the basis of any benefit? - Held that: - From a combined reading of the Form and the Rules, it is quite evident that the declaration per se does not contain any provision limiting the date or dates or time period for which it is valid. All that proviso to Rule 7(1) of the Rules requires is that if transactions are concerned with the delivery of goods spreading over different years, it is necessary to furnish a separate declaration in respect of goods delivered in each year. We fail to understand how this provision would come to the aid of the Revenue in the circumstances of the case. The Form concededly was issued in August, 1994; there was absolutely no authority or warrant for the Revenue to stamp on it “1994-95”, to denote its validity, given that the circular was issued much later on 23.06.1995. The so-called validity of the Form, therefore, could not have bound either the selling or the purchasing dealer in the circumstances of this case It is further reaffirmed by Rule 8(9) of the Rules which specifically states that a registered dealer is bound to surrender to the appropriate Assessing Authority all unused declaration forms remaining in hand upon cancellation of his certificate. Thus, Forms once issued per se have validity in terms of the Rules. The rejection of the Forms in the present case and claiming deduction on the basis thereof for the sale of PVC resins at ₹ 9,25,52,964/- was contrary to law. The findings of the Sales Tax Tribunal and the Authorities below are accordingly reversed. Appropriate relief shall be given to the dealer - appeal allowed - decided in favor of assessee. Issues Involved:1. Validity of ST-1 forms used by the assessee.2. Interpretation of Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975.3. Impact of circulars issued by the Sales Tax Authorities.4. Conditions for claiming deductions under the Delhi Sales Tax Rules, 1975.5. Role of interpolations and overwritings on the ST-1 forms.Detailed Analysis:1. Validity of ST-1 forms used by the assessee:The primary issue was whether the Appellate Tribunal erred in holding that the ST-1 forms used by the assessee were invalid and could not be the basis for any benefit. The assessee, a registered Sales Tax dealer in Delhi, sought to avail the benefit of Form ST-1 for a transaction dated 23.11.1996. The Sales Tax Authorities rejected this benefit, citing issues with the form's validity, leading to a higher tax rate being imposed. The Tribunal upheld this decision, dismissing the assessee's appeal and maintaining the demand of Rs. 1,41,64,613/-.2. Interpretation of Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975:The Tribunal's reasoning included a detailed examination of Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975, which deals with deductions from the turnover of a dealer. The Tribunal noted that the form was issued for the Assessment Year 1994-95 but was used in 1996-97 with alterations to the year and goods. The Tribunal emphasized that the restrictions under this section primarily apply to the purchasing dealer, not the selling dealer, and that a true declaration in the prescribed form must be furnished within the prescribed time.3. Impact of circulars issued by the Sales Tax Authorities:The Tribunal relied on a circular dated 23.06.1995, which stated that statutory forms should be stamped for the particular year of the transactions. The Tribunal rejected the appellant's argument that the circulars were not binding, concluding that the concerned Authorities could issue directions under Section 4(2)(a)(v) of the Act and Rule 8 of the Delhi Sales Tax Rules, 1975.4. Conditions for claiming deductions under the Delhi Sales Tax Rules, 1975:The Tribunal highlighted Rule 7 of the Delhi Sales Tax Rules, 1975, which mandates that declarations must be collected on a yearly basis. The Tribunal found that the selling dealer had altered the date on the ST-1 form from 31.03.1995 to 23.11.1996, which was against the circular's provisions. The Tribunal held that the circular was valid and binding, and thus, the purchasing dealer could not claim the benefits of the adjustments/deductions.5. Role of interpolations and overwritings on the ST-1 forms:The Tribunal noted that the ST-1 form had multiple overwritings and corrections, including changes to the date and description of goods. The Tribunal concluded that these alterations undermined the form's validity. However, the High Court found that the goods sold were indeed those the selling dealer was authorized to transact, and the circular could not retroactively invalidate the form issued in 1994.Conclusion:The High Court reversed the Tribunal's findings, stating that the rejection of the forms and the claim for deduction based on the sale of PVC resins was contrary to law. The Court emphasized that the circular issued on 23.06.1995 could not retroactively affect the validity of forms issued before that date. The Court allowed the appeal, directing that appropriate relief be given to the dealer.