2019 (9) TMI 524 - HC - VAT and Sales Tax

Court quashes circular denying Form-C post-GST, upholds petitioners' entitlement. Registration not automatically ceases. Precedents support.

The court quashed the circular dated 11.10.2017, ruling in favor of the petitioners' entitlement to Form-C for purchasing high-speed diesel despite their ... Issuance of C-Forms - validity of Notification dated 11.10.2017 - interpretation of statute - amendment and scope of the word 'goods' - Situation of CST post GST - HELD THAT:- In view of the law laid down by the Hon’ble Apex Court in Printers (Mysore) Ltd.'s case [1994 (2) TMI 261 - SUPREME COURT], wherein it is clearly held that the use of the expression ‘goods’ referred to in the first half of Section 8(3)(b), i.e., on first three occasions can be understood in the sense it is defined in Section 2(d) of the CST Act, whereas the expression “goods” in the second half of the clause, i.e., on the fourth occasion does not and cannot be understood in the sense it is defined in Section 2(d) of the CST Act, as it refers to the manufactured goods, in the case of the writ petitioners, their end products need not be 'goods' within the meaning of Section 2(d) of the CST Act. There is no merit in the submission of the learned counsel for the State that this meaning has been assigned to the word ‘goods’ appearing in the second half of Section 8(3)(b) of the CST Act, by the Apex Court in view of the peculiar facts of that case, as in that case, the benefit of Section was given to the printers publishing the 'newspapers' who were not liable to any tax on the sale of 'newspapers' published by them or that they were enjoying the freedom of press under Article 19(1)(a) of the Constitution of India. The only difference in the definition of pre and post amendment of ‘goods’ as given under Section 2(d) of the CST Act is that earlier the definition was having a wider connotation, empassing into it almost all types of goods, except five goods mentioned therein, i.e., newspapers, actionable claims, stocks, shares and securities, whereas after the amendment the restricted meaning has been given to the word ‘goods’ which shall include the six items only, which are presently there in the Act. The dealers are entitled to continue to be registered under Section 7(2) of the Act, irrespective of the fact whether they are liable to pay any tax to State or not. We do not find any merit in the submission of the learned counsel for the State that, since the dealers are no more liable to pay tax under the JVAT Act, in view of the fact that the word “goods” used in Section 2(i) of the CST Act defining the 'Sales tax law' shall mean only those six goods as defined under Section 2(d) of the CST Act, their registration under Section 7(2) of the Act shall come to an automatic end - thus, the very reasoning for issuance of the circular dated 11.10.2017 has no legs to stand in the eyes of law and the said circular cannot be sustained in the eyes of law. Application allowed. Issues Involved:1. Validity of the circular dated 11.10.2017 issued by the State of Jharkhand.2. Entitlement of petitioners to Form-C for inter-State purchase of high-speed diesel.3. Interpretation of the term 'goods' under Section 2(d) and Section 8(3)(b) of the CST Act.4. Impact of GST regime on registration under Section 7(2) of the CST Act.5. Legal precedents and their applicability to the current case.Detailed Analysis:1. Validity of the Circular dated 11.10.2017:The petitioners challenged the circular dated 11.10.2017 issued by the State of Jharkhand, which denied the issuance of Form-C for items included in the definition of 'goods' under Section 2(d) of the CST Act, including high-speed diesel. The State issued this circular on the pretext that after the GST regime's implementation, the registration of dealers under the JVAT Act came to an automatic end, making them ineligible for Form-C.2. Entitlement of Petitioners to Form-C:The petitioners, engaged in manufacturing, mining, and power generation, argued that they were entitled to Form-C for purchasing high-speed diesel at concessional rates, despite their end products not being classified as 'goods' under Section 2(d) of the CST Act. They cited the Hon'ble Supreme Court's decision in Printers (Mysore) Ltd. & Anr. Vs. Asstt. Commercial Tax Officer & Ors., which clarified that the term 'goods' in the second half of Section 8(3)(b) does not necessarily refer to 'goods' as defined under Section 2(d) of the CST Act.3. Interpretation of the Term 'Goods':The court referred to the Hon'ble Supreme Court's interpretation in Printers (Mysore) Ltd., which held that the term 'goods' in the latter part of Section 8(3)(b) should not be understood in the same sense as defined in Section 2(d). This interpretation was crucial as it allowed the petitioners to claim Form-C for high-speed diesel even if their end products did not fall under the restricted definition of 'goods' post-GST amendment.4. Impact of GST Regime on Registration under Section 7(2) of the CST Act:The State's argument that the petitioners' registration under Section 7(2) of the CST Act automatically ended with the GST regime's implementation was rejected. The court held that registration under Section 7(2) is not dependent on the liability to pay tax under the JVAT Act or any other sales tax law. This view was supported by the Hon'ble Supreme Court's decision in Commissioner of Sales Tax, M.P. Vs. Madhya Bharat Papers Ltd., which stated that dealers could continue to be registered under Section 7(2) regardless of their tax liability.5. Legal Precedents and Applicability:The court noted that the issue had been settled by various High Courts, including Punjab and Haryana High Court in Carpo Power Limited Vs. State of Haryana, and affirmed by the Hon'ble Supreme Court. The Central Government's letter dated 01.11.2018, which directed compliance with the Punjab and Haryana High Court's decision, further supported the petitioners' stance. The court found no merit in the State's argument that the dismissal of the Special Leave to Appeal by the Hon'ble Supreme Court did not constitute a binding precedent.Conclusion:The court quashed the impugned circular dated 11.10.2017, holding that the State's reasoning for denying Form-C was invalid. It directed that the provisional credit notes given to the petitioners be given effect, and appropriate refunds be processed. The court also clarified that while individual cases of misuse of Form-C could be addressed, a blanket denial was not permissible. All writ applications were allowed, and pending interlocutory applications were disposed of accordingly.