2021 (1) TMI 857 - HC - VAT and Sales Tax

Court affirms dealers' rights to 'C' Forms for concessional tax benefits, rejects Revenue's contentions.

The court ruled in favor of dealers' entitlement to 'C' Forms for purchasing High Speed Diesel from out-of-state suppliers for concessional tax benefits. ... Entitlement to C-forms for inter-state purchases - Concessional rate of tax under the Central Sales Tax regime for restricted six commodities - Registration under the CST Act not confined to selling dealers - Continuing operability of declaration facility under Section 8(3)(b) of the CST Act - Invalidity of departmental restriction on issuance/download of C-forms - Freedom of trade under Article 301 and restriction under Article 304(b) - Equal protection and impermissible classification under Article 14Entitlement to C-forms for inter-state purchases - Registration under the CST Act not confined to selling dealers - Concessional rate of tax under the Central Sales Tax regime for restricted six commodities - Right of dealers purchasing High Speed Diesel (and analogous inter-State purchases of the specified six commodities) to obtain C-forms and claim concessional CST rates despite amendments and the advent of GST. - HELD THAT: - The Court applied and followed the earlier decisions, including the Division Bench dismissal of the State's Writ Appeal in the Ramco Cements matter, holding that purchasing dealers retain the entitlement to registration under the CST Act and to claim concessional rate by filing C-forms for inter-State purchases. The statutory scheme distinguishes liability of the seller and the independent liability/rights of the purchasing dealer; Section 7(2) confers an independent right to obtain registration notwithstanding that the dealer may not be a seller liable under Section 6. The amendment narrowing the definition of 'goods' to six commodities from 1.7.2017 does not extinguish the facility of concessional purchase under Section 8(3)(b), nor the seamless flow of inter-State trade protections. Denying C-forms on the ground that a dealer is not a selling dealer or not party to earlier litigations is unsustainable; judicial decisions in rem apply to all similarly situated dealers until stayed or reversed. [Paras 4, 13, 14, 15, 39]Dealers purchasing the specified commodities inter-State are entitled to C-forms and concessional CST treatment; the State's contrary contention is rejected and the precedent applies to all eligible dealers.Invalidity of departmental restriction on issuance/download of C-forms - Continuing operability of declaration facility under Section 8(3)(b) of the CST Act - Invalid departmental circulars and consequential proceedings - Whether the State and its assessing authorities may restrict issuance or online download of C-forms to only those dealers who were parties to the precedent decisions, and whether departmental circulars or notices restricting such use are sustainable. - HELD THAT: - Relying on the reasoning of the Division Bench and the Single Judge decisions referred to, the Court held that departmental action blocking online access to C-forms or restricting their use to litigants in earlier cases is unacceptable. Judicial rulings in rem bind the authorities and similarly situated dealers; until such rulings are stayed or reversed, assessing authorities must implement the rationale of those decisions across pending assessments. Consequently, departmental circulars that contravene the declared right (including the Commissioner's circular dated 31.5.2018) and consequential notices and proceedings were quashed by the Division Bench and are to be given no effect in the State. [Paras 6, 7, 41]The department is directed not to restrict issuance or online downloading of C-forms and to cease/withdraw circulars, notices and proceedings that prevent eligible dealers from availing concessional treatment.Final Conclusion: Following and applying the Court's prior decisions (including the Division Bench dismissal of the State's appeal in the Ramco Cements matter), the writ petition is allowed: dealers purchasing the specified commodities inter-State are entitled to C-forms and concessional CST rates, and the State/authorities must permit use and online downloading of C-forms and withdraw blocking circulars and consequential proceedings until any higher court stay or reversal. Issues involved:1. Entitlement to 'C' Forms for purchase of High Speed Diesel from suppliers outside Tamil Nadu to avail concessional tax benefit.2. Application of court decisions regarding entitlement to 'C' Forms to all pending assessments in Tamil Nadu.3. Challenge to the decision in the case of Ramco Cements Ltd. through a Writ Appeal.4. Interpretation of Sections 7(1) and 7(2) of the CST Act regarding registration and liability to pay tax.5. Rights of purchasing dealers under the CST Act and the impact of the amendment of the definition of 'goods' in 2017.Analysis:1. The judgment addresses the issue of entitlement to 'C' Forms for purchasing High Speed Diesel from out-of-state suppliers for concessional tax benefits. The court references previous decisions favoring dealers in similar cases, emphasizing that the benefit of concessional rates is available to dealers engaging in inter-state sales. This principle has been upheld by various courts, including the Supreme Court, establishing a precedent applicable to all dealers seeking such benefits. The court directs all assessing authorities in Tamil Nadu to apply this rationale to pending assessments, rejecting the notion that only parties to specific decisions can benefit, as these judgments are binding on all dealers seeking similar relief. The Writ Petitions are allowed, and necessary actions are mandated by the department.2. Following the above order, the State files a Writ Appeal challenging the decision in the Ramco Cements case. The Division Bench dismisses the appeal, affirming that purchasing dealers can retain registration under the CST Act independently of their liability to pay tax, as per Sections 7(1) and 7(2) of the Act. The court clarifies that the amendment to the definition of 'goods' in 2017 does not affect the rights of purchasing dealers to continue purchasing at concessional rates using 'C' Forms. It emphasizes that the CST Act's scope remains intact for purchasing dealers, ensuring their right to inter-state trade and purchase. The court rejects contentions from the Revenue, highlighting that denying such rights would lead to unconstitutional discrimination. The Writ Appeals by the Revenue are dismissed, and the State is directed not to restrict the use of 'C' Forms for inter-state purchases, quashing previous circulars and proceedings against dealers in Tamil Nadu.3. The State expresses intent to challenge the Writ Appeal decision through a Special Leave Petition. However, as the Writ Appeal order stands final, the court allows the Writ Petition based on the rationale of the previous decision. No costs are imposed, and the connected Miscellaneous Petition is closed.