2025 (3) TMI 952 - HC - VAT / Sales Tax

Company's CST Act Section 8(5) exemption continues without C-Form requirement until GST implementation despite 2006 notification

Jayaswal Neco Industries Ltd., Versus State of Chhattisgarh, Commissioner of Commercial Tax, Raipur, Chhattisgarh., Assistant Commissioner, Commercial Tax, Raipur.

Chhattisgarh HC ruled that notification dated 31-10-2006 making C-Form production mandatory for CST Act Section 8(5) exemption would not apply ... Legality, validity and correctness of notification No.F-10/101/2006/CT/V/(94) dated 31-10-2006 (Annexure P-2) issued by the State of Chhattisgarh in exercise of the powers conferred by Section 15-B & 72(i)(b) of the Chhattisgarh Value Added Tax Act, 2005 read with sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (CST Act) incorporating the amended provisions of Section 8 (5) of the CST Act - HELD THAT:- It is not in dispute that pursuant to the notification dated 3-6-1993, the petitioner Company was granted exemption as the petitioner Company is said to have invested more than Rs. 1, 000 crores in Integrated Steel Plant and the benefit of exemption started from 22-9-1996, thereafter on 10-5-2002, Section 8 (5) of the CST Act was amended making fulfillment of Section 8 (4) of the CST Act (production of C-Form) mandatory for availing the benefit of exemption under Section 8 (5) and pursuant to the notification dated 10-5-2002 making production of C-Form mandatory, the State Government issued notification dated 31-10-2006 in exercise of the powers conferred by Section 15-B & 72(i)(b) of the Chhattisgarh VAT Act read with sub-section (5) of Section 8 of the CST Act incorporating the amended provisions of Section 8 (5) of the CST Act by which filing / production of C-Form has been made mandatory for availing the benefit of exemption under Section 8 (5) of the CST Act which the petitioner Company has called in question in the instant writ petitions. However, in this regard, decision of the Bombay High Court in Prism Cement Limited [2013 (7) TMI 668 - BOMBAY HIGH COURT] was assailed before the Supreme Court by the State of Maharashtra in Prism Cement Limited's case [2025 (2) TMI 475 - SUPREME COURT] in which their Lordships have considered the issue with respect to Section 8 (5) of the CST Act clarifying the legal position and held that such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. Reverting to the facts of the case in light of the aforesaid decision of the Supreme Court, it is quite vivid that the petitioner Company has been granted absolute exemption from the tax liability on fulfillment of certain conditions as per the notification dated 3-6-1993 and as per the decision of the Supreme Court, the amendment made in Section 8 (5) of the CST Act making the production of C-Form mandatory for availing benefit of tax exemption wold apply with effect from 10-5-2002 and the amended provision of Section 8 (5) with effect from 10-5-2002 would apply prospectively to the transactions in respect of which Eligibility Certificate are issued subsequently, as held by their Lordships of the Supreme Court. It is made clear that notification dated 31-10-2006 would not apply to the petitioner Company as they had already been exempted with effect from 22-9-1996, as the exemption was available up to 21-9-2019 and now, on coming into force of the GST regime up to 30-6-2017. In that view of the matter, notification dated 31-10-2006, would not apply to the petitioner Company and exemption would be available as per the notification dated 3-6-1993 up to 30-6-2017. Conclusion - The absolute power initially conferred under Section 8 (5) upon the State Government to grant exemption/partial exemption of tax in connection with inter-State sale, trade or commerce with the amendment was circumscribed and restricted to the fulfilment of the requirement of Section 8 (4) of the CST Act which prescribes for the submission of Form 'C' and 'D' only w.e.f. 11.05.2002. However, such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:- Whether the notification No.F-10/101/2006/CT/V/(94) dated 31-10-2006 issued by the State of Chhattisgarh is unconstitutional and invalid, particularly in light of the amended provisions of Section 8(5) of the Central Sales Tax Act, 1956 (CST Act).- Whether the petitioner company, M/s. Jayaswal Neco Industries Limited, can be denied the benefit of tax exemption due to the non-submission of Form C, as mandated by the notification dated 31-10-2006.- Whether the principle of promissory estoppel applies, preventing the State from retrospectively applying the amended provisions to the petitioner company, which had already been granted a tax exemption under an earlier notification.- Whether the assessment order dated 18-6-2010 for the assessment year 2006-2007 is valid in light of the above considerations.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The legal framework involves the Chhattisgarh Value Added Tax Act, 2005, and the CST Act, particularly Section 8(5) and its amendment which mandated the submission of Form C for availing tax exemption. The precedent set by the Supreme Court in the case of Prism Cement Limited was heavily relied upon, which clarified that amendments to Section 8(5) are prospective and do not apply to transactions prior to the amendment.Court's interpretation and reasoning:The Court interpreted the amendment to Section 8(5) of the CST Act as being prospective, meaning it could not retroactively affect the petitioner company's previously granted exemption. The Court emphasized that substantive rights, once accrued, cannot be unilaterally taken away without due process, such as notice or an opportunity for a hearing.Key evidence and findings:The petitioner company had been granted a tax exemption starting from 1996, which was supposed to last until 2019. The company argued that this exemption constituted a vested right. The State's notification in 2006, requiring compliance with the amended Section 8(5) of the CST Act, was challenged as it effectively revoked this vested right without due process.Application of law to facts:The Court applied the legal principles from the Supreme Court's decision in Prism Cement Limited to the facts of the case, determining that the petitioner's exemption, granted prior to the amendment, should not be affected by the retrospective application of the 2006 notification. The Court found that the petitioner was entitled to the exemption without the need to submit Form C.Treatment of competing arguments:The State argued that the notification was valid and that the petitioner had delayed challenging it. However, the Court found that the petitioner's rights, as established under the earlier notification, could not be overridden by the 2006 notification without proper legal processes such as revoking the entitlement certificate.Conclusions:The Court concluded that the notification dated 31-10-2006 was not applicable to the petitioner company due to the prospective nature of the amendment to Section 8(5) of the CST Act. The petitioner company was entitled to the tax exemption as per the original notification of 1993, up to the introduction of GST in 2017.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:The Court quoted the Supreme Court's judgment: 'The absolute power initially conferred under Section 8 (5) upon the State Government to grant exemption/partial exemption of tax in connection with inter-State sale, trade or commerce with the amendment was circumscribed and restricted to the fulfilment of the requirement of Section 8 (4) of the CST Act which prescribes for the submission of Form 'C' and 'D' only w.e.f. 11.05.2002. However, such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment.'Core principles established:The judgment reaffirmed the principle that substantive rights cannot be retroactively annulled without due process. It also underscored the prospective application of statutory amendments unless explicitly stated otherwise.Final determinations on each issue:The Court quashed the notification dated 31-10-2006 as it applied to the petitioner, as well as the assessment order dated 18-6-2010. The petitioner was entitled to the tax exemption without the submission of Form C, up to the implementation of GST.