TaxTMI 
TaxTMI 
2016 (6) TMI 504
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....ersus The Commercial Tax Officer-1, The Union Territory of Puducherry, The Deputy Commissioner (CT)-IV, Shri Maruthi Agencies Union of India ,M/s. Sri Rajeswari Agencies Versus The Additional Deputy Commercial Tax Officer-II, Commercial Taxes For the Petitioners : Mr.S.Raveekumar For the Respondent : Mr.A.N.R.Jayapratap, G.A.(Taxes), Mrs. N. Mala, AGP (P) JUDGMENT V. Ramasubramanian, J Bharat Petroleum Corporation Limited and Indian Oil Corporation Limited have appointed several dealers in the Union Territory of Puducherry. Two of those dealers by name M/s.Shri Maruthi Agencies and M/s.Amurtham Agencies, committed default in payment of the local value added tax under the Puducherry Value Added Tax Act, 2007 (hereinafter referred to as the Puducherry VAT Act, 2007). Therefore, the Appropriate Authority under the Central Sales Tax Act, 1956 (hereinafter referred to as the CST Act), (who naturally happens to be an Officer of the Union Territory of Puducherry), refused to issue 'C' Forms to the dealers. This resulted in the Assessing Officers in the State of Tamil Nadu, demanding a higher rate of tax under Section 8(2) of the CST Act, 1956 from the Bharat Petroleum Corpora....
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....herefore, the BPCL filed three writ petitions in W.P.Nos.127 to 129 of 2015, either challenging the order of assessment of the year 2012-13 or seeking a Declaration that 'C' forms cannot be withheld or seeking a Mandamus to direct the respondents to issue 'C' forms. Similarly, the IOCL came up with three writ petitions in W.P.Nos.4515 to 4517 of 2015 either seeking a Declaration that the Puducherry Authorities cannot withhold 'C' forms or challenging the orders of assessment for the assessment years 2012-13 and 2014-15. 6. In view of the fact that the issues raised in the writ appeals and the writ petitions are common, the writ petitions were directed to be tagged along with the writ appeals and they were taken up together for disposal. 7. We have heard Mr.C.Natarajan, learned Senior Counsel appearing for the two Oil Corporations, Mr.S.Raveekumar, learned counsel appearing for the authorised dealers, Mr.A.N.R.Jayaprathap learned Government Advocate (Taxes) appearing for the State of Tamil Nadu and Mrs.N.Mala, learned Additional Government Pleader (Pondicherry), appearing for the Union Territory of Puducherry. 8. For the purpose of easy appreciation, the d....
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....590004067/ 2009-10/23 dated 16 March 2010 and consequently forbear the respondent from denying to issue the statutory C-Forms to the petitioner WRIT PETITIONS S. No WP NO. PETITIONER RESPONDENTS PRAYER DETAILS 1 21556 of 2014 M/s Shri Maruthi Agencies, Pondicherry CTO, Pondicherry Writ of Mandamus directing the Respondent to issue Form C to the Petitioner Petitioner is a dealer of Indian Oil Corporation Ltd. Petitioner had made representations to the respondent for issue of Form C on 14.09.2012, which has not been issued till date and hence this writ petition. 2 15804 of 2014 M/s Amurtham Agencies, Pondicherry Additional DCTO--IW, Pondicherry Writ of Mandamus directing the Respondent to issue form C to the Petitioner Petitioner is a dealer of Bharat Petroleum Corporation Ltd. Petitioner had made representations on 17.03.2014 to the Respondent to issue form C . 3 127 of 2015 M/s Bharat Petroleum Corporation Ltd., Chennai 1. Additional DCTO-IW, Pondicherry 2. UTP 3.Deputy Commissioner (CT)-1, Chennai 4.Amurtham Petroleum Agency, Pondicherry 5.Commissioner of Commercial Taxes, Pondicherry Writ of Cert....
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....d the IOCL, effected sales of petroleum products both within the State of Tamil Nadu as well as to dealers outside the State. The sales that they effected in the course of Inter-State trade and commerce, were to registered dealers and hence the sales are taxable under section 8(1) of the CST Act, 1956, provided the dealers furnish 'C' Forms. The CST Act, 1956 is a legislation enacted in terms of Entry 92A of the Union List in the 7th Schedule to The Constitution. 10. Under Section 6(1) of the CST Act, 1956, every dealer shall be liable to pay tax under the Act on all sales effected in the course of Inter-State trade and commerce. The rate of tax payable by a dealer, who sells goods in the course of Inter-State trade or commerce, to another registered dealer, is stipulated at the concessional rate of 2% under Section 8(1) of the Act, if the goods are of the description contained in Sub-Section (3) of Section 8. In so far as the goods that do not satisfy the description contained in Section 8(3) are concerned, the rate of tax payable by a dealer on the turnover of Inter-State sales, is as per the rate applicable to the sale or purchase of such goods inside the appropriate St....
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....uthi Agencies and Amurtham Agencies and that too, in relation to the Puducherry Value Added Tax, it is the BPCL and the IOCL, which are affected by such default. Therefore, the BPCL and the IOCL have also joined issues with their registered dealers, though not actually supporting the default committed by them. 15. The sum and substance of the grievance of the BPCL and the IOCL is that for the default committed by Shri Maruthi Agencies and Amurtham Agencies in the payment of Puducherry Value Added Tax, these Corporations should not be deprived of the benefit statutorily conferred upon them under Section 8(1) of the CST Act, 1956. 16. Advancing the cause of the BPCL and the IOCL, it is contended by Mr.C.Natarajan, learned Senior Counsel - (i) that once the twin requirements of Section 8(1) are satisfied by these Corporations, the Prescribed Authority in Puducherry should not deprive the benefit of a reduced rate of tax to the Corporations, especially when they are not in default; (ii) that for a default committed by a registered dealer under a State Enactment, the Prescribed Authority under the State Enactment cannot refuse to issue a declaration under a Central Enactment; (iii)....
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....nded that BPCL and the IOCL are not registered dealers under the Puducherry VAT Act, 2007 and that they are not the persons aggrieved in so far as the refusal of the Prescribed Authority of the Government of Puducherry to issue 'C' Form Declarations in favour of the registered dealers under the Act. According to the learned Additional Government Pleader, these Oil Corporations do not even have a contractual relationship with the Union Territory of Puducherry. If at all, the Oil Corporations should proceed against their authorised dealers, who are bound, as per the terms and conditions of the contract that they have mutually entered into, either for recovery of damages or for any other relief. 21. To test the above contentions, it is necessary to take note of the provisions of the CST Act, 1956 and two sets of Rules issued thereunder. 22. Section 6(1) of the CST Act, 1956 imposes an obligation upon every dealer, to pay tax under the Act, on all sales effected by him in the course of Inter-State trade or commerce. Even if no tax is payable under the Sales Tax Law of the appropriate State in respect of such sale, the obligation under Section 6(1) would still be there on acco....
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....d in Sub-Section (4) cannot be issued. 27. Section 13(4) of the Act empowers the State Government to make rules, prescribing - (i) the Authority from whom (ii) the conditions subject to which and (iii) the fees, subject to payment of which, any form prescribed under Sub-section (4) of Section 8 may be obtained. The rules so framed by the State Government may also prescribe the manner in which, any such form may be used and any such certificate or declaration may be furnished. 28. Therefore, despite fulfilling the conditions stipulated in Sub-section (1) of Section 8, a dealer under the CST Act, 1956 has necessarily to rely upon his purchaser (if he is a registered dealer of the concerned State) and also upon the Prescribed Authority of the concerned State, to get a declaration under Sub-section (4) of Section 8. Since the State Government is empowered by Section 13(4) of CST Act, 1956, to prescribe the procedure for the issue of such forms, the Prescribed Authority becomes obliged to perform a statutory duty. The expression "Prescribed Authority" is defined in Rule 2(cc) of the Central Sales Tax (Registration and Turnover) Rules, 1957 to mean the Authority prescribed by a Sta....
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.... Act upon every dealer to pay tax at the rate stipulated by the local Sales Tax Law of the appropriate State, on his turnover, which relates to sale of goods in the course of Inter-State trade or commerce. But, if such sale happens to be (i) to a registered dealer and (ii) that too of goods described in Sub-Section (3), the rate of tax will only be 2%. Thus the rate of tax at least in respect of sales covered by Section 8(1) is statutorily fixed at 2% and hence, the same cannot be termed as a concession. If the statute fixes the rate of tax, the payment of the same is a statutory obligation. Every obligation shall correspond only to a right and not to a concession. 34. Moreover, the Explanation to Sub-section (2) of Section 8 is a direct answer to the contention of the learned Additional Government Pleader. Under the Explanation to Sub-section (2), a dealer will be deemed to be a dealer liable to pay tax under the Sales Tax Law of the appropriate State, even if he is not liable under the local Sales Tax Law of the appropriate State. If a dealer is liable, as per the CST Act, to pay tax under the local Sales Tax Law of the appropriate State at a rate higher than 2%, it may be....
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....o effect, not even in tax. The Commercial Tax Officer was not constituted as a policeman to regulate and conduct the assessee along with virtuous path. If the assessee had registered himself under the provisions of the Central Act, he was, as a matter of right, entitled to get C forms from the officer, who had no authority to refuse the same. The petition is therefore allowed with costs." 38. In A.P.Gas Power Corporation Ltd. v. Assistant Commercial Tax Officer [(1998) 109 STC 625], the Andhra Pradesh High Court was concerned with a case as to whether the assessee entered into a contract with another company for the supply, erection and commissioning of gas/ steam turbines for generation of power. The contractor supplied certain equipments, parts and components, which were procured from suppliers outside the State and effected transit sales to the assessee. C-Forms were denied on the ground that the goods purchased by the assessee were entrusted to the seller under a bailment agreement for the erection of the project and that therefore, the assessee had camouflaged the transactions of supply and transferred the goods to the contractor as one under the bailment agreement. However, ....
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.... claiming "C" form is a registered dealer and that the charges for "C" form were paid and that he produced the challans in proof of having paid the amount for obtaining the "C" form. Once these conditions are satisfied, the authorities are bound to issue "C" form. Whether the "C" forms are properly used or misused, cannot be enquired into at the initial stage of issuance of "C" forms. If any person misused the "C" form, he is liable to the penalties as contemplated under the Act. Therefore, the authorities, which issue "C" forms have to issue the forms, once they satisfy the above conditions." 41. In the case of City Tower Hotels (P) Ltd. v. The Commercial Tax Officer [(2003) 131 STC 317 (Mad.)], the petitioner, a hotel group, had earlier filed a writ petition for a direction to the Commercial Tax Officer to issue 'C' Form as per the various letters of request. That writ petition was disposed of with a direction to the respondent - CTO to consider the representations of the petitioner and to take appropriate action, which was not complied with by the respondents. The petitioner thereupon filed the writ petition, upon which, the respondent submitted that since the pet....
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....ase hand is the fact that persons, who are the registered dealers under the Puducherry VAT Act, 2007, have committed default in payment of the local VAT. Therefore, the Prescribed Authority of the Government of Puducherry has refused to issue C-Declaration Forms by taking refuge under Section 43 of the Puducherry VAT Act, 2007. Hence, the first contention, based upon the above decisions, cannot be sustained. Contention-2 : 45. The second contention of the learned Senior Counsel for the Oil Corporations is that for a default committed by a registered dealer under a State Enactment, the Prescribed Authority cannot refuse to issue a declaration under a Central Enactment. 46. In order to understand the scope of the second contention raised by the learned Senior Counsel for the Oil Corporations, it is necessary to note that though the CST Act, 1956 formulates the principles for determining when a sale or purchase of goods takes place in the course of Inter-State trade or commerce or outside the State or in the course of imports into or export from India and also provides for the levy, collection or distribution of taxes on sale of goods in the course of Inter-State trade or com....
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....ctment. 51. In other words, an officer of the State Government empowered to assess and enforce the provisions of the Local Sales Tax Law of the State, performs a dual role, one under the Local Sales Tax Law of the State and another under the CST Act, 1956. Therefore, it is not possible for him to compartmentalise his mindset and ignore the default committed under one Enactment, while dealing with the question of issuance of "C" declaration forms under another Enactment. Hence it is futile to contend that for a default committed under a State Enactment, the Prescribed Authority cannot refuse to issue a declaration under the Central Enactment. Contention-3: 52. The third contention of the Senior Counsel is that the mandate of a Parliamentary Enactment cannot be defeated by a State Enactment and that the States are empowered by the Central enactments only to prescribe the procedural provisions for the collection of the tax under the Central Enactment and hence, the States cannot go beyond their competence. 53. This contention is actually a collateral attack on Section 43 of the Puducherry VAT Act, 2007, without challenging the vires of the provision. Therefore it is necessar....
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....arned counsel for the authorised dealers - assessees placed strong reliance upon the decision of the Madhya Pradesh High court in Dawar Brothers vs State Of Madhya Pradesh [(1979) 44 STC 286 (MP)]. It is a case where the Sales Tax Authorities refused to issue C-Forms in the purported exercise of their power under Rule 8(1-A)(f) of the M.P. Sales Tax (Central) Rules, 1957. These rules had been issued by the State Government under the rule-making power conferred on it by the Central Act. The said Rule 8(1A)(f) of the M.P. Sales Tax (Central) Rules, 1957, was challenged by the petitioner to be ultra vires the rule-making power conferred on the State Government by the Central Act. The Madhya Pradesh High Court, emphasizing that the State Government was merely an agency of the Central Government to carry out the assessment under the Central enactment and that the rule-making power of the State cannot be used by the State Government as a device for the realization of its own dues under the State Act, laid down the following: "12. From the above discussion as regards the scheme and purpose of Section 8(1) of the Central Act, read with the relevant rules framed thereunder, and as regards....
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....learned Senior Counsel for the Oil Corporations actually has two facets. The first revolves around Sub-Sections (3) and (4) of Section 13 of the CST Act, 1956 that deal with the rule making power of the State Government under the Central Enactment. The second facet is the scope of Section 43 of the Puducherry VAT Act, 2007 and the question as to how the same has to be interpreted in its application to a statutory requirement under the Central Enactment. 60. As we have pointed out earlier, the CST Act, 1956 does not create a hierarchy of Authorities for the administration and enforcement of the Act. While the power and jurisdiction to levy central sales tax is retained by the Government of India under the CST Act, 1956, all procedural aspects such as registration of dealers, assessment, re-assessment, collection and enforcement of payment of tax are all left to the Authorities nominated by the respective State Governments. Since these procedural aspects are left at the hands of the Authorities of the respective States, the CST Act, 1956 also confers rule making power upon the State Government. 61. The rule making power is again compartmentalized. Under Sub-Section (1) of Section 1....
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....shall be produced or furnished." 64. Section 13(4)(e) reads as follows : "In particular and without prejudice to the powers conferred by Sub-Section (3), the State Government may make rules for all or any of the following purposes namely - (e) the Authority, from whom, the conditions, subject to which and fees, subject to payment of which, any form of certificate prescribed under Clause (a) of the First Proviso to Sub-Section (2) of Section 6 or of declaration prescribed under Sub-Section (1) of Section 6A or Sub-Section (4) of Section 8 may be obtained, the manner, in which, such forms shall be kept in custody and the records relating thereto maintained and the manner, in which, any such form may be used and any such certificate or declaration may be furnished." 65. A careful comparison of the language employed in Section 13(1)(d) with the language employed in Section 13(4)(e) would show that the former speaks generally about declarations and certificates to be given under the Act, without particular reference to any provision. On the contrary, the latter namely Section 13(4)(e) speaks about the form of certificate prescribed under Section 6(2). It also speaks of a de....
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....ndate of a Parliamentary Enactment is sought to be defeated by the State, which is authorized only to regulate the procedure for the administration of the Act. 68. Therefore, the first facet of the third contention that the mandate of a parliamentary enactment is now defeated by a State enactment cannot hold good in the light of the interplay between Section 13(1)(d) and 13(4)(e) of the CST Act, 1956. It is not just an empowerment to prescribe the procedural provisions for the collection of tax, but also a power conferred upon the State to prescribe the conditions, subject to which 'C' Form declarations can be given. 69. The second facet of the third contention of the learned Senior Counsel for the Oil Corporations is the one that revolves around Section 43 of the said Act. As we have seen earlier, Sub-Section (1) of Section 43 empowers the Assessing Officers and even any other officer authorized in this regard, to withhold the issue of statutory or other declaration forms. The contention that the reference in Section 43(1) to statutory or other declaration forms should be construed to mean only those forms as contemplated by the Puducherry VAT Act, 2007, does not hold go....
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....er declaration forms', we cannot reach the same conclusion that the appellants want us to reach. Therefore, the second facet of the third contention of the learned Senior Counsel for the Oil Corporations cannot be sustained. 73. That takes us to the next part of the third contention, based upon the decision of the Madhya Pradesh High Court in Dawar Brothers. It is true that in Dawar Brothers, the vires of Rule 8(1-A)(f) of the M.P. Sales Tax (Central) Rules, 1957 was under challenge. The said rule empowered the Sales Tax Officer to withhold the issue of the declaration forms, till such time the assessee paid the tax. A Division Bench of the Madhya Pradesh High Court declared the said rule to be ultra vires the provisions of Section 8(4) read with Section 13(3) and (4) of the CST Act, 1956. 74. But, a careful look at the decision of the Madhya Pradesh High Court would show that the Court arrived at the aforesaid conclusion based upon three reasonings. They are (i) that the phrase 'in the prescribed manner' appearing in Section 8(4) of the CST Act, 1956, has a restrictive meaning; (ii) that by virtue of Section 9(2) of the CST Act, 1956, the role of the State Government....
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....ribed manner' has to be understood in a restricted sense in the light of Section 8(4) of the Central Act. Therefore, the first reasoning given by the Madhya Pradesh High Court in Dawar Brothers, with utmost respect to the learned Judges, is flawed. 79. The second reasoning of the Madhya Pradesh High Court in Dawar Brothers is that by virtue of Section 9(2) of the CST Act, 1956, the role of the State Government is merely that of an agency of the Central Government to carry out the assessment, re-assessment, collection and enforcement of payment of tax and nothing more. This conclusion was reached by the Madhya Pradesh High Court on the basis of another decision of the Supreme Court in Khemka and Co. Pvt. Ltd. Vs. State of Maharashtra [AIR 1975 SC 1549]. 80. But, the decision of the Supreme Court in Khemka & Co. arose under peculiar circumstances. It was a case where the Assessing Officer invoked a provision in the State Enactment namely Section 16(4) of the Bombay Sales Tax Act, for imposing a penalty for non payment of central sales tax payable under the Central Act. The Central Act itself contained specific provisions for penalty. Therefore, the Supreme Court held that when ....
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....akes every dealer, who sells goods of the description referred to in Sub-Section (3) to a registered dealer, in the course of Inter-State trade and commerce, to pay tax at the rate of 2% of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the Sales Tax Laws of that State, whichever is lower. But, the entitlement or liability to pay tax at the rate stipulated in Section 8(1) is made subject to the fulfillment of the condition stipulated in Sub-Section (4). The condition stipulated in Sub-Section (4) of Section 8 is that a declaration should be furnished in the prescribed form. But, the very entitlement of a person to a declaration in Sub-Section (4) is made subject to certain other restrictions such as (i) that the declaration should be in the prescribed form (ii) that it should have been obtained from the Prescribed Authority (iii) that it should contain the prescribed particulars and (iv) that it is furnished within the prescribed time. These conditions are left to the rule making power of the Government under Section 13. 84. In any case, the Division Bench of the Madhya Pradesh High Court appears to have laid emphasi....
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....les Tax Officer, 4th Circle, Kochi [(1998) 109 STC 543 (Kerala)], the Authorities refused to issue C-Forms under the CST Act and delivery notes in Form 26 under the Kerala General Sales Tax Act to the petitioner, a registered dealer under both Acts, on the ground that the petitioner company was engaged in execution of works contract and that it had not paid tax for the previous years. Granting relief to the assessee, a learned Judge of the Kerala High Court held that the delivery notes, C-Forms etc., are required by every dealer in the regular course of his day to day business transactions either Intra-State or Inter-State and that the right of every citizen to carry on business or trade is a well-recognized fundamental right under the provisions of The Constitution. 89. Though the Kerala High Court recognized that it was not an absolute or unqualified right, the Court held that the issue of delivery notes and C-Forms is intended to regulate the conduct of trade and business and that the withholding of these documents may sometimes result in complete destruction of trade or business, in which event, it may amount to total restriction, which is impermissible under the law. Therefor....
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....ttaching the sale proceeds from the properties or even the bank account of the petitioner, the respondent had no power to deny C-Form license to the petitioners. This Court further held that Section 9(2) of the CST Act, 1956 does not contemplate refusal of C-Form license for non-payment of tax or penalty and that where there is no prohibition to issue C-Form license to the petitioner on the ground that the petitioner has not paid the tax due and penalty, the respondent cannot deny the issuance of C-Form license to the petitioner. 92. But, unfortunately, the decision in Sri Rajeswari Agencies, has not taken note of the entire scheme of the CST Act, 1956. Though the learned Judge took note of Section 43 of the Puducherry VAT Act, 2007, the learned Judge held that Section 9(2) of the CST Act, 1956 does not contemplate the withholding of C- Form Declaration. As a matter of fact, the learned Judge did not even go into the question whether the phrase 'statutory or other declaration forms' appearing in Section 43(1) would cover the forms contemplated by the CST Act or not. Therefore, we are unable to accept the opinion expressed by the learned Judge in Sri Rajeswari Agencies as c....
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....lity of different modes for the recovery of a tax due, is actually for the benefit of the State and not intended to benefit the assessee. Neither the assessee,nor the person to whom the assessee owes an obligation, can dictate to the State, the mode of recovery to be chosen by them. The power available to the State for the cancellation of the registration of a defaulting dealer, is actually in addition to the several modes of recovery available to the State. After all, the cancellation of registration does not result in the automatic recovery of tax due. The recourse to the revenue recovery proceedings may or may not yield the desired result, since it would depend upon whether the dealer has sufficient resources or not. There is also no impediment in law for the simultaneous adoption of more than one method of recovery. 97. Though, strictly speaking, Section 43 of the Pondicherry VAT Act does not prescribe a mode of recovery of the tax due, it is certainly an effective provision that would hit the dealer where it hurts. The power available under Section 43 is akin to the power available to the Electricity Boards to disconnect power supply, whenever a default is committed by the su....