AI Drafter 
TaxTMI 
TaxTMI 
2019 (1) TMI 894
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....ecting the Respondentauthorities to issue statutory Form 'C' to the Petitioner in respect of inter-state purchases of goods made by it by way of transit purchases under Section 3(b) of the Central Sales Tax Act, 1956 (for short 'C.S.T. Act') of a value of Rs. 195,64,75,066.25 pertaining to financial years 2014-15, 2015-16,2016-17 and 2017-18 (up to 1st quarter); xx xx xx (iii) For issuance of an appropriate writ/order/direction, including Writ of Declaration, declaring that at the time of issuance of statutory Form 'C', the Respondent-State of Jharkhand and/or it authorities cannot pre-judge and adjudicate the legality and propriety of the transactions of inter-State purchases of goods made by the Petitioner by way of transit purchases and the Respondent-State of Jharkhand has no authority under law to withhold issuance of statutory Form 'C'." 2. Factual Matrix: This petitioner is engaged in manufacturing of iron and steel for which registration has been obtained under the Central Sales Tax Act, 1956, (hereinafter referred to as the Act, 1956, for the sake of brevity). In the certificate of registration issued to this petitioner under Section 7 of the Act, 1956, several....
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....Such type of sale is covered under Section 3(b) of the Act, 1956. Once, there is a sale in transit, by the dealer of the goods which is the second sale it is covered under the scheme of Section 6(2) of the Central Sales Tax Act, 1956 to be read with Central Sales Tax (Registration and Turnover) Rules 1957. Especially, under Rule 12 (1) a declaration and the certificate referred to in Section 8(4) of the Central Sales Tax, Act 1956 has to be submitted for availing the benefit of exemption of tax. This form prescribed under Section 12(1) is known as Form-C with which we are concerned in this matter. Form-D is meant for Government with which we are not concerned in this case. By way of an illustration, the transaction and movement of the goods are as under: Mr. 'A' is manufacturer of goods from where the goods are purchased by Mr. 'B'. Mr. 'B' is dealer of the goods to whom the specifications were given by this petitioner for purchase of the goods which are mentioned in the certificate of registration. Mr. 'C' is this petitioner. This Mr. 'C' is giving the narration of the goods to Mr. 'B' so that Mr. 'B' can purchase those goods from anywhere in the country. Mr. 'B' having a....
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....(Dealer). In this invoice e.g. if the sale price is mentioned as Rs. 100/- and Rs. 2/- is a sales tax, then, invoice will be of Rs. 102/- given by Mr. 'A' to Mr. 'B'. This invoice has to be mentioned by Mr. 'C' (petitioner) while generating road permit through e-portal from the respondent-State and it has to be given by Mr. 'C' to Mr. 'A' (Manufacturer). Now, after the sale in transit by Mr. 'B' (Dealer) to Mr. 'C' (petitioner) by way of an endorsement in favour of Mr. 'C' by Mr. 'B', for taking the benefit of exemption of tax, Form-C is to be generated by Mr. 'C' (petitioner) through e-portal of the respondent. For getting Form-C also, invoice number is to be given along with other details, which is generated by Mr. 'B' for Mr. 'C'. Now, the difficulty is that being a dealer, he will add the commission e.g. Rs.102/- + Rs. 3/- = Rs. 105/-. Now, in the invoice given by Mr. 'B' to Mr. 'C', the amount mentioned is Rs.105/- whereas in the earlier invoice given by Mr. 'A' to Mr. 'B' it was Rs.102/-. This has created difficulty in getting Form-C through e-portal which is programmed by the State of Jharkhand and as there is a difference in the price of the invoice, Form-C is not being ....
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....te of registration can be purchased directly by the petitioner outside the State of Jharkhand or can be purchased through a dealer. In the facts of the present case, they are purchased through a dealer. The dealer has purchased the goods from different States of this country and after purchasing those goods, during the movement of the goods in transit "an endorsement" is made by the dealer in favour of this petitioner. Thus, the goods purchased by this petitioner, by way of "sale" is, during the movement of the goods in transit which is covered under Section 3(b) of the Act, 1956 for which the petitioner is entitled to purchase the same with exemption of tax as prescribed under Section 8 (1) to be read with Section 8(3) to be read with Section 6 (2) of the Act, 1956. Under Section 8(4) a declaration and the certificate is to be given for which Rule 12(1) has been enacted under Rules, 1957 which prescribes Form-C to be given by this petitioner to the dealer. The residence of the dealer and petitioner are not sine qua non for issuance of Form-C. The residence of dealer and petitioner is not a sine qua non for getting or for grant of benefit of concessional rate of tax or exemption of....
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....e generating Form-C through e-portal. Thus, the dealer has purchased the goods at Rs. 102/- and thereafter, he will sell the goods at Rs. 105/- to this petitioner. Thus, there will always be a difference of sale price, whenever the goods are purchased through the dealer. Thus, the first invoice is issued by the manufacturer to the dealer with a lessor price and another invoice is issued by the dealer to this petitioner, which is issued after addition of the commission. Thus, in a road permit given by this petitioner to the original manufacturer in another State, lessor price will be mentioned as per first invoice, whereas while getting Form-C now, details of another invoice are to be given. Another invoice is issued by the dealer to the petitioner, by adding the commission or profit and therefore, there will be price difference. The eportal developed by the respondent-State is such that if there is any price difference then, Form-C will not be generated. This difficulty has been created by wrong programming into the computer by the respondent- State authority without envisaging the practical sale and purchase of the goods through the dealer and without envisaging the sale dur....
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....r has further submitted that there is no sale of the goods prior to the transit of the goods. As Per Section 4, 5, 6(3) to be read with Section 18 to be read with Section 23 of the Sale of the Goods Act, 1930, whenever the specifications are given by this petitioner to the dealer of the goods, to purchase those goods, from anywhere from the country, it is not a sale at all. These details which are given of the goods to be purchased by the dealer at the highest can be said, to be an agreement to sale or at the highest it is "a sale of the future goods" which as per Section 6(3) of the Sale of Goods Act, 1930 is "an agreement to sale". The dealer is purchasing the goods from the rest of the States from India. Sometimes, the goods are yet to be manufactured or sometimes out of several goods they are to be ascertained. As and when the goods are manufactured the same will be purchased by the dealer or out of the whole lot of already manufactured goods, the goods for the petitioner are to be ascertained. In both these eventualities, this petitioner is purchasing the goods from the dealer which is known as the purchase of the future goods and the present sale of future goods is known as a....
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....or a contract nor it can be labelled as pre-decided contract or sale. This aspect of the matter has not been appreciated by the respondent because they are working through e-portal and their programming is not properly done or generated, keeping in mind these types of eventualities. Machine thinks what the programming is supplied to the machine. Machine developed by the respondent-State is never using artificial intelligence. Thinking of the machine cannot be more than the thinking of the respondent- State Officers. The respondents have never developed artificial intelligence in their e-portal which thinks on their own, and hence, this petition has been preferred for getting Form-C for the years which are mentioned hereinabove. Counsel appearing for the petitioner has placed reliance on the following decisions: (a) AIR (1961) SC 1065 (b) (1976) 3 SCC 14 (c) (1992) 84 STC 317 On the basis of aforesaid decisions, it is submitted by the counsel for the petitioner that agreement to sale, which is prior in point of time which cannot be followed by actual "sale" by putting an endorsement during transit of the goods. In such eventualities, the tax can be levied only upon th....
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.... It is vehemently submitted by the counsel for the petitioner that in several isolated cases and in several selected cases, arbitrarily and discriminately, manually also Form-C have been granted by the State, but, it is denied in the case of present petitioner even manually grant of Form-C. This discriminative treatment ought to be stopped forthwith by the respondent-State. 4. Argument canvassed by counsel for the respondent-State: Counsel for the respondent-State has vehemently submitted that there is a predetermined contract of sale and there is a pre-decided contract of sale of the goods in favour of this petitioner, hence, Form-C cannot be given to this petitioner. It is further submitted by the counsel for the respondent-State that the name of this petitioner has already been mentioned as consignee in the invoice issued by the manufacturer of the goods, when the manufacturer has sold the goods to the dealer. Whenever, the name of the petitioner is mentioned as a consignee, it is because of predetermined contract of sale or it is a pre-decided contract of sale. Once there is a predetermined contract of sale or pre-decided contract of sale before the movement of th....
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....12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957. (ii) For ready reference Section 6(2), 8(1), 8(3), 8(4) of the Central Sales Tax Act, 1956 as well as Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 read as under: "6(2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under subsection (1) [are true and that no inter-State sale has been effected, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall, subject to the provisions of sub-section (3),] be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale. 8(1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be three per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside ....
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....ovided also that where, in the case of any transaction of sale, the delivery of goods is spread over to different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of a financial year.]" (emphasis supplied) (iii) Much litigation has been generated from denial of grant of Form-C, Form-F etc. which are referred to hereinabove. This case is no exception to such type of denial of grant of Form-C by the respondent-State. Looking to the aforesaid provisions of the Act and the Rules, very limited is the scope for denial of grant of Form-C to the assessees like this petitioner for the purchase of the goods, which are mentioned, in the certificate of the registration, especially, when such goods are being purchased, either directly or through dealer, from the other States of India. (iv) In the facts of the present case, this petitioner, who is engaged in the manufacturing activity of iron and steel, is a registered dealer within the State of Jharkhand and has also been issued a certificate of registration (under section 7 of the Central Sales Tax....
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....r to the purchase of the goods by the dealer from the manufactures who are situated in other States. There is no contract of sale between this petitioner and the dealer, before the goods are being purchased by the dealer from the manufacturer who are situated in the other States. (vii) Even if, there is an agreement to sale of the goods which are mentioned in the certificate of registration between this petitioner and the dealer, the incident of tax is a sale and not an agreement to sale. Thus, even if there is an agreement to sale between the petitioner and the dealer prior to the purchase of the goods by the dealer from the manufacturer who are situated in other States of the country and if the property in the goods are being transferred by the dealer to the petitioner after purchase of the goods through transit of those goods, such type of transaction is covered by Section 3(b) of the Central Sales Tax Act, 1956. The respondent-State has not properly appreciated the difference between sale and agreement to sale and therefore, they are denying the grant of Form-C to this petitioner which is not permissible in the eye of law. (viii) There is one more reason for grant of Form....
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.... Under the varieties of reasons which are not tenable at law and every now and then such type of matters are coming in different courts of this country even the matters have already been decided by different High Courts which are referred hereinbelow. In this State also this type of litigation is frequently coming to this Court and therefore, the powers of the State is required to be mentioned by this Court about grant or denial of Form-C to the registered dealers. (x) Looking to the provisions of the Central Sales Tax Act, 1956 to be read with Central Sales Tax (Registration and Turnover) Rules, 1957 Form-C has to be given to the registered dealer- (a) When a person who has applied for Form-C is a registered dealer, (b) When the goods in respect of which Form-C is to be used, are included in the certificate of registration, (c) When the applicant of Form-C has paid the necessary amount for getting Form-C and produced the proof of the payment of such amount, and (d) If the registered dealer or the applicant of Form-C has followed provisions of Rule 8 of Central Sales Tax (Jharkhand) Rules, 2006. (xi) These requirements are as per the provisions of the Central Sale....
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....e issue about the nature of the transaction nor the officers of the respondent-State can enquire into the fact whether Form-C being demanded by the petitioner is for avoidance of payment of the tax. It is a work to be done at the time of assessment of annual returns and if any violation is found out, there are provisions under the Central Sales Tax Act 1956, under Section 10 and 10(A), which read as under: "10. Penalties- If any person- [(a) furnishes a declaration under sub-section (2) of section 6 or sub-section (1) of section 6-A or sub-section (4) [or subsection (8)] of section 8, which he knows, or has reason to believe, to be false; or (aa) fails to get himself registered as required by section 7 or fails to comply with an order under sub-section (3-A) or with the requirement of sub-section (3-C) or sub-section (3-E) of that section;] (b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration; or goods in the course of inter-state trade or commerce that he is a registered dealer; or (c) not being a registered dealer, falsely represents when purchasing goods in the ....
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.... (emphasis supplied) (xiii) In view of the aforesaid provisions, if Form-C is/are being misused, the penalty can be levied in accordance with aforesaid provisions of the Central Sales Tax Act, but, at the time of grant of Form-C neither this type of enquiry is permissible nor the State can decide the nature of the transaction whether it is falling under Section 3(a) or 3(b) of the inter-State sale or it is an intra-State sale and Form-C is being denied. Neither of these things can be done by the State. The State has to wait till the assessment of annual return is filed by the applicant of Form-C. (xiv) Time and again this issue has been raised in the different Courts including the Hon'ble Supreme Court and this issue has already been decided and followed by several Courts. These decisions are as under: (a) It has been held by Hon'ble the Supreme Court in the case of State of U.P. & Another Vs. Universal Exporters & Another reported in (1997) 7 SCC 531 wherein Section 3 AA and Section 3 AAA of Uttar Pradesh Sales Tax Act, 1948 have been referred which is para meteria with Section 8 of the Central Sales Tax Act. Provisions of Rule 12 A (5) of Uttar Pradesh Sales Tax Rules ha....
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....bolts, machinery, spare parts of machinery, etc., and therefore he is entitled to be supplied with "C" forms. Counsel also submits that the correct or incorrect yuse of "C" forms is not a question to be gone into at the time of supply of "C" forms, and that wherther a particular "C" form has been correctly used or not arises for consideration only at a latter stage. 2. Section 8(3)(b) so far as it is relevant, reads as follows: "(3) The goods referred to in clause (b) of sub-section (1): (b) are gods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him, or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or purchasing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power. 3. A reading of clause (b) shows that the goods specified in the certificate of registration of the registered dealer purchasing the goods may be intended either (1) for resale by him or (2) subject to any rules made by the central Government in this behalf to be used by him in the manufacture or pr....
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.... the prescribed authority in order to avail concession in payment of tax on inter-State transactions. Neither Section 8 of the Act nor Rule 12 imposes any restriction on supply of "C" declaration form by the notified authority to a dealer registered under the Act. Under the provisions of Section 10 of the CST Act only if a person misuses the "C" form he is liable to penalty. It is only Rule 6 of the CST (0) Rules which imposes certain restriction on supply of "C" declaration form. A coherent reading of Section 8 of the Act Rule 12 of the CST (R&T) Rules and Rule 6 of the CST (0) Rules, makes it amply clear that once a dealer satisfies the conditions that he is a registered dealer authorized to purchase goods mentioned in the certificate of registration and charges for obtaining "C" forms were paid and a true copy of the accounts of the forms last supplied was furnished, the authorities are bound to issue him "C" form and the same cannot be refused on any ground other than those stipulated in Rule 6 of the CST (0) Rules so long his certificate of registration remains valid. 11. xxxxx xxxxx xxxxx xxxxx 12. The Kerala High Court in Salvicate (Bangalore) Private Limited [19....
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....authorities acting on behalf of the Revenue in the matter of collection of Tax. In order to gain faith of the assessees and create confidence in the minds of the taxpayers for smooth administration of tax law, the sales tax authorities must act in a fair and legal manner." (emphasis supplied) (xviii) In view of the aforesaid decision rendered by Hon'ble Orissa High Court that, it appears that while granting Form-C, the authorities are required to consider the following facts: (a) Whether the applicant is a registered dealer or not? (b) Denial of the issuance of Form-C is under very very limited circumstances and what is to be verified by the officers of the respondent-State while grant or otherwise of Form-C is: (i) Whether the goods for the purchase of which Form-C is demanded by the registered dealer is mentioned in the certificate of registration or not? (ii) Whether the necessary amount for getting Form-C has been paid or not and so far as the State of Jharkhand is concerned, whether the applicant for getting Form-C has committed any violation of Rule 8 of the Central Sales Tax (Jharkhand) Rules, 2006 or not. For no other reason Form-C can....
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....is of a contract of sale. The dividing line between sales or purchases under Section 3(a) and those falling under Section 3(b) is that in the former case the movement is under the contact whereas in the latter case the contract comes into existence only after the commencement and before termination of the inter-State movement of the goods. Therefore, it follows that an inter-State sale can either be governed under Section 3(a) - if it occasions under Section 3(b) - if it is effected by transfer of documents of title after such movement has started and before the goods are actually delivered. 12. That for the purpose of determining as to whether the Petitioner is eligible for the issuance of C Forms and as to whether the sale as claimed by it is an inter state sale and not intra state, the authorities have asked the petitioner to appear along with all the documents and details and upon the presentation of the same the authorities concerned will decide the same." (emphasis supplied) (xx) These reasons have to be given by the respondent State in the counter affidavit because under Rule 11(A) of the Central Sales Tax (Jharkhand) Rules, 2006, now e-portal has been s....
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....e and the goods are to be transported. As stated hereinabove, this petitioner has already given a narration of the goods to be purchased by the dealer and hence, in view of this understanding between the petitioner and the dealer of the goods or at the highest due to agreement of sale between petitioner and the dealer of the goods or in a worst case, as per the contract of sale of future goods between the petitioner and the dealer, during transit of the goods, the dealer will put an endorsement. This endorsement is a transfer of property in the goods. This endorsement is a sale of the goods between dealer and this petitioner. Hence, the transaction is covered by Section 3(b) of the Central Sales Tax Act, 1956 and the benefit of concessional rate of tax is also available to this petitioner under Section 6(2) of the Central Sales Tax Act, 1956. (xxi) When the dealer is purchasing the goods from the manufacturer of the other States, invoice has to be issued by the manufacturer of the goods in favour of the dealer of the goods in which the name of the manufacturer of the goods will be mentioned and the name of the purchaser of the goods will be mentioned (who is a dealer of the good....
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....ale of goods between the dealer of the goods and this petitioner. Now this petitioner has to give Form-C to the dealer of the goods and while giving the details to the e-portal created by the respondent-State under Rule 11(A) of Central Sales Tax (Jharkhand) Rules, 2006, the value of the goods is to be mentioned. Now the dealer of the goods is selling the goods to the petitioner for more than Rs. 102/- in the example given hereinabove, keeping his own margin of profit as provided as per example at Rs. 105/- and hence when the petitioner is giving the details to the e-portal for getting Form-C he has to give the details of the road permit-Sugam-G and the details of the sale price between the dealer of the goods and the petitioner. As stated hereinabove, the road permit will reflect a sale price at Rs. 102/-, in the example given hereinabove, which is a sale price between, the manufacturer/seller of the goods and the dealer of the goods which is known as sale no.1. Now when sale no.2 starts upon endorsement made by the dealer of the goods during the transit of the goods under Section 3(b) of the Central Sales Tax Act, 1956, the dealer will add his own margin of profit and hence, the ....
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....difficulty by way of issuance of dummy road permit. Thus, there is an error committed by the respondent-State. The dummy road permit is given for the goods transported by the dealer to the petitioner which is never envisaged by any law for the time being in force applicable in the State of Jharkhand. (xxiv) Looking to the counter affidavit filed by the respondent- State, as stated hereinabove, one more reason has been given for denial of Form-C which is mentioned in paragraph no.8 of the counter affidavit. Let us first of all analyse the wrong reason given by the State and thereafter consider the analysis of that reason. The reason given by the State is that if dealer of the goods is situated within the State of Jharkhand, then the transaction between the dealer and the petitioner is an intra-state sale. This reason can be given by absolutely a confused minded person. Even if the dealer is situated within the State of Jharkhand and the petitioner is also situated within the State of Jharkhand, there may be an inter-State sale, especially under Section 3(b) of the Central Sales Tax Act, 1956. What is required to be appreciated by the respondent-State is the sale of goods durin....
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.... (emphasis supplied) (xxvii) Looking to the counter affidavit, it appears that the aforesaid paragraph of the judgment delivered by Hon'ble the Supreme Court has been wrongly appreciated by the respondent- State that there was pre-determined or pre-decided contract of sale between the petitioner and the dealer of the goods at a point of time prior to the sale of goods between the manufacturer of the goods from other inter-State and the dealer of the goods. It ought to be kept in mind that mere narration of the goods given by this petitioner to the dealer for their purchase from outside the State is nothing, but, an understanding on purchase of the goods or at the highest it can be said to be an agreement to sale between the petitioner and the dealer of the goods or in the worst case, it can be a "present sale of future goods", (which is known as agreement to sale as per Section 6(3) of the Central Sales Tax Act 1956). Sale of goods between this petitioner and the dealer will come into existence, when the dealer puts an endorsement during transit of the goods in favour of this petitioner. This endorsement made by the dealer of the goods converts "agreement to sale" into "s....
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....is judgment is of no help to the respondent. The two stages are different; one is Form-C stage and another is assessment stage. At the time of grant of Form-C, assessment is not to be done. Learned counsel appearing for the respondent-State has also placed reliance upon the decision rendered by Orissa High Court in Writ Petition (Civil) No.19828 of 2010, dated 24.02.2011. We have perused the said judgment. Nothing is in favour of the respondent- State. The said judgment has pointed out to the State authorities that whenever there is a violation of provision of the Central Sales Tax Act, 1956 and the Rules made thereunder or if at all there is any misuse of Form-C looking to provision under Section 10 to be read with 10-A of the Central Sales Tax Act, 1956, penalty can be imposed and levied by the respondent-State. Moreover, counsel for the respondent has relied upon paragraph nos.7 and 9. Looking to the facts of the present case and the decisions referred to hereinabove, the nature of the transaction cannot be pre-judged by the respondent-authorities at the stage of grant of Form-C nor any other controversial issue can be decided or pre-judged by the respondent-authorities while....