TaxTMI 
TaxTMI 
2022 (3) TMI 1625
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.... order by treating Writ Petition No.2290/2021 (F) as the lead petition. 4. The petitioners in both these petitions challenge the insistence on the part of the respondents that the petitioners furnish an undertaking concerning the payment of all taxes, interest, and penalty, in case the GST Council ultimately decides that Extra Neutral Alcohol (ENA) is a commodity covered under the Goods and Services Tax (GST) Law, as a precondition for the issuance of "C and F Forms" under the provisions of the Central Sales Tax Act, 1956 (CST Act) and Rules made thereunder. 5. The petitioners claim that they have fulfilled the necessary terms and conditions prescribed under the CST Act thereby entitling them to the "C and F Forms". They submit that there is no provision in the CST Act, 1956, The Central Sales Tax (Registration and Turnover) Rules, 1957 (CST Rules), or the Central Sales Tax (Goa) Rules, 1973 (Goa Rules) based upon which the respondents can insist upon such undertaking. Therefore, the petitioners seek a declaration that the impugned direction in Office Memorandum dated 21.04.2021 (OM) and the impugned undertaking, in the format appended to the said OM is ultra vires and the respon....
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....upon the impugned undertaking that is itself ultra vires. 9. Mr. Shah submits that it is impermissible for the respondents to withhold "C and F Forms" on the ground that in the future some tax might become recoverable should the GST Council and the Central Government ultimately decide that the GST regime will be applicable for the inter-state trade and commerce in the said commodity. He submits that such an approach will be contrary to the law laid down in Chowhan Machinery Mart v. State of Orissa - 2008 (8) TMI 813 (Orissa), Tata Steel Ltd. v. Jharkhand & Ors. - 2019 (1) TMI 891 (Jharkhand) and Manan Auto Link Pvt. Ltd. v. State of Gujarat - 2017 (7) TMI 698 (Gujarat). 10. Mr. Shah submitted that the OM dated 21.04.2021, at the highest, is like an executive instruction. He submitted that such an executive instruction cannot amend the provisions of the CST Act, CST Rules, or the Goa Rules and to this extent, the impugned direction and the impugned undertaking are ultra vires and cannot be enforced by the State. He points out that there are sufficient provisions under the GST regime for recovery of taxes if and when they become due and therefore it is not legally permissibl....
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.... case where the respondents were denying the "C and F Forms". He submitted that subject to fulfillment of requirements under the CST Act and the Rules made thereunder, the State was not at all averse to issuing the "C and F Forms" provided the petitioners were to furnish the undertaking appended to the OM dated 21.04.2021. He submitted that such an undertaking would operate only in the eventuality the GST Council were to decide that the said commodity would be covered under the GST regime but not otherwise. He submitted that if such a decision is taken by the GST Council and accepted by the Central Government, then, the State Government also stands to earn a portion of such taxes so recovered. Therefore, if the State takes reasonable measures in its executive capacity to safeguard its interest in the matters of recovery of such taxes, such an executive action does not attract the doctrine of ultra vires or unreasonableness. 16. Learned Advocate General submitted that as the provisions of law now stand, ENA whether for the manufacture of alcohol for human consumption or industrial purposes is a commodity covered under the GST regime. He pointed out that the working arrangeme....
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....ure as above. Sd/- (Hemant Kumar, IAS) Commissioner of State Tax, Goa. " "UNDERTAKING I/we ................. Proprietor/Partner(s)/Manager/ Director/ Karta of HUF/Principal Officer managing the business/ Society of ...... registered vide Tax Identification No. ......... under Goa Value Added Tax Act, 2005, do hereby undertake that, in case the GST Council decides that ENA is a commodity covered under Goods and Services Tax law, all the taxes, interest and penalty arising due to such decision would be paid me/us to the Government." 20. The boldened portion of the above OM dated 21.04.2021 has been styled by the petitioners as the "impugned direction" and the above undertaking appended to the OM dated 21.04.2021 has been styled as the "impugned undertaking". The challenge in these petitions, as noted at the outset, is to the above referred impugned direction and the impugned undertaking as a precondition for the issuance of "C Forms" or the "F Forms" for inter-state sale and purchase of ENA when used in the manufacturing alcoholic liquor for human consumption (said commodity). 21. Now there is no dispute that the "C Forms" referred to in the OM dated 21.04.2021 or the "F For....
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....e in Form F. The statutory Forms C, D, and F have been appended to the Central Rules. 28. The scheme that emerges from the conjoint reading of the aforesaid provisions of the CST Act, 1956, CST Rules, 1957, and the Goa Rules, 1973 is that the dealer, who in the course of inter- State trade or commerce sells to a registered dealer the goods as defined under Section 2(d) of the CST Act, shall be liable to pay tax which shall be 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 law of that State whichever is lower. This means that the dealer, in the origin State will have to normally pay tax at the rate of 2% of his turnover unless the rate of tax in such State is lower. In the destination state, however, the dealer will have to pay full tax as may be prescribed in the destination state, in the event of the sale taking place in such destination State. 29. The scheme also envisages that the destination state issues a C Form in terms of Section 8 of the CST Act read with Rule 12 of the CST Rules, 1957 to the dealer, so that such dealer can then submit the same to the origin State. Upon such C Form being ....
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....gistered 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. 34. Now the provisions of the Goa Rules, 1973 are not substantially different from the provisions of the Jharkhand Rules, 2006. Therefore, C Form will have to be issued by the State of Goa, being a destination State in this case provided the petitioners fulfill the aforesaid conditions as prescribed in CST Act, 1956, CST Rules, 1957, and Goa Rules. 35. Apart from the aforesaid conditions, no other conditions were pointed out to us by the learned Advocate General as a precondition for the issuance of either C and F Forms by reference to the CST Act, 1956, CST Rules, 1957, or the Goa Rules, 1973. No doubt, the learned Advocate General did contend that ENA was not at all alcoholic liquor for human consumption and therefore the same was not "goods" as defined under Section 2(....
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.... 39. In M/s. Tata Steel LTD (supra) , the issue that arose for consideration was whether the State of Jharkhand was justified in law in refusing to issue the C Form to the petitioner in respect of certain inter-State purchases of goods made by it by prejudging or adjudicating the legality and propriety of the transactions of inter- State purchases of goods made by the petitioner by way of transit purchases. The challenge, therefore, was to the denial or withholding of the C Forms by the State of Jharkhand based on the potential liability of the petitioner to pay certain taxes on the transactions in question or the apprehension of the misuse of such forms. 40. In the above context the Court after analyzing and listing the conditions prescribed by the CST Act, 1956, CST Rules, 1957, and the Jharkhand Rules, 2006 proceeded to formulate the conditions that a dealer is required to fulfill before he can insist upon the State issuing the C Form. The High Court then concluded that once these conditions are fulfilled, there is a corresponding duty on the State to issue the C Forms and further, the State authorities cannot refuse the C Forms at the whims and caprice of the officers of the S....
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....om the prescribed authority to avail concession in payment of tax on inter-State transactions. Neither Section 8 of the Act nor Rule 12 imposes any restriction on the 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 a penalty. It is only Rule 6 of the CST (O) Rules which imposes certain restrictions on the supply of the "C" declaration form. 44. The Court held that a coherent reading of Section 8 of the Act, Rule 12 of the CST (R&T) Rules, and Rule 6 of the CST (O) 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 (O) Rules so long his certificate of registration remains valid. 45. The Court finally held that even if a dealer was found to have default....
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....ondition stipulated by the Circular dated 16.11.2009, the State argued that it was entitled to refuse C Forms to the petitioners. 49. The Gujarat High Court noted that there was no dispute of the petitioner having made local sales of vehicles purchased from outside the State. There was also no dispute that the petitioner had failed to deposit the self-assessed tax with the State authorities. The Court also noted that the Circular dated 16.11.2009 issued by the State Government did provide for the deposit of self-assessed tax as a precondition for the issuance of C Forms. Based on all this, the Court posed to itself the question as to whether the requirement of deposit of self-assessed tax as a precondition for the issuance of the C Forms was legally permissible? 50. The Gujarat High Court then considered the provisions and scheme of the CST Act, 1956 including in particular the provisions of Sections 6, 6A, 8, 9, and 13 of the said Act. The Court also took note of the provisions in Rule 12 of the CST Rules, 1957 as also the provisions of the Gujarat VAT Act that contain detailed provisions for assessing and levying of taxes and finally held that none of these provisions had presc....
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....structions cannot take the shape of a statute. What is envisaged in sub-section (3) and (4) of Section 13 is the power of delegated legislation vested in the State Government for carrying out the purposes of the CST Act. Such rule-making power cannot be substituted by executive instructions. The circular in question is certainly not in the exercise of the rule-making powers exercised by the State Government. The Court finally held that the action of the respondent State in not allowing the petitioner to generate a C Form solely on the ground that the petitioner had not paid the self-assessed tax for the relevant period under the VAT Act is illegal. The Special Leave Petition (C) No.002847/2018 instituted by the State Government questioning this judgment was dismissed by the Hon'ble Supreme Court on 27.01.2018. 54. Thus from the conspectus of the statutory provisions, the statutory schemes, and the precedents on the issue, we think that the impugned direction and the impugned undertaking that in effect, introduces an additional pre-condition of furnishing the impugned undertaking for the issuance of the C Forms, is indeed ultra vires and liable to be declared as such. The State....
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....the legislation. He has further stated that subject to the decision of the GST Council that ENA is subject to the GST regime, any recovery under CGST Act on ENA may be prejudiced on account of section 73 which is restricted to tax 'which has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax' . The affiant has further stated that the said vacuum in the legislature is sought to be supplemented by the impugned memorandum and the impugned declaration. 58. From the aforesaid, it is quite apparent that the State upon perceiving that the statutory provisions may not be sufficient to protect its interests at revenue collection has virtually attempted to add to or alter the statutory provisions enacted by the Central Government. Merely styling such acts as filling the vacuum in the legislation or supplementing the legislative vacuum is not sufficient to mask the true nature of the exercise. In paragraph 12 of the affidavit, the affiant seeks to invoke some presumption about the validity of the impugne....
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....covered under the GST regime or not because such an issue does not properly arise in these petitions. 62. Besides, Mr. Shah pointed out that the GST Council constituted under Article 279-A of the Constitution of India is empowered to make recommendations to the Union and the States inter alia on the goods and services that may be subjected to or exempted from Goods and Services Tax. He also pointed out that the GST Council while discharging the functions conferred by Article 279-A, shall be guided by the need for a harmonized structure of Goods and Services Tax and the development of a harmonized national market for goods and services. Admittedly, as of now, this issue is pending consideration by the GST Council and the State of Goa has itself chosen to presently exclude such ENA from the GST regime and apply to such ENA the CST or the VAT regime. Having consciously chosen this path, the only question is whether the State can disregard the statutory provisions or add and alter them by mere executive action or executive instructions. We think the State cannot, given the statutory regime and the scheme of the statutory provisions. 63. The contention that no prejudice will oc....