Telangana High Court

M/S. Laxmi Trading Company vs State Of Telangana, And 5 Others on 4 November, 2022

Bench: Ujjal Bhuyan, C.V. Bhaskar Reddy

        THE HON'BLE THE CHIEF JUSTICE SRI UJJAL BHUYAN
                             AND
          THE HON'BLE SRI JUSTICE C.V. BHASKAR REDDY

                       WRIT PETITION No.8243 OF 2021

ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)

       Heard Mr. S. Ravi, learned Senior Counsel representing

Mr. Pasham Mohith, learned counsel for the petitioner and Mr.

K. Raji Reddy, learned Senior Standing Counsel, Commercial

Tax Department for the respondents.

2. By filing this petition under Article 226 of the

Constitution of India, petitioner seeks a declaration that the

action of the respondents in not considering the various

documents submitted by the petitioner as proof of inter-State

trade in dals and pulses and insisting on submission of

C-Forms as illegal, arbitrary and unjust.

3. Petitioner is a proprietorship firm represented by its

proprietor A. Ravinder. Petitioner is a dealer engaged in the

business of milling and trading in different kinds of dals and

pulses. Dals and pulses are procured by the petitioner from

the open market both in the State of Telangana and from

outside the State of Telangana.

4. According to the petitioner, it exports dals and pulses to

the purchasers in various States such as Maharashtra,

Karnataka, Tamil Nadu, Orissa, Kerala, etc. In those States,

there is no Value Added Tax (VAT) on dals and pulses. In the

course of such transactions, petitioner procures invoices,

waybills and clearances from the Agricultural Market

Committee and thereafter transports the same to the

suppliers. In the course of inter-State trade, dals and pulses

are also subjected to various checks at the state borders.

Upon thorough scrutiny, goods are cleared for onward transit.

Thereafter, goods are delivered to the purchasers.

5. For such inter-State transactions on dals and pulses,

VAT is levied at the rate of 2% as against 5%, but for availing

the said benefit purchasers in the supply State are required to

issue C-Forms to the seller i.e., to the petitioner. Since VAT

on dals and pulses is 'NIL' in those States, purchasers therein

are not registered with the respective indirect tax department.

Therefore, they could not furnish or issue C-Forms to the

petitioner for the transactions.

6. Faced with such a situation, petitioner and similarly

situated dealers approached the then Government of Andhra

Pradesh. After due consideration, G.O.Ms.No.294 dated

9.3.2007 was issued by the Revenue (CT.II) Department,

Government of Andhra Pradesh. As per the said

G.O.Ms.No.294, Government ordered that the excess demand

raised or to be raised over and above the tax leviable at the

rate of 4% by the Commercial Tax Department against the

dealers in respect of inter-State sales on dals and pulses for

non-production of C-Forms as prescribed under the Central

Sales Tax Act, 1956 (briefly, ' the CST Act', hereinafter) for the

period from 1.7.2002 to 31.3.2007 be waived for the purpose

of assessment as well as for collection of tax by the

Department.

7. This was followed by G.O.Ms.No.347 dated 17.3.2008

issued by the Revenue (CT.II) Department, Government of

Andhra Pradesh extending such concession, rather dispensing

with furnishing of C-Forms under the CST Act, for the further

period from 1.4.2007 to 31.3.2009.

8. Government of Andhra Pradesh in the Revenue (CT.II)

Department, issued Memo dated 8.6.2011 providing for the

documents to be furnished in lieu of C-Forms. However, it was

mentioned therein that rice millers would have to mandatorily

furnish C-declaration Forms from 1.1.2011 onwards. It may

be mentioned that the aforesaid Memo dated 8.6.2011

pertained to inter-State sale of rice which is also subject to

non-levy of VAT in the purchasing States.

9. According to the petitioner, it had been submitting

various documents in lieu of C-Forms and was accordingly

granted the benefit in terms of G.O.Ms.No.294 and

G.O.Ms.No.347.

10. However, the composite State of Andhra Pradesh was

bifurcated into the two States of Telangana and Andhra

Pradesh on 1.6.2014 whereafter assessments were carried out

by the assessing authorities under the Telangana Value Added

Tax Act, 2005. Thereafter, demands were raised for the period

from 2011 to 2015. In the absence of C-Forms, millers and

traders like the petitioner were levied higher taxes. In this

connection, petitioner as well as other dealers and their

association had approached the 1st respondent to consider

their grievance not to insist on C-Forms while levying

concessional VAT. It appears that a grievance committee was

constituted by the 1st respondent to look into the grievance

expressed by the petitioner and others. As per the

recommendation of the grievance committee, Government of

Telangana in the Revenue (CT.II) Department issued Memo

dated 4.4.2016 ordering that central sales tax for the period

from 1.1.2009 to 31.3.2015 would be waived of in case of

excess demand raised over and above the scheduled rate in

the absence of C-Forms in respect of inter-State sale of dals

and pulses, subject to production of relevant documents

as proof.

11. Petitioner and others had availed the benefit of the above

G.O.Ms.No.294 and G.O.Ms.No.347 as well as Memos dated

13.7.2011 and 4.4.2016.

12. With effect from 1.7.2017 the earlier indirect tax regime

got subsumed in the new Goods and Services Tax (GST)

regime. Central Goods and Services Tax Act, 2017 and the

relevant acts were enacted in this regard.

13. In the above scenario, petitioner and others submitted

representations to the 3rd respondent on 18.6.2019 for

exemption from filing C-Forms and for continuing the earlier

procedure of submitting other documents in lieu of C-Forms

as proof of inter-State sale for exempting levy of higher taxes.

This was followed by another representation dated 1.7.2019

for waiver of required submission of C-Forms from 1.4.2015

onwards till implementation of GST.

14. The above representations were not considered by the

concerned authorities. On the other hand, respondents 5 and

6 i.e., the assessing authorities issued show-cause notice to

the petitioner on 7.6.2019 for filing of CST returns for the

assessment periods from April, 2016 to March, 2017 and from

April, 2017 to June, 2017. Additionally, the said respondents

also issued demand notices to the petitioner raising demand of

full tax (VAT) without any exemption.

15. It is in such circumstances that the present writ petition

came to be filed.

16. This Court by order dated 1.4.2021 had admitted the

writ petition for hearing and passed an interim order in I.A.

No.1 of 2021 directing the state authorities to consider the

representations of the petitioner. Till a decision was taken

thereon, respondents 5 and 6 were directed not to finalize or

give effect to the assessments conducted for the period from

1.4.2015 to 30.6.2017.

17. Respondent No.5 has filed counter-affidavit. It is stated

that petitioner is engaged in the business of trading in all

kinds of dals. It was registered as a dealer under the

Telangana Value Added Tax Act, 2005 (VAT Act) as well as

under the CST Act. Petitioner is assessed by respondent No.5.

Assessments for the period 2015-2016 and 2016-2017 under

the CST Act were completed by the said respondent

determining the tax payable by the petitioner at Rs.9,36,705/-

and Rs.9,83,697/- respectively. However, assessments for the

period from 2017 - 2018 (i.e., upto June, 2017) is pending.

Show-cause notice dated 7.6.2019 was issued for the purpose

of assessment for the period 2017-2018 (i.e., upto June,

2017). The said assessment has been kept in abeyance in

view of the interim order of this Court.

18. Petitioner without filing any statutory documentary

evidence like C-Forms in terms of Section 8(1) of the CST Act

has claimed concessional rate of tax at 2% on inter-State sales

of the above goods. In the absence of C-Forms, the entire

turnover would be exigible to higher rate of tax at 5% under

Section 8 (2) of the CST Act.

19. Though the petitioner was served show-cause notice

dated 7.6.2019, it did not file any objection nor sought for time

to file objection. Respondent No.5 as the jurisdictional

assessing authority completed the assessments of the

petitioner for the periods 2015-16 and 2016-17 on 11.3.2019

and 31.3.2021 respectively confirming the turnovers proposed

in the show-cause notice under Section 8(2) of the CST Act.

Thereafter, demand notices were issued to the petitioner.

However, the same has not been paid.

20. Answering respondent has further contended that if

petitioner is aggrieved by the assessments finalized for the

periods 2015-16 and 2016-17, petitioner has got an adequate

and efficacious alternative remedy by way of appeal under

Section 31 of the VAT Act read with Section 9(2) of the CST

Act. Instead of availing the alternative remedy as provided

under the statute, the petitioner has filed the present writ

petition before this Court. But importantly the writ petition

came to be filed after expiry of the limitation period for filing

appeal. Therefore, the writ petition is not maintainable and it

should be dismissed.

21. Petitioner has asserted that as per Sections 8 (1) and

8 (4) of CST Act and Rule 12 of Central Sales Tax (Registration

and Turnover) Rules, 1957, levy of concessional rate of tax at

2% on the sale of goods to registered dealers outside the State

is only upon proof of statutory declaration in Form-C from the

purchasing dealers outside the State. However, the

Government upon consideration of various representations

made had earlier issued orders exempting filing of C-Forms for

availing concessional rate of tax. Instead of C-Forms, other

documentary evidence were allowed to be submitted. This

benefit was available upto the assessment period 2014 - 2015.

Thereafter, no orders were passed by the Government

extending levy of concessional tax without C-Forms. Thus,

from the assessment period from 2015 - 2016 onwards

furnishing of C-Form is absolutely necessary for availing

concessional rate of tax on sale of dals and pulses in the

course of inter-State trade. Mere pendency of any

representation with the Government would not confer any

right on the petitioner to seek levy of concessional rate of tax

at 2% without C-Forms. Therefore, the writ petition should be

dismissed.

22. Mr. S. Ravi, learned Senior counsel for the petitioner

submits that grievance of the petitioner was duly considered

by the State Government and accordingly exemption from

filing C-Form to avail concessional rate of tax was granted to

the petitioner upto 31.3.2015. With effect from 1.7.2017, GST

has come into operation. For this intervening period i.e., from

01.04.2015 to 30.06.2017, there can be no justifiable reason

to deny the same benefit to the petitioner.

23. Mr. K. Raji Reddy, learned Senior Standing Counsel for

Commercial Tax appearing for the respondents, on the other

hand, submits that exemption from filing C-Form was granted

by the State Government upto 31.3.2015. Thereafter, there is

no exemption. Therefore, petitioner is bound to file C-Form if

it wants to avail concessional rate of tax.

24. Submissions made by learned counsel for the parties

have received the due consideration of the Court.

25. Section 8 of the CST Act deals with rates of tax on sales

in the course of inter-State trade or commerce. As per sub-

section (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 the CST Act 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. Sub-section (2) says that the tax

payable by any dealer on his turnover or any part thereof

relates to the sale of goods in the course of inter-State trade or

commerce not falling within sub-section (1), shall be at the

rate applicable to the sale or purchase of such goods inside

the appropriate State under the sales tax law of that State.

Sub-section (4) of Section 8 stipulates that the provisions of

sub-section (1) shall not apply to any sale in the course of

inter-State trade or commerce unless the dealer selling the

goods furnishes to the prescribed authority in the prescribed

manner a declaration duly filled and signed by the registered

dealer to whom the goods are sold containing the prescribed

particulars in a prescribed form.

26. Rule 12 (1) of the Central Sales Tax (Registration and

Turnover) Rules, 1957 (briefly, 'the Rules', hereinafter)

provides that the declaration and the certificate referred to in

sub-section (4) of section 8 shall be in Forms C and D

respectively. The format of Form-C i.e., Form of Declaration is

appended to the Rules.

27. As per the above, it is evident that if a dealer seeks to

avail concessional rate i.e., 2% of the tax on his turnover he

has to produce/file Form-C. If he fails to furnish Form-C, sub-

section (2) of Section 8 of CST Act would be attracted and the

dealer would be liable to pay tax at the rate applicable to the

sale or purchase of goods inside the appropriate State under

the sales tax law of that State. This position has also been

clarified by the Supreme Court in the case of M/s. TVS Motor

Company Limited Vs. State of Tamil Nadu (Civil Appeal

No.10560 of 2018 decided on 12.10.2018) wherein the views of

the High Court vis-à-vis Sections 8 (1) and 8 (2) of the CST Act

were approvingly referred to as under:

"27. Discussing the provisions of Section 8(1) and (2) of the CST Act, the High Court pointed out that Section 8(1) gives preferential treatment to sale by a dealer to a registered dealer. Vires of this provision has also been upheld in Gwalior Rayon Silk Manufacturing (Wvg.) Co., Ltd. vs. Assistant Commissioner of Sales Tax and others [(1974) 4 SCC 98].

28. Discussing ratio of the aforesaid judgments, the High Court pointed out that this Court noted the proposition that the aforesaid provision was to check the evasion of tax on inter-State sales and to prevent discrimination between the rates in one State and those in other States, the Parliament thought fit to enact Section 8 (2) (b) of the CST Act and further held that the object of the law apparently is to deter inter-State sales to unregistered dealers as such inter- State sales would facilitate evasion of tax and the fixation of the rate of local sales tax is essentially a matter for the

State legislatures and the Parliament does not have any control in the matter. It has been further held in the said decision that it is in public interest to see that in the guise of freedom of trade, they do not evade the payment of tax and it is an effective safeguard against the evasion of tax."

28. It is true that State Government had exempted

furnishing of C-Forms for the period upto 31.3.2015. But

there is no such exemption for the period thereafter till coming

into force of GST regime with effect from 1.7.2017. In the

absence of such exemption, petitioner is bound to furnish the

C-Forms if it wants to avail concessional rate of tax under

sub-section (1) of Section 8. Since it failed to do so, for

whatever reason, the rigour of sub-section (2) of Section 8

comes into play. Mere submission of representation cannot

confer any right on a dealer to seek waiver of filing C-Forms.

Principle of legitimate expectation cannot be invoked in a

taxing statute.