Calcutta HC allows Concessional Rate of Duty on Interstate Sale [Read Order]

The Calcutta High Court allowed the concessional rate of 2% on the subject transaction based on the admitted documents, more particularly the stand taken by the 6th respondent that the sale transaction is an inter- State sale.

M/S. N.P. Trading Company , the petitioner challenged an order passed by the West Bengal Taxation Tribunal (“the  Tribunal”) dated 15.7.2024 whereby the application filed by the writ petitioner in RN-183 of 2023 was rejected on the ground that the tribunal cannot issue the direction sought for.

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It is true that the tribunal could not have granted the direction sought for by the applicant as it would be fall outside the jurisdiction of the tribunal as the tribunal would be entitled to consider the correctness of the order passed by the Revisional Board or the Revisional Authority in a revision petition filed by the assessee challenging the order of assessment.

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The admitted facts are that the writ petitioner is the selling dealer having entered into a transaction with the 7th respondent for sale of Tendu Leaves. The sale is admittedly an inter-State sale as the commodity was sold from Chhattisgarh State. This aspect of the matter has not been disputed by the department at any point of time.

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Apart from the transaction which the writ petitioner had with the 7th respondent, the writ petitioner had other inter-State sale transactions with other entities and in respect of those transactions the writ petitioner was able to obtain Form-C declaration from the purchasing dealer and, therefore, the transactions were charged at the concessional rate of duty at 2% instead of 5%.

However, in respect of the transaction done with the 7th respondent, the writ petitioner was unable to obtain Form-C declaration, as a result of which, the writ petitioner’s assessing officer did not extend the benefit of concessional rate of tax at 2% and was compelled to tax the writ petitioner at the rate of 5%. The challenge to such assessment was unsuccessful twice before the Revisional Authority.

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Consequently, the writ petitioner thought fit to file an application before the tribunal and what prompted the writ petitioner to do so was an internal communication which was sent by the 6th respondent, namely, the Assistant Commissioner of Revenue, Commercial Taxes, Berhampore Charge to the 1st respondent, namely, the Deputy Secretary to Government of West Bengal dated 16.11.2022. In the said communication it is admitted that the transaction done by the writ petitioner with the 7th respondent was an inter-State sale.

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However, since the 7th respondent has not applied for issuance of Form-C declaration before his jurisdictional assessing officer, namely, the 6th respondent, Form-C declaration could not be issued in favour of the writ petitioner. This has been explicitly stated. That apart it has been pointed out by the 6th respondent that the 7th respondent has not submitted any return for the quarter ending 30th June, 2017 and was assessed provisionally under Section 45 of the West Bengal Value Added Tax Act, 2003.

Thus, it is required to be seen as to what remedy the petitioner is entitled to. Form-C declaration have been held to be documents when produce by the dealer, they will be entitled to benefit of the concessional rate of tax or reduced rate of tax. There are several decisions which have been pointed out and even if there is a defect in Form-C declaration issued in respect of an inter-State sale the same can be rectified and if there is a delay in issuance of Form-C declaration by the assessing officer of the purchasing dealer and if the Form-C declaration is issued belatedly, such declaration can be produced before the jurisdictional assessing officer of the selling dealer and the assessment for the relevant period can be revised.

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Apart from that, it has also been held that if the selling dealer is unable to get the defects rectified in the Form-C declaration issued at the behest of the purchasing dealer, it will be well open to the selling dealer to produce contemporaneous records to establish the genuinity of the inter-State sale so that they get the benefit of the reduced rate of tax or the concessional rate of tax.

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The factual position is much better as the respondent/department does not dispute the fact that the transaction done by the writ petitioner with the 7th respondent is a case of inter- State sale. There may be cases where the purchasing dealer might have faced action by the department including that of cancellation of registration and there are decisions which have held that if the registration of the selling dealer is valid during the period when the inter-State sale took place, then the selling dealer would be entitled to the concessional rate of tax.

The court disposed of the writ petition by directing the 6th respondent to address a letter to the writ petitioner to the effect that the subject sale transaction is admittedly an inter-State sale, and Form-C declaration is not being able to be issued as the 7th respondent has not filed any application for issuance of Form-C declaration.

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Considering the peculiarity of the facts and circumstances of the case and more particularly that the 6th respondent has admitted the transaction to be the inter-State sale, it was held that the petitioner will be entitled to concessional rate of tax at the rate of 2% on the subject transaction based on the admitted documents, more particularly the stand taken by the 6th respondent that the sale transaction is an inter- State sale.

Since the jurisdictional assessing officer of the petitioner is outside the territorial jurisdiction of the court, a positive direction cannot be issued to the said officer. Further the division bench of Chief Justice T S Sivagnanam and Justice Chaitatli Chatterjee held that the jurisdictional assessing officer of the petitioner shall extend concessional rate of tax to the petitioner on the subject transaction at the rate of 2%. The above direction be complied with by the 6th respondent within a period of eight weeks.

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