In a recent Judgment Jain Manufacturing (India) Pvt. Ltd vs The Commissioner Value Added Tax & Anr, the Delhi High Court has held that the Commissioner of VAT has no statutory power that permits cancellation of a C-Form that has been validly issued.
The Petitioner Jain Manufacturing India Pvt Ltd is a company having its registered office in Kanpur, Uttar Pradesh engaged in trading of duty entitlement pass book scrips. The Petitioner is also registered under the Central Sales Tax Act, 1956 (CST Act).
The Petitioner made an inter-state sale of goods to Respondent No. 2 (Purchasing Dealer) by way of two invoices both dated 10th March 2015. The first invoice was for a sum of Rs.7,53,373/- and the second for a sum of Rs.2,49,715/-. In terms of Section 8(1), (b) of the CST Act with Respondent No. 2 is a dealer registered under the CST Act in New Delhi [apart from being registered under the Delhi Value Added Tax Act, 2004 (DVAT Act)] as of that date, and having purchased the goods from the Petitioner by way of inter-state sale, tax at the concessional rate of 2% was chargeable in the invoices and was accordingly included in the invoices raised by the Petitioner. The said two invoices accordingly mentioned the CST amounts as 15,067 and 4,994 respectively. The total sums of the 2 invoices were Rs. 7,68,441/- and Rs. 2,54,709/- respectively. The payments for these invoices were made by RTGS into the Petitioner’s bank account.
On 13th April 2015, Respondent No. 2 obtained C-Form from the DT&T in respect of the aforementioned two invoices. A copy of the said C-Form is enclosed with the petition as Annexure P-4. It shows that it was a system generated C-Form containing details of the purchasing dealer i.e. Respondent No.2 with its Registration Certificate Number and the amount up to which such registration is valid. The name and address of the purchasing dealer i.e. Respondent No. 2 have also been indicated. It also bears the TIN and name of the selling dealer i.e. the Petitioner. It contains the details of the two invoices dated 10th March 2015 with the respective amounts.
The Petitioner later learnt that the above C-Form had been cancelled by the DT&T. In order to verify this, the Petitioner checked the website of the DT&T. The status of the C-Form issued to the Petitioner was shown as cancelled on 27th November 2015. The Petitioner also obtained a copy of an order passed by the Assistant Value Added Tax Officer (AVATO) in Form DVAT-11 on 4th August 2015 cancelling the registration of Respondent No.2. A copy of the said cancellation order has been enclosed as Annexure P-6 to the petition. It was noticed that the cancellation was made retrospective from 26th February 2014.
The Counsel for the petitioner, Mr Vinod Srivastava contended that in the present case the C-Form was cancelled only because the registration of Respondent No.2 under the CST Act was cancelled retrospectively from 26th February 2014 although there was no power under the CST Act to do so. It is contended that as far as Petitioner is concerned, as a selling dealer it is only required to ensure that on the date of the sale to Respondent No. 2, the latter as a purchasing dealer held a valid registration under the CST Act in Delhi. The subsequent cancellation of such registration retrospectively from a date earlier to the sale would not, according to the Petitioner, affect the validity of the C-Form issued to the Petitioner since on the date of issuance of such C-Form Respondent No.2 was validly registered under the CST Act.
The Counsel for the respondent, however not to dispute the fact that there is no provision in the CST Act for cancellation of the C-Form. He submitted that under Section 7(4) of the CST Act the registration granted under the CST Act can be cancelled by the authority which granted it. However, he again did not dispute that under Section 7 (4) (b) of the CST Act retrospective cancellation of a registration is not contemplated.
The bench Comprising of Justices Vibhu Bakhru and S. Muralidhar observed that “No provision in the CST Act has been brought to the notice of the Court which enables an authority issuing a C-Form to cancel the C-Form. Rule 5(4) of the Central Sales Tax (Delhi) Rules, 2005 enables the authority which has to issue a C-Form to “withhold” the C-Form’.
“In the present case with their being a valid registration of the purchasing dealer on the date of the transaction and the C-Form having been validly issued on the date it was so issued, there could not have been a retrospective cancellation of the C-Form. At the risk of repetition, it must be observed that there is no statutory power that permits cancellation of a C-Form that has been validly issued, much less retrospectively. The only circumstance perhaps that could lead to the cancellation of a C Form is the failure by the issuing authority to notify the cancellation of the purchasing dealer’s CST registration previous to the date of the sale. That would be a case of a purchasing dealer obtaining a C Form by fraudulent means concealing the fact of cancellation of his CST registration. The issuance of a C Form in such instance would be void ab initio since it would not satisfy the requirement of Section 8 (1) of the CST Act read with Section 7 (4) thereof”, the Court also observed.
Read the full text of the Judgment below.
