CST: C Forms cannot be Cancelled with Retrospective Effect to Deny Benefit to Assessee, says Delhi HC [Read Order]

In a significant ruling, the Delhi High Court (HC) held that C Forms cannot be cancelled with its retrospective effect to deny the benefit to the assessee.

Zapsell Retail, the petitioner is engaged in the business of sale and purchase of electronic items and at the material time was registered as a dealer under the provisions of the Central Sales Tax Act, 1956 (‘CST Act’) Haryana Value Added Tax Act, 2003 (‘HVAT Act’). After the rollout of the Goods and Services Tax regime (‘GST regime’), the petitioner has migrated to the GST regime and is registered under the Goods and Services Tax Act, 2017.  

The petitioner is, essentially, aggrieved by the denial of the concessional rate of duty in respect of certain inter-state sales made to M/s Shree Ram Overseas (TIN-07450431050) (‘the purchasing dealer’), a dealer registered under the Delhi Value Added Tax Act, 2004 (‘DVAT Act’) against declaration in Form C prescribed under the Central Sales Tax (Registration & Turnover) Rules, 1957 (‘CST Rules’).  

The C-forms submitted by the petitioner in respect of the sales made to the purchasing dealer in the 1st and 2nd Quarter of the Financial Year 2016-17, were not verifiable online. However, the Forms submitted for the 3rd Quarter of the said Financial Year was accepted. 

The respondents stated that based on the information received from the Enforcement Directorate regarding the investigation under the Prevention of Money Laundering Act 2002 (‘PMLA’), against certain firms registered under the DVAT Act, a notice under Section 59(2) of the DVAT Act (being Ref no.: 10486004) was issued to the purchasing dealer on 12.04.2018 directing it to produce financial records about the period on or before 19.04.2018.

Cancellation proceedings of the C-forms were initiated against the purchasing dealer since no response was received from the purchasing dealer to the notice dated 12.04.2018 and did not furnish any documentation to verify the purchases made by it.

In Jain Manufacturing (India) Pvt. Ltd. v. The Commissioner Value Added Tax & Anr. it was held that C-forms cannot be cancelled retrospectively. In light of the decision, Justice Vibhu Bakhru and Justice Amit Mahajan held that the benefit of the C-Forms in question cannot be denied to the petitioner, by cancelling the same retrospectively and allowing the petition. 

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