The Supreme Court has expedited the hearing process for a case revolving around sales tax demand linked to the utilisation of invalid ST-1 forms. Condoning the delay, the apex court has accepted the Special Leave Petition ( SLP ) filed by the Commissioner of Trade and Taxes.
The SLP stems from a decision by the Delhi High Court favouring the appellant, DCW Limited, a registered Sales Tax dealer in Delhi. The company entered into a transaction for the purchase of PVC resins and sought to benefit from Form ST-1 issued for a transaction dated 23.11.1996, valued at Rs. 9,25,52,964, with M/s Geco Engineering Company as the selling dealer.
However, the Sales Tax Tribunal dismissed the appeal, upholding a demand of Rs. 1,41,64,613, inclusive of an interest component of Rs. 63,57,976. Subsequently, the assessee approached the Delhi HC.
Upon examination of both the Form and the Sales Tax Rules ( STR ), the Delhi HC noted that the declaration did not specify any limitation on its validity period. Rule 7(1) of Sales Tax Rules ( STR ) merely required separate declarations for goods delivered in different years. Consequently, the Revenue’s reliance on this provision was deemed unfounded.
The High Court added that Rule 8(9) of STR mandated dealers to surrender unused declaration forms upon certificate cancellation, indicating that once issued, forms remained valid as per the Rules. The Revenue’s reliance on a circular issued after the Form’s issuance held no weight.
Referring to legal precedents, including Bengal Iron Corporation Vs. Commercial Tax Officer, the High court established that such circulars did not bind courts. Consequently, rejecting the Forms and disallowing deductions for PVC resin sales totaling Rs. 9,25,52,964 was considered unlawful. The Delhi HC overturned the decisions of the Sales Tax Tribunal and lower authorities, granting appropriate relief to the dealer. However, the authorities approached the Supreme Court via Special Leave Petition ( SLP ).
During the SLP proceedings before the the bench of bench of Justices Hrishikesh Roy and Prashant Kumar Mishra, Ms. Monica Benjamin, representing the Revenue, highlighted the core issue: a sales tax demand arising from the use of invalid ST-1 Forms by the selling dealer.
However, Mr. Gaurav Pachnanda, a Senior Counsel representing the assessee, along with Ms. Apeksha Mehta, counsel for another assessee in a related case, countered this argument. They clarified that the ST-1 Forms were provided by the purchasing dealer(s), and the selling dealer(s) merely submitted them to the taxing authorities.
Furthermore, they emphasised that the validity of the transaction itself was not in doubt, leading the High Court to favour the assessees and dismiss the sales tax demand.
Acknowledging both sides’ arguments, the court granted leave for further proceedings and urged an expedited hearing to resolve the matter promptly.
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