Gauhati HC Grants CST Section 6(2) Benefit Despite Non-Furnishing of ‘C’ Forms, Citing Uncontested Inter-State Movement of Goods [Read Order]

The petitioner, M/S Bharat Trading Corporation, is a dealer in acids and chemicals,and received an order from Hindustan Paper Corporation for caustic soda. The petitioner purchased the goods from a registered dealer outside Assam and completed the interstate sale during transit by transferring the title documents, and the bills were raised accordingly.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The petitioner marked the transactions as E1 sales in the invoices, clearly mentioning the original supplier and noting that ‘C’ Forms would be provided by Hindustan Paper Corporation. Despite regular follow-ups, the Corporation failed to issue the forms. In a letter dated June 14, 2017, they explained that due to a severe financial crisis and a mill shutdown since October 2015, caused by a coal ban in Meghalaya, they were unable to comply. As a result, the petitioner couldn’t furnish the required ‘C’ forms, which led to assessment proceedings, which resulted in the impugned order, where the tax benefit was ultimately denied.

In this case, the court has combined all the writ petitions filed by the same petitioner but in respect of the transactions covered by different periods, raises similar questions of law.

It was submitted by the petitioner’s counsel that the petitioner supplied goods to Hindustan Paper Corporation on the condition that ‘C’ Forms would be provided. Since the Corporation failed to supply the forms and has since been taken over by the State of Assam following insolvency proceedings, the tax demand raised against the petitioner is unjust.

The petitioner argued that the Assam Tax Department should issue a notification under Section 8(5) of the CST Act, 1956, exempting it from submitting ‘C’ Forms for these transactions.

The High Court observed that a plain reading of Section 8 of the CST Act shows that exemptions must serve the public interest.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

The High Court held that if the petitioner’s inter-state procurement of goods is not disputed, the benefit under Section 6(2) of the CST Act cannot be denied merely because ‘C’ Forms were not furnished due to the buyer’s inability to provide them owing to tax issues.

The high court, by relying on the decision of the Bombay High Court in the case of M/S. Prism Cement Limited and Another vs. State of Maharashtra and Others, Writ Petition No. 6475 of 2009, held that “even after the amendment of Section 8(5) by the Finance Act, 2002, the State Government in public interest may, subject to the fulfilment of the requirements of Section 8(4), applicable to the transactions covered under Section 8(1), grant total/partial exemption from tax payable on inter-State sales covered under Section 8(1) as also under Section 8(2) of the CST Act.”

The High Court, consisting of Justice Soumitra Saikia, allowed the writ petitions.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates