Gauhati HC Quashes Indian Oil’s CST Demand: ‘C’ Form for Concessional Tax Rate Wrongly Denied on Basis of Quashed Circular [Read Order]

The Gauhati High Court has set aside a differential tax demand raised by the Indian Oil Corporation Limited (IOCL) that stemmed from a circular denying concessional Central Sales Tax (CST) benefits through ‘C’ Forms on six notified commodities. The Court ruled that the restrictive circular issued by the Assam tax authority had already been invalidated in an earlier case, and with a new circular now in force, no further adjudication was necessary.

The Petitioner, M/s Vijay Nirman Co. Pvt. Ltd., a private limited company registered under the Companies Act, 1956, challenged Circular No. 7/2017 dated September 5, 2017, issued by the Commissioner of State Tax, Assam. The petitioner, a registered dealer under the Central Sales Tax Act, 1956, argued that denial of ‘C’ Forms not only violated statutory provisions but also triggered an unjustified differential tax demand from IOCL, causing financial harm.

The Petitioner represented by N. Hawelia, contended that the blanket denial of concessional tax through ‘C’ Forms was arbitrary, contrary to the scheme of the Central Sales Tax Act, 1956 and inconsistent with central government notifications under the Ministry of Finance. It was submitted that such refusal lacked legal sanction and breached principles of natural justice.

The Respondents represented by B. Gogoi, and P. S. Chakraborty argued that the restrictive circular had already been quashed in Star Cement Meghalaya v. State of Assam & Ors. (2018) by a co-ordinate bench of the same Court. It was emphasized that the State had since issued a replacement Circular No. 12/2018-GST dated August 9, 2018, aligning with central government directions and restricting concessional ‘C’ Forms only to specific uses such as telecommunication networks, mining, and electricity generation or distribution.

Justice Kardak Ete held that since the impugned Circular of September 5, 2017 had already been struck down in Star Cement Meghalaya (supra) and a new circular dated 09.08.2018, was now in operation, nothing remained to be adjudicated in the present proceedings.

Accordingly, the Court set aside the differential tax demand raised by IOCL, while granting liberty to the respondents to take appropriate action under the new circular, if required.

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