Madras High Court
Quality Enterprises, Kamaraj Salai, ... vs The Additional Deputy Commercial Tax ... on 18 February, 2002
Equivalent citations: [2002]127STC504(MAD)
Author: A.K. Rajan
Bench: A.K. Rajan
ORDER A.K. Rajan, J.
1. This writ petition is for the issue of writ of certiorarified mandamus to quash the proceedings of the respondent, dated 19.10.1994.
2. In the affidavit filed in support of the petition, it is stated as follows: The petitioner is a partnership firm. It is an assessee under the Pondicherry General Sales Act, 1967. The petitioner company is a distributor for the goods manufactured by M/s. Space Tech Plastics Private Limited in Tamil Nadu who have a local branch office and godown at Pondicherry. The petitioner company buys the products at Pondicherry. Space Tech Plastics raises invoices of sale at Pondicherry, effects deliveries and collects prices at Pondicherry. The petitioner does not place orders directly to the factory at Tamil Nadu. Manufacturers Collect local tax of 3% under Pondicherry General Sales Tax Act and the petitioner is a second seller. Accordingly, the petitioner claims second sale exemption which was granted by the authorities at Pondicherry. While so, the petitioner company was shocked to know that its sales at Pondicherry was treated as inter-state sales at Pondicherry by the Tamil Nadu Government authorities. Therefore, there is a threat of assessment at 10% under penalty thereon in the absence of "C" declaration. Show cause notice was also sent to the petitioner. Two instances referred to in the show cause notice relate to the amounts paid by the petitioner to Space Tech Plastics Private Limited for the purchases already made and they did not relate to any advance payment against future order. In some isolated instances, the petitioner forwarded Form "F" declaration. The manufacturers were advised that unless they filed "C" declaration under protest, the authorities will levy higher tax. The manufacturers assured that they will challenge the order relating to the nature of transaction. Therefore, the request of the petitioner was to assist them in reducing the liability; the liability may be around Rs.46 lakhs. The petitioner as purchaser was convinced that the issue of "C" Form under threat of huge liability to the seller will not compromise either the purchaser/petitioner or the character of local sales effected by the branch. Initially, the petitioner refused to accept the request of the Space Tech Plastics Private Limited as its purchases were only within the State of Pondicherry. Therefore, the petitioner requested for issue of "C" Forms. The respondent rejected the application for issue of "C" Forms for the purchases effected at Pondicherry, during the past three years, from 1991 to 1993 on the ground that they were all local purchasers. The petitioner is bound to come to the rescue of the manufacturers with whom they have business transaction from 1984. Therefore, they are constrained to come before this Court for relief. The respondent authority cannot brush aside the serious threat of assessment by the Commercial Tax Officer, Pondicherry against the sales of Space Tech Plastics Private effected at Pondicherry which is erroneously treated as inter-State sale of Tamil Nadu. The issue of "C" Form in such circumstances is only to render assistance to the suppliers and it cannot be treated as impermissible. The respondent is only an agent of the Central Government in the matter of issuing declaration in Form "C" and cannot ignore the notice dated 31.8.1994 to the manufacturers by Tamil Nadu. The petitioner repudiate the notice of the Commercial Tax Officer, Ponneri as erroneous in law. In fact the goods moved to Pondicherry are unascertained goods and being standard goods capable of sale to anybody. The petitioner accordingly treated the sale as second sales. Petitioner company says that there is no loss of revenue to the respondents. Once single point tax is paid in Pondicherry, the goods cannot suffer further tax and the Union Territory of Pondicherry cannot demand tax on the same goods. Once the tax is paid to the respondent, the respondent is bound to give "C" Form.
3. In the counter, it is stated that the writ petitioner is a dealer registered under the Pondicherry General Sales Tax as well as Central Sales Tax Act. M/s. Space Tech Plastics Private Limited is a Madras based firm having a branch in Pondicherry and its branch is also duly registered under the Pondicherry General Sales Act. The petitioner is under no legal obligation to furnish "C" form declaration in respect of purchases of P.V.C. Pipes from M/s.Space Tech Plastics Private Limited, Pondicherry. This respondent is not aware of the circumstances under which the Commercial Tax authority in Tamil Nadu proposes to assess the turnover of M/s. Space Tech Plastics Private Limited. The Pondicherry authorities have a right to reject the application of the petitioner seeking supply of "C" Forms since the transaction between them is purely commercial under local law. The provisions of the Central Sales Tax Act do not provide for issue of "C" declaration form in respect of the sale transaction within the Union Territory of Pondicherry. The petitioner has no locus standi in respect of the assessment made by the tax authorities in Tamil Nadu in respect of M/s. Space Tech Plastics Private Limited. The petitioner cannot help the said company by issuing the "C" form declaration contravening the provisions of Central Sales Tax. Therefore, the writ petition is devoid of any merits and is liable to be dismissed.
4. The counsel for the petitioner relies upon a decision of the Supreme Court in Sahney Steel & Press Works Limited v. Commercial Tax Officer (1985 60 S.T.C.301) where the facts are almost similar to the present case. The petitioner in that case was a company engaged in manufacture and sale and had its factory as well as registered office at Hyderabad; it had branches at Bombay, Calcutta, Coimbatore and it mainly engaged in effecting sales and looking after sales promotion and liaison work. Those branches received orders from customers within and outside their respective States for the supply of goods conforming to definite specifications and drawings and advised the registered office at Hyderabad. The company manufactured the goods and such goods were booked to "self" and sent to the branches. In the branch office, they were entered in the account books and ultimately delivered to the customers. The branches raised the bills and received the sale price. They also furnished Form "F" to the registered office at Hyderabad in case of stock transfers to the branches. The petitioner company was assessed to State sales tax in Maharashtra, West Bengal and Tamil Nadu in respect of those goods. The petitioner claimed that there was only a transfer of stocks from Hyderabad to the branches outside the State of Andhra Pradesh and that the sales effected to the customers by the branches were local sales in the respective States. The Commercial Tax Officer held the sales to be sales in the course of inter-state trade and assessed accordingly. Notices of re-opening of the assessment were issued. The Petitioner filed a writ petition in the Supreme Court claiming that the sales were not sales in the course of inter-State and in the event of the transactions being held to be inter-State sales, the petitioner be permitted to avail the concessional rate envisaged by Section 8(1) read with Section 8(4) of the Act. In that case, the Supreme Court held that even if the customer placed an order with the branch office and the branch office communicated the terms and specifications of the order to the registered office and the branch office itself was concerned with the despatching and billing and receiving the sale price, the order were placed with the company and for the purpose of fulfilling that order, the manufactured goods commenced their journey from the registered office in the State of Andhra Pradesh to the branches outside the State for delivery of goods to the customers. Both the registered office and the branch office were offices of the same company. They did not possess separate juridical personalities. The movement of the goods from the registered office at Hyderabad was occasioned by the order placed by the customer and was an incident of the contract and therefore, from the very beginning from Hyderabad all the way until delivery to the customer, it was an inter-State movement. The sale transactions were inter-State sales under Section 3(a) of the Act. In that case, the Supreme Court further held that the petitioner company should be given reasonable opportunity to collect "C" Forms from the customers for the purpose of obtaining reliefs under Section 8(1) read with Section 8(4) of the Act, for the reason that the question whether the transaction was to be treated as inter-State sales was in doubt and was pending judicial pronouncement.
5. Learned Government Pleader for Government of Pondicherry contended that in so far as these sales are concerned, they have been treated as local sales by the Pondicherry Government. Further "C" Form could be issued only for a proposed purchase and not for the sales already effected, that too after three years of the purchase. In so far as the Pondicherry is concerned, it is purely a local purchase and it was assessed to tax and already been collected, in accordance with the Pondicherry Sales Tax Act.
6. The counsel for the petitioner relies upon a another decision in A.P. Gas Power Corporation Limited v. A.C.T.O. (109, S.T.C. 625), wherein a Division Bench of this Court held, " Rule 9 of the C.S.T. (Andhra Pradesh) Rules, 1957 directs that every registered dealer shall apply to the notified authority and obtain from him adequate number of forms of declaration "C" forms, for use by him at the time of receipt or purchase of goods as mentioned in sub-section (1) of Section 6-A or sub-section (4) of Section 8 of the Act, on payment of the costs and on production of the receipt or challan in proof of such payment along with the application.
.......
Rule 10 enjoins upon every registered dealer the duty to maintain the register in form XIII, showing a true and correct account of such C forms and the allied matters.
Thus from the reading of the above provisions, it is clear at the stage of issuing of "C" declaration form, the notified authority is not required to conduct an enquiry into the nature of the transaction and as to whether the petitioner needs the forms for use in the course of inter-State trade or for avoidance of payment of tax which he would be liable to pay. The authorities will, however, be at liberty to make such an enquiry as it is necessary to see whether "C" forms have been properly issued and if not what is the liability of the parties under the APGST or CST Act, as the case may be. Such an enquiry need not be made at the stage of issuance of C form. What all is required under rule 9 of the said Rules is:
(1) whether the person applied for C form is a registered dealer;
(2) Whether the goods in respect of which C form is used are included in the certificate of registration form "A"; and (3) whether he has paid the amount for the C form and produced necessary challan in proof of the payment;
When these requirements are satisfied, C for has to be issued. From the above discussion it follows that the petitioner is entitled to receive C form on the compliance of the above three conditions. This is without prejudice to the authorities making enquiry at the time of assessment as to the proper use of the C form. "
7. Further, in the case Larsen and Toubro Limited v. C.T.O.(85 S.T.C. 422), a similar prayer for issue of "C" forms was made. The only difference is that in that case, the claim was made prior to purchase of the goods. In that case, the Supreme Court has held that, " .....in my view, the petitioners are entitled to have themselves registered as dealers under Section 7(2) and consequently are entitled to the supply of "C" forms for use in their purchase of goods in the course of inter-State sale or trade or commerce at the concessional rate. The further question whether the goods have been rightly purchased for any one of the approved and permitted purposes and whether there was sufficient compliance or non-compliance or violation of the terms of the registration certificate or as to whether the "C" forms issued have been misused by the registered dealer shall be considered only at the subsequent and appropriate stage and in accordance with section 10-A of the Central Sales Tax Act and it would be not only premature, but inappropriate to enter into an enquiry postulated under Section 10-A even at the stage of issue or the supply of "C" forms. "
8. From the decisions of this Court and the Supreme Court, it is clear that for issuance of "C" forms, the only conditions that are to be satisfied are that the person claiming "C" form is a registered dealer and that the charges for "C" form were paid and that he produced the challans in proof of having paid the amount for obtaining the "C" form. Once these conditions are satisfied, the authorities are bound to issue "C" form. Whether the "C" forms are properly used or misused, cannot be enquired into at the initial stage of issuance of "C" forms. If any person misused the "C" form, he is liable to the penalties as contemplated under the Act. Therefore, the authorities which issue "C" forms have to issue the forms, once they satisfy the above conditions. Therefore, the rejection of the request by the respondent is not justifiable, under the relevant provisions of law, the petitioner is entitled for 25 "C" forms, at a time . The petitioner is entitled to get the forms, in accordance with that R.15(2).
9. In the result, the writ petition is allowed accordingly. No costs.