2025 (6) TMI 1163 - HC - VAT / Sales Tax

Grant of refund for purchase of High Speed Diesel under the Central Sales Tax Act 1956 - HELD THAT - The petitioner is required to file an application for refund before the respondent authority and the respondent authority is supposed to consider and process such refund claim within 12 weeks of the same being made by the petitioner in writing. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the petitioner is entitled to a refund of Central Sales Tax (CST) paid on the purchase of High Speed Diesel (HSD) under the provisions of the Central Sales Tax Act, 1956, particularly in light of the amendment to Clause (d) of Section 2 of the CST Act defining 'Goods' and the denial of issuance of 'C' Forms by the tax authorities.

(b) Whether the respondent authorities are obligated to grant the refund of the tax amount collected and deposited by the sellers (IOCL and RIL) along with appropriate interest, as prayed by the petitioner.

(c) What procedural steps the petitioner must follow to claim such refund, and the corresponding obligations of the respondent authorities in processing the refund claim.

(d) Whether the petitioner's failure to file a formal application for refund affects the entitlement to refund and the respondent's duty to process the claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Entitlement to Refund of CST on High Speed Diesel Purchases

Relevant Legal Framework and Precedents: The Central Sales Tax Act, 1956 governs interstate sales and the levy of CST. A key procedural document under the CST regime is the 'C' Form, which allows for concessional tax rates or exemption on interstate sales of goods used in manufacturing or other specified activities. The amendment to Clause (d) of Section 2 of the CST Act altered the definition of 'Goods', which has implications on the eligibility for 'C' Forms and hence on tax liability.

The Rajasthan High Court's decision in Hindustan Zinc Limited vs. State of Rajasthan & Ors. (S.B Civil Writ Petition No. 5506/2018) is a binding precedent on the issue, holding that 'C' Forms are to be issued for High Speed Diesel procured for mining through interstate trade, and any wrongful refusal entitles the purchaser to refund of excess tax paid.

Court's Interpretation and Reasoning: The Gujarat High Court recognized that the issue is no longer res integra and squarely covered by the ratio of the Rajasthan High Court judgment. The denial of 'C' Forms by the tax authorities, based on the amended definition of 'Goods', was held to be wrongful in the context of High Speed Diesel used for manufacturing or mining activities.

Key Evidence and Findings: The petitioner's purchase of HSD was made under the assumption of entitlement to 'C' Forms, which were denied by the respondents. The petitioner paid CST at a higher rate and seeks refund of the tax amount collected and deposited by the sellers (IOCL and RIL).

Application of Law to Facts: Since the petitioner's case falls within the scope of the Rajasthan High Court precedent, the petitioner is entitled to the issuance of 'C' Forms and consequently to refund of the excess CST paid on HSD purchases.

Treatment of Competing Arguments: The respondents contended that no refund claim was filed by the petitioner as per the procedural requirements, and thus no refund could be granted. The Court noted this procedural lapse but did not dispute the substantive entitlement to refund.

Conclusions: The petitioner is substantively entitled to refund of CST paid on High Speed Diesel purchases for interstate trade used in manufacturing/mining, as per the binding precedent.

Issue (b): Obligation of Respondent Authorities to Grant Refund and Interest

Relevant Legal Framework and Precedents: The CST Act and Rules provide for refund of excess tax paid when 'C' Forms are not issued or are wrongfully withheld. The Rajasthan High Court order dated 19.03.2024 specifically directs the concerned authorities to process refund claims within twelve weeks upon receipt of a proper application.

Court's Interpretation and Reasoning: The Gujarat High Court emphasized that the respondent authorities have a clear obligation to process refund claims timely once a formal application is filed. The Court reiterated the directions of the Rajasthan High Court that refund claims must be processed within twelve weeks.

Key Evidence and Findings: The petitioner has not filed a formal refund application but has sent an email requesting refund. The respondents maintain that without a formal application, refund cannot be processed.

Application of Law to Facts: The Court held that the procedural requirement of filing a formal refund application is mandatory. Upon such application, the respondents must grant refund along with appropriate interest as per the statutory provisions and directions of the Rajasthan High Court.

Treatment of Competing Arguments: The petitioner argued that the email communication should suffice as an application; however, the Court found that a formal application is necessary to trigger the refund process.

Conclusions: The respondents are obligated to grant the refund and interest once a formal refund application is filed by the petitioner, and to process the claim within twelve weeks.

Issue (c): Procedural Requirements for Refund Claim and Respondents' Duties

Relevant Legal Framework and Precedents: The procedural framework under the CST Act requires the taxpayer to file a written refund claim along with requisite documents and forms. The Rajasthan High Court order mandates processing of such claims within a stipulated period.

Court's Interpretation and Reasoning: The Gujarat High Court underscored the necessity of compliance with procedural requirements by the petitioner. The Court accepted the petitioner's undertaking to file a formal application within four weeks.

Key Evidence and Findings: The petitioner's failure to file a formal refund application was noted. The respondents' position that they cannot process the refund without a formal claim was accepted as consistent with legal requirements.

Application of Law to Facts: The Court directed the petitioner to file the refund application within four weeks, thereby enabling the respondents to comply with the Rajasthan High Court's directions to process the claim within twelve weeks.

Treatment of Competing Arguments: The petitioner's reliance on informal communication was not accepted as sufficient procedural compliance.

Conclusions: The petitioner must file a formal refund application to enable the respondents to process the refund claim in accordance with the law and judicial directions.

Issue (d): Effect of Petitioner's Non-Compliance on Refund Entitlement

Relevant Legal Framework and Precedents: The CST Act and judicial pronouncements require adherence to procedural formalities for refund claims, but substantive rights to refund are not extinguished by procedural lapses.

Court's Interpretation and Reasoning: The Court observed that while the petitioner's failure to file a formal application delays the refund process, it does not negate the petitioner's substantive right to refund as established by the precedent.

Key Evidence and Findings: The petitioner's email communication was insufficient to constitute a formal refund claim, but the petitioner's undertaking to comply remedied this deficiency.

Application of Law to Facts: The Court balanced the procedural requirements with substantive rights by allowing the petitioner time to file the proper application without denying the refund claim.

Treatment of Competing Arguments: The respondents' insistence on procedural compliance was accepted as valid; the petitioner's substantive entitlement was preserved.

Conclusions: Non-compliance with filing a formal refund application delays but does not extinguish the petitioner's right to refund; compliance must be completed to proceed.

3. SIGNIFICANT HOLDINGS

The Court held that the petitioner is entitled to refund of the CST paid on High Speed Diesel procured for interstate trade used in manufacturing/mining activities, as per the binding precedent of the Rajasthan High Court. The Court emphasized the following crucial legal reasoning:

"The issue involved in the present case is no more res integra and is squarely covered by the ratio of the judgement rendered by this Court in the case of Hindustan Zinc Limited vs. State of Rajasthan & Ors."

"The respondents are liable to issue 'C' Forms in respect of the High Speed Diesel procured for Mining through interstate trade. In the event of the petitioner having had to pay any amount on account of the respondents wrongful refusal to issue 'C' Forms, the petitioner shall be entitled to refund and/or adjustment of the same from the concerned authorities who collected the excess tax."

"The concerned authorities