TMI Blog2016 (6) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... see,nor the person to whom the assessee owes an obligation, can dictate to the State, the mode of recovery to be chosen by them. The power available to the State for the cancellation of the registration of a defaulting dealer, is actually in addition to the several modes of recovery available to the State. After all, the cancellation of registration does not result in the automatic recovery of tax due. The recourse to the revenue recovery proceedings may or may not yield the desired result, since it would depend upon whether the dealer has sufficient resources or not. There is also no impediment in law for the simultaneous adoption of more than one method of recovery. The appellants and petitioners are not entitled to the reliefs prayed for. Hence, the writ appeals and writ petitions are dismissed - Decided against the petitioners / assessee. - W.P.Nos.15804 and 21556 of 2014, 127 to 129 of 2015 and 4515 to 4517 of 2015 and W.A.Nos.783 to 788 & 1496 of 2014 & all connected pending MPs - - - Dated:- 7-4-2016 - V. Ramasubramanian And T. Mathivanan, JJ. Shri Maruthi Agencies, Puducherry Versus The Commercial Tax Officer, M/s Bharat Petroleum Corporation Limited Versus The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2006. The IOCL also filed four writ petitions in W.P.Nos.31015, 31016 and 31680 of 2012 and 11739 of 2014, either seeking a mere Mandamus to forbear the Assessing Officer in the State of Tamil Nadu from enforcing the demand or seeking a Mandamus directing the Assessing Officer in Puducherry to issue 'C' forms to their dealers. 3. The two writ petitions filed by the BPCL and the three writ petitions filed by the IOCL were dismissed by the learned Judge, forcing the BPCL to come up with two writ appeals in W.A.Nos.783 and 784 of 2014 and the IOCL to come up with three writ appeals in W.A.Nos.785 to 787 of 2014. The fourth writ petition filed by the Indian Oil Corporation Limited in W.P.No. 11739 of 2014 was disposed of by the learned Judge directing them to avail the alternative remedy of appeal, as the challenge in the writ petition was to an order of assessment. Since the core issue may not get resolved by filing an appeal, the Indian Oil Corporation Limited has come up with one more writ appeal in W.A.No.788 of 2014 challenging the disposal of their writ petition in W.P.No.11739 of 2014. 4. During the pendency of the above writ appeals, M/s.Amurtham Agencies, Puduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 1.CTO, Pondicherry 2.UTP 3.Deputy Commissioner (CT) Chennai 4.Joint Commissioner (CT) Appeals 5.Bharat Petroleum Agency, Pondicherry Dismissed Writ of Certiorari calling for the files of R4 and quash the same 2 784 of 2014 15800 of 2013 Bharat Petroleum Corporation Ltd. 1.CTO, Pondicherry 2.UTP 3.Deputy Commissioner (CT) Chennai 4.Joint Commissioner (CT) Appeals 5.Bharat Petroleum Agency, Pondicherry Dismissed Writ of Certiorarified Mandamus calling for the files of R1 and quash the same and direct R1 to issue C Form to R5. 3 785 of 2014 31015 of 2012 Indian Oil Corporation 1. CTO, Pondicherry 2.UTP 3.Deputy Commissioner (CT)-IV, Chennai 4.Shri Maruthi Agency, Pondicherry Dismissed Writ of Mandamus forbearing R3 from proceeding to enforce assessment to R4. 4 786 of 2014 31016 of 2012 Indian Oil Corporation 1. CTO, Pondicherry 2.UTP 3. Deputy Commissioner (CT)-IV, Chennai 4.Shri Maruthi Agency, Pondicherry Dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roleum Corporation Ltd., Chennai 1. Additional DCTO-IW, Pondicherry 2. UTP 3.Deputy Commissioner (CT)-1, Chennai 4.Amurtham Petroleum Agency, Pondicherry 5.Commissioner of Commercial Taxes, Pondicherry Writ of Certiorarified Mandamus calling for the records of R3 and quashing the same and to direct R1 to issue Form C to the dealer, R4. The Additional Deputy Commercial Tax officer (R1) has refused to issue form C to the dealer (R4) 4 128 of 2015 M/s Bharat Petroleum Corporation Ltd., Chennai 1.Additional DCTO-IW, Pondicherry 2.UTP 3.Deputy Commissioner (CT)-1, Chennai 4.Amurtham Petroleum Agency, Pondicherry 5.Commissioner of Commercial Taxes, Pondicherry Writ of Declaration declaring that R1 and R2 have no authority to rely upon Section 43 of the PVAT Act to decline form C and to declare that Online website of R2 disabling form C generation is ultra vires the CST act 5 129 of 2015 M/s Bharat Petroleum Corporation Ltd., Chennai 1. Additional DCTO-IW, Pondicherry 2.UTP 3. Deputy Commissioner (CT)-1, Chennai 4. Amurtham Petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered dealer, is stipulated at the concessional rate of 2% under Section 8(1) of the Act, if the goods are of the description contained in Sub-Section (3) of Section 8. In so far as the goods that do not satisfy the description contained in Section 8(3) are concerned, the rate of tax payable by a dealer on the turnover of Inter-State sales, is as per the rate applicable to the sale or purchase of such goods inside the appropriate State under the Sales Tax Law of that State. 11. In so far as the petroleum products are concerned, they fall within the description referred to in Section 8(3) and all sales effected by the BPCL and the IOCL are to their registered dealers in Puducherry. Therefore, these sales in the course of Inter-State trade and commerce, obviously attract only 2% as the rate of tax, by virtue of Section 8(1). But, in order to enable the BPCL and the IOCL (or any other dealer for that matter), to claim the benefit of Section 8(1), they should furnish to the Prescribed Authority, in the prescribed manner, a declaration duly filled and signed by the registered dealer in the other State (Pondicherry in this case). This declaration should be furnished within the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) that once the twin requirements of Section 8(1) are satisfied by these Corporations, the Prescribed Authority in Puducherry should not deprive the benefit of a reduced rate of tax to the Corporations, especially when they are not in default; (ii) that for a default committed by a registered dealer under a State Enactment, the Prescribed Authority under the State Enactment cannot refuse to issue a declaration under a Central Enactment; (iii) that the mandate of a Parliamentary Enactment cannot be defeated by a State Enactment, since the States are empowered by the Central enactments only to prescribe the procedural provisions for the collection of the tax under the Central Enactment; and (iv) that when there are other effective provisions available to the State Authorities for the recovery of the dues under the State Enactment and when the State Authorities are empowered even to cancel the certificate of registration, it is not open to the State Authorities to rely upon Section 43 of the Puducherry VAT Act, 2007 to withhold a 'C' Form Declaration under Section 8(4) of the CST Act, 1956. 17. Responding to the above submissions, Mrs.N.Mala, learned Additional Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove contentions, it is necessary to take note of the provisions of the CST Act, 1956 and two sets of Rules issued thereunder. 22. Section 6(1) of the CST Act, 1956 imposes an obligation upon every dealer, to pay tax under the Act, on all sales effected by him in the course of Inter-State trade or commerce. Even if no tax is payable under the Sales Tax Law of the appropriate State in respect of such sale, the obligation under Section 6(1) would still be there on account of Sub-Section (1A). 23. Under Section 7(1) of the Act, every dealer, who is liable to pay tax under the CST Act, 1956, should make an application for registration under the Act, to such Authority in the appropriate State, as the Central Government may specify. The certificate of registration so issued is liable to be cancelled under Sub-Section (4)(b) of Section 7, if the dealer fails to pay any tax or penalty payable under the CST Act. 24. We have already indicated the scope of Sub-ections (1), (2) and (4) of Section 8. In short, Sub-section (2) of Section 8 obliges every dealer to pay tax on turnover, which relates to the sale of goods in the course of Inter-State trade or commerce, at the rate applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also upon the Prescribed Authority of the concerned State, to get a declaration under Sub-section (4) of Section 8. Since the State Government is empowered by Section 13(4) of CST Act, 1956, to prescribe the procedure for the issue of such forms, the Prescribed Authority becomes obliged to perform a statutory duty. The expression Prescribed Authority is defined in Rule 2(cc) of the Central Sales Tax (Registration and Turnover) Rules, 1957 to mean the Authority prescribed by a State Government under Section 13(4)(e) of the CST Act. Though Rule 12(1) of the 1957 Rules stipulates that the declaration and the certificate referred to in Section 8(4) shall be in Forms 'C' and 'D', as provided in the Rules, the Prescribed Authority is nevertheless the Authority named by the State Government concerned. 29. In exercise of the power conferred by Section 13(4) of the CST Act, 1956, the Government of Puducherry had issued a set of rules known as Central Sales Tax (Pondicherry) Rules, 1957. These Rules cast certain obligations upon the purchasing dealers. 30. Therefore, by virtue of the statutory prescription, it is the Prescribed Authority in the Union Territory of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to Sub-section (2) of Section 8 is a direct answer to the contention of the learned Additional Government Pleader. Under the Explanation to Sub-section (2), a dealer will be deemed to be a dealer liable to pay tax under the Sales Tax Law of the appropriate State, even if he is not liable under the local Sales Tax Law of the appropriate State. If a dealer is liable, as per the CST Act, to pay tax under the local Sales Tax Law of the appropriate State at a rate higher than 2%, it may be possible to see Section 8(1) as conferring a benefit or concession. But, when Section 8(1) imposes an obligation to pay central sales tax at 2%, even if nothing is payable under the local Sales Tax Law of the appropriate State, we do not know how what is conferred by Section 8(1) can be called a concession. Therefore, the aforesaid contention of the learned Additional Government Pleader is rejected. CONTENTIONS OF THE APPELLANTS : 35. Having disposed of the preliminary objections of the learned Additional Government Pleader, we shall now take up for consideration the contentions of the appellants/assessees. Contention-1 : 36. The first contention of the learned Senior Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or generation of power. The contractor supplied certain equipments, parts and components, which were procured from suppliers outside the State and effected transit sales to the assessee. C-Forms were denied on the ground that the goods purchased by the assessee were entrusted to the seller under a bailment agreement for the erection of the project and that therefore, the assessee had camouflaged the transactions of supply and transferred the goods to the contractor as one under the bailment agreement. However, the Andhra Pradesh High Court, after a combined reading of the provisions of Section 8 of the CST Act, 1956, Rule 3 of the Central Sales Tax (Registration and Turnover) Rules, 1957 and Rules 9, 9A and 10 of the Central Sales Tax (Andhra Pradesh) Rules, 1957, held that at the stage of issue of C-Form declarations, the Notified Authority is not required to conduct an enquiry into the nature of the transaction and as to whether the dealer needed the forms for use in the course of inter-State trade or for avoidance of payment of tax. The Court also held that the Authorities would, however, be at liberty to make such enquiry, as it is necessary to see whether C-Forms had been prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer [(2003) 131 STC 317 (Mad.)], the petitioner, a hotel group, had earlier filed a writ petition for a direction to the Commercial Tax Officer to issue 'C' Form as per the various letters of request. That writ petition was disposed of with a direction to the respondent - CTO to consider the representations of the petitioner and to take appropriate action, which was not complied with by the respondents. The petitioner thereupon filed the writ petition, upon which, the respondent submitted that since the petitioner was a proprietor of a hotel, 'C' Forms were not required to be given to the petitioner. The Madras High Court allowed the petition and held that mere apprehension that a person applying for 'C' Forms was likely to misuse such forms was not a ground for rejection of the application. The respondents were directed to deal with the request of the petitioner and pass necessary orders in accordance with law. The Court also emphasized that the Appropriate Authority shall not, at the stage of issue or supply of 'C' Forms, get into any enquiry as to any compliance or non-compliance or violation of terms of the registration certificate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Enactment. 46. In order to understand the scope of the second contention raised by the learned Senior Counsel for the Oil Corporations, it is necessary to note that though the CST Act, 1956 formulates the principles for determining when a sale or purchase of goods takes place in the course of Inter-State trade or commerce or outside the State or in the course of imports into or export from India and also provides for the levy, collection or distribution of taxes on sale of goods in the course of Inter-State trade or commerce, the enforcement of the provisions of the Act is entrusted only to the State Governments. This can be seen from some of the provisions of the Act. 47. For instance, Section 7(1) of the CST Act, 1956 obliges every dealer, who is liable to pay tax under the Act, to make an application for registration to such Authority in the appropriate State, as the Central Government may specify. Sub-section (1) of Section 13 empowers the Central Government to make rules, prescribing the manner, in which, and the Authority, to whom, the application for registration may be made. In exercise of the power conferred by Section 13(1), the Central Government had issued a set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion-3: 52. The third contention of the Senior Counsel is that the mandate of a Parliamentary Enactment cannot be defeated by a State Enactment and that the States are empowered by the Central enactments only to prescribe the procedural provisions for the collection of the tax under the Central Enactment and hence, the States cannot go beyond their competence. 53. This contention is actually a collateral attack on Section 43 of the Puducherry VAT Act, 2007, without challenging the vires of the provision. Therefore it is necessary now to take a look at Section 43, which reads as follows:- 43. Withholding issue of statutory forms and seizure of goods - (1) Notwithstanding that any recovery proceeding initiated under this Act, the Assessing Officers or any other Officers authorized in this regard, shall have power to withhold issue of statutory or other declaration forms to a dealer from whom any tax or penalty, interest or any other amount payable under this Act, is due. (2) The Assessing Officer or any other Authorized Officer empowered in this regard shall also have the power to seize and confiscate goods being transported by a dealer from whom, tax, penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Government by the Central Act. The Madhya Pradesh High Court, emphasizing that the State Government was merely an agency of the Central Government to carry out the assessment under the Central enactment and that the rule-making power of the State cannot be used by the State Government as a device for the realization of its own dues under the State Act, laid down the following: 12. From the above discussion as regards the scheme and purpose of Section 8(1) of the Central Act, read with the relevant rules framed thereunder, and as regards the role of the State Government as merely an agency of the Central Government to carry out the assessment, reassessment, collection and enforcement of tax and penalty payable by a dealer under the Central Act, and as regards the phrase in the prescribed manner occurring in Section 8(4), being confined only to prescribing rules as regards what particulars are to be mentioned in the prescribed form, nature and value of the goods sold, the parties to whom they are sold and to which authority the form is to be furnished , it follows very clearly that the provisions in question in the impugned rule, i.e., Rule 8(1-A)(f) of the M.P. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction to levy central sales tax is retained by the Government of India under the CST Act, 1956, all procedural aspects such as registration of dealers, assessment, re-assessment, collection and enforcement of payment of tax are all left to the Authorities nominated by the respective State Governments. Since these procedural aspects are left at the hands of the Authorities of the respective States, the CST Act, 1956 also confers rule making power upon the State Government. 61. The rule making power is again compartmentalized. Under Sub-Section (1) of Section 13, the Central Government is empowered to make rules providing for certain matters such as: (i) procedure for grant of registration (ii) the manner of determination of sale price in respect of works contracts (iii) the manner of furnishing declarations under Section 8(8) (iv) the manner of determination of turnover (v) the procedure for cancellation of registration (vi) the issuance of declarations and certificates to be given under the Act (vii) the enumeration of goods, etc., used in the generation and distribution of electricity and (viii) the terms and conditions of service of the Chairman and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, such forms shall be kept in custody and the records relating thereto maintained and the manner, in which, any such form may be used and any such certificate or declaration may be furnished. 65. A careful comparison of the language employed in Section 13(1)(d) with the language employed in Section 13(4)(e) would show that the former speaks generally about declarations and certificates to be given under the Act, without particular reference to any provision. On the contrary, the latter namely Section 13(4)(e) speaks about the form of certificate prescribed under Section 6(2). It also speaks of a declaration prescribed under Section 6A(1) and a declaration under Section 8(4). 66. Therefore, Section 13(1)(d) should be construed to refer only to the declarations and certificates not covered by Section 13(4)(e). In other words, the procedure for the issue of any declaration under Section 8(4), is left by the Central Enactment entirely to the rule making power of the State Government under Sub-Section (3) read with Sub-Section (4) of Section 13. We have already seen that a C-Form Declaration is one that is dealt with by Section 8(4). Therefore, it is crystal clear that in so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to which 'C' Form declarations can be given. 69. The second facet of the third contention of the learned Senior Counsel for the Oil Corporations is the one that revolves around Section 43 of the said Act. As we have seen earlier, Sub-Section (1) of Section 43 empowers the Assessing Officers and even any other officer authorized in this regard, to withhold the issue of statutory or other declaration forms. The contention that the reference in Section 43(1) to statutory or other declaration forms should be construed to mean only those forms as contemplated by the Puducherry VAT Act, 2007, does not hold good. As a matter of fact, if the Government of Puducherry has framed a rule in exercise of the power conferred by Section 13(4)(e), prescribing as a condition precedent, the payment of arrears of tax, the same might have been within the rule making power of the Government. But then, the same would have been subject to a challenge as made in the case of Dawar Brothers in the State of Madhya Pradesh. Therefore, the Legislature itself has enacted a specific provision under Section 43 and we do not find any justification to limit the meaning of the expression 'statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on forms, till such time the assessee paid the tax. A Division Bench of the Madhya Pradesh High Court declared the said rule to be ultra vires the provisions of Section 8(4) read with Section 13(3) and (4) of the CST Act, 1956. 74. But, a careful look at the decision of the Madhya Pradesh High Court would show that the Court arrived at the aforesaid conclusion based upon three reasonings. They are (i) that the phrase 'in the prescribed manner' appearing in Section 8(4) of the CST Act, 1956, has a restrictive meaning; (ii) that by virtue of Section 9(2) of the CST Act, 1956, the role of the State Government is merely that of an agency of the Central Government to carry out the assessment, re-assessment, collection and enforcement of payment of tax and nothing more and (iii) that for the entitlement of a concessional rate of tax under Section 8(1), one cannot look beyond the Central Enactment. 75. But, with great respect, we are unable to accept all the above three reasonings given by the Madhya Pradesh High Court. This is due to certain fundamental issues that we shall now highlight. 76. The first reasoning given by the Madhya Pradesh High Court that the phrase ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing more. This conclusion was reached by the Madhya Pradesh High Court on the basis of another decision of the Supreme Court in Khemka and Co. Pvt. Ltd. Vs. State of Maharashtra [AIR 1975 SC 1549]. 80. But, the decision of the Supreme Court in Khemka Co. arose under peculiar circumstances. It was a case where the Assessing Officer invoked a provision in the State Enactment namely Section 16(4) of the Bombay Sales Tax Act, for imposing a penalty for non payment of central sales tax payable under the Central Act. The Central Act itself contained specific provisions for penalty. Therefore, the Supreme Court held that when there was a specific provision under the Central Act itself for the imposition of a penalty for non payment of dues under the Central Act, it was not open to the Assessing Officer to invoke the deeming fiction under Section 9(2) of the CST Act, 1956, to impose a penalty under Section 16(4) of the Bombay Sales Tax Act. For coming to the said conclusion, the Supreme Court pointed out that for the applicability of the doctrine of ejusdem generis, the genus in Section 9(2) of the Central Act is in the phrase 'for this purpose'. In other words, the purpose i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (4) of Section 8 is that a declaration should be furnished in the prescribed form. But, the very entitlement of a person to a declaration in Sub-Section (4) is made subject to certain other restrictions such as (i) that the declaration should be in the prescribed form (ii) that it should have been obtained from the Prescribed Authority (iii) that it should contain the prescribed particulars and (iv) that it is furnished within the prescribed time. These conditions are left to the rule making power of the Government under Section 13. 84. In any case, the Division Bench of the Madhya Pradesh High Court appears to have laid emphasis, only upon the phrase in particular and without prejudice to the powers conferred by Sub-section (3) appearing in Sub-section (4) of Section 13 of the CST Act, 1956. With great respect, the Madhya Pradesh High Court did not take note of the dichotomy made between the rule making power of the Central Government under Section 13(1)(d) and the rule making power of the Central Government under Section 13(4)(e). 85. Nothing turns out of the embargo created under Sub-section (3) of Section 13. This Sub-section prohibits the State Government not to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of his day to day business transactions either Intra-State or Inter-State and that the right of every citizen to carry on business or trade is a well-recognized fundamental right under the provisions of The Constitution. 89. Though the Kerala High Court recognized that it was not an absolute or unqualified right, the Court held that the issue of delivery notes and C-Forms is intended to regulate the conduct of trade and business and that the withholding of these documents may sometimes result in complete destruction of trade or business, in which event, it may amount to total restriction, which is impermissible under the law. Therefore, the Kerala High Court held that the non-payment of tax for any year is not a ground for withholding or not issuing the delivery notes and C-Forms under the provisions of the relative Acts and Rules. The payment of tax and issue of delivery notes and C-Forms are different processes in the business adventure and the former is a duty of the dealer and the latter is the duty of the Assessing Authority. The Court held that one is not dependent the other, though both operate in the field of business and trade and that the Assessing Authority sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, unfortunately, the decision in Sri Rajeswari Agencies, has not taken note of the entire scheme of the CST Act, 1956. Though the learned Judge took note of Section 43 of the Puducherry VAT Act, 2007, the learned Judge held that Section 9(2) of the CST Act, 1956 does not contemplate the withholding of C- Form Declaration. As a matter of fact, the learned Judge did not even go into the question whether the phrase 'statutory or other declaration forms' appearing in Section 43(1) would cover the forms contemplated by the CST Act or not. Therefore, we are unable to accept the opinion expressed by the learned Judge in Sri Rajeswari Agencies as correct. 93. The last decision relied upon by Mr.S.Raveekumar, learned counsel for the Puducherry dealers - assessees is the one in Chowhan Machinery Mart Vs. State of Orissa [(2009) 19 VST 178 (Orissa)]. In that case, the Orissa High Court was concerned with the case of a registered dealer under the Orissa Value Added Tax Act, 2004 and the Central Sales Tax Act. When the dealer applied for supply of C-Forms, the Sales Tax Officer called for an explanation as to why C-Forms shall not be refused on the ground of non-payment of entry t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omatic recovery of tax due. The recourse to the revenue recovery proceedings may or may not yield the desired result, since it would depend upon whether the dealer has sufficient resources or not. There is also no impediment in law for the simultaneous adoption of more than one method of recovery. 97. Though, strictly speaking, Section 43 of the Pondicherry VAT Act does not prescribe a mode of recovery of the tax due, it is certainly an effective provision that would hit the dealer where it hurts. The power available under Section 43 is akin to the power available to the Electricity Boards to disconnect power supply, whenever a default is committed by the subscriber. As a matter of fact, the Courts have affixed the seal of approval on the power of the State Electricity Boards to disconnect power supply, even in respect of consumers whose dues have become time barred. The provision may appear to be one empowering the State to indulge in arm twisting tactics. But, so long as there is power and so long as the vires of Section 43 is not under challenge, the petitioners cannot dictate to the State that they could adopt any other mode of recovery. 98. In Commissioner of Sales Tax v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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