M/S E.V. MATHAI & SONS v. STATE OF KERALA

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE T.R.RAVI** **THURSDAY, THE 11TH DAY OF JUNE 2020 / 21ST JYAISHTA, 1942** **ST.Rev..No.21 OF 2019** **AGAINST THE ORDER/JUDGMENT IN TAVAT 351/2014 DATED 04-042018 OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM** ## **REVISION PETITIONER/RESPONDENT/ASSESSEE:** **M/S.E.V.MATHAI & SONS REPRESENTED BY ITS MANAGING PARTNER, RUBBER DEALER, KOTHAMANGALAM** **BY ADVS. SRI.V.K.PEERMOHAMED KHAN SRI.ADARSH KUMAR SRI.K.M.ANEESH SRI.SHASHANK DEVAN** ## **RESPONDENT/APPELLANT:** **STATE OF KERALA REPRESENTED BY THE SECRETARY, COMMERCIAL TAXES DEPARTMENT, THIRUVANANTHAPURAM - 695 001** **BY SENIOR GOVT.PLEADER SRI.V.K.SHAMSUDHEEN** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 11.06.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** S.T.REV.No.21/2019 -2- **“CR”** ## **ORDER** ## **T.R.RAVI, J.** The revision petitioner is a dealer in rubber. While completing the assessment under Central Sales Tax for the year 2005-06, the Assessment Officer declined to accept C Forms submitted by the revision petitioner, relating to interstate sale worth Rs.3,10,71,460/-. The reason for rejecting the C Forms was that the same were not in accordance with the second proviso to Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 as amended. 2. The revision petitioner filed appeal before the Deputy Commissioner (Appeals) and the same was allowed as per order dated 01.11.2013. The Appellate Authority relied on the judgment of the Calcutta High Court in **Cipla Ltd. V. Deputy** ## **Commissioner, Commercial Tax, Corporate Division and** **others** reported in **[(2013) 16 VST 445]** wherein, the court interpreting the provisions of Rule 12(5) and requirement of F Form, held that F Form can cover transactions of more than one month, since the word used in Rule 12(5) is 'may' and not 'shall'. The Appellate Authority proceeded to adopt the same reasoning to hold that in Rule 12(1) also the word used is “may” and hence S.T.REV.No.21/2019 -3- the provision should be treated as directory. The Appellate Authority therefore, directed the Assessing Authority to accept the C Forms produced by the revision petitioner if the same were otherwise valid. 3. The order of the Appellate Authority was challenged before the KVAT Appellate Tribunal by the Revenue. By order dated 05.03.2018, the Appellate Tribunal allowed the appeal, held that the defect regarding the C Forms produced by the assessee is a curable defect, and remitted the case to the Assessing Authority for giving opportunity to the assessee to cure the defects and produce C Forms in compliance with the second proviso to Rule 12(1). The Tribunal relied on the decision of the Hon'ble Supreme Court in **India Agencies (Regd.) v. Additional Commissioner Commercial Tax** reported in **[AIR 2005 SC 1594]** to hold that Rule 12(1) has to be strictly construed. Aggrieved by the order of the Appellate Tribunal, the assessee has filed this revision petition. 4. Heard Sri Shashank Devan on behalf of the petitioner and Sri V.K.Shamsudheen Senior Government Pleader on behalf of the Revenue. 5. To appreciate the contentions of the parties, it is helpful to extract Rule 12(1) of the Central Sales Tax S.T.REV.No.21/2019 -4- (Registration and Turnover) Rules, 1957 as it stood prior to the amendment with effect from 01.10.2005 and as it stands after the amendment. Rule 12(1) prior to the amendment reads thus:- “12 (1). The declaration and the certificate referred to in sub-section (4) of section 8 shall be in forms 'C' and 'D' respectively. Provided that Form C in force before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1974, or before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1976, may also be used upto the 31[st] December 1980, with suitable modifications. Provided further that a single declaration may cover all transactions of sale which take place in one financial year between the same two dealers. Provided also that where, in the case of any transaction of sale, the delivery goods is spread over to different financial years it shall be necessary to furnish a separate declaration or certificate in respect of goods so delivered in each financial year. The provisos 2 and 3 were substituted by GSR 588(E) dated 16.9.2005 with effect from 01.10.2005. The provisos after substitution reads thus; “Provided further that a single declaration may cover all transactions of sale, which take place in a quarter of a financial year between the same two dealers. Provided also that where, in the case of any S.T.REV.No.21/2019 -5- transaction of sale, the delivery of goods is spread over to different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of a financial year.” 6. According to the counsel for the petitioner, the 2nd proviso to Rule 12(1) was amended during the financial year 2005-06, only with effect from 1.10.2005. As such, even if the Rule is to be strictly construed, till 1.10.2005, there was no requirement for the assessee to submit separate declarations in Form C for different quarters of a financial year, regarding transactions between the same two dealers. The counsel further contends that since the word used in the second proviso is 'may', the same can only be treated as directory and not mandatory. It is in support of the above contention, the the counsel relies on the decision in **Cipla Ltd. (supra).** We have gone through the above said decision. The above decision relates to the interpretation of Rule 12(5). On a conjoint reading of Rules 12(1) and 12(5), we are of the opinion that the interpretation placed on Rule 12(5) cannot be made applicable to Rule 12(1). Rule 12(1) deals with Form C declaration and even though the word used in the second proviso is 'may', the third proviso to the Rule categorically says that where delivery of goods is spread S.T.REV.No.21/2019 -6- over different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of financial year. It can thus be seen that the effect of the third proviso is to make the requirement in the second proviso mandatory and not directory. In the case of Rule 12(5), there is no proviso similar to the third proviso of Rule 12(1), which mandates that there shall be different Form F declarations for different periods. Hence we find that the decision in **Cipla Ltd. (supra)** cannot have any application to the case on hand. 7. While holding that the requirement under Rule 12(1) is mandatory, we are aware of the the decision of the Hon'ble Supreme Court in **State of H.P. and others v. Gujarat Ambuja Cement Ltd. and another,** reported in **[(2005) 6 SCC 499]** , the decision of the Madras High Court in **State of Tamil Nadu v. India Rosin Industries** reported in ( **2018) 51 GSTR 319 (Madras)** and the decision of the High Court of Madhya Pradesh in **Manganese Ore (India) Ltd. v. Commissioner of Sales, Tax, Madhya Pradesh** reported in [( **1991) 83 STC 116]** . 8. The Hon'ble Supreme Court in **[(2005) 6 SCC 499]** has considered Rule 12(7) of Central Sales Tax (Registration and S.T.REV.No.21/2019 -7- Turnover) Rules, 1957 which says that the declaration form can be filed at a subsequent point of time and not necessarily along with returns and that on an application being made before the Assessing Officer, exemption can be granted, and held that the defects pointed out in that particular case are only curable defects. Paragraph 37 of the said judgment, which is extracted below, puts the aspects in perspective. “37.It was urged on behalf of the appellant-State that declaration forms under the Central Act were not filed within the time and/or were defective. That does not in reality amount to non-compliance of a statutory provision. The respondent No.1-company was claiming exemption and, therefore, had not filed the declaration forms. Some of the forms which were filed were treated to be defective. Undisputedly, before the revisional authority a prayer was made for grant of opportunity to rectify the defects, if any. That was turned down. It is to be noted that under Rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (in short the `Registration Rules') the declaration form can be filed at a subsequent point of time and not necessarily along with returns. On an application being made before the Assessing Officer the exemption can be granted. The object of the Rule is to ensure that the assessee is not denied a benefit which is available to it under law on a technical plea. The Assessing Officer is empowered to grant time. That means that the provisions requiring filing of declaration forms along with the return is a S.T.REV.No.21/2019 -8- directory provision and not a mandatory provision. In a given case even the declaration forms can be filed before the appellate authority as an appeal is continuation of the assessment proceedings. In a given case, if the appellate authority is satisfied that assessee was prevented by reasonable and sufficient cause which disenabled him to file the forms in time, it can be accepted. It can also be accepted as additional evidence in support of the claim for deduction. In the instant case, Respondent 1 Company made a specific request before the Revisional Authority which was turned down. Therefore, the question of any non-compliance with the relevant statutes does not arise. It was noted by this Court in **Sahney Steel and Press Works Ltd. v. CTO** that even in a given case, an assessee can be given an opportunity to collect declaration forms and furnish them to the assessing authority if the challenge of the assessee to taxability of a particular transaction is turned down.” 9. It can be seen from the above extract, that the Apex court has only held that the provisions requiring filing of declaration forms along with the returns is a directory provision and not a mandatory provision and it could be produced later at the stage of even an appeal. The said judgment does not consider the requirement of filing separate declarations for transactions relating to different quarters of a financial year as mandated in Rule 12(1) and the provisos thereto. The Hon'ble S.T.REV.No.21/2019 -9- Supreme Court held that the defect is a curable defect. The above proposition cannot be doubted. As a matter of fact, the Appellate Tribunal in the case on hand, has remitted the case back to the Assessing authority, for affording an opportunity to the assessee to cure the defect. 10. In **Manganese Ore (India) Ltd.** (supra), the High Court of Madhya Pradesh considered the question whether filing of original parts of declarations in C Form is mandatory or directory under the Rules and held that it is only directory. The context in which the provision was examined by the Court was totally different from the case on hand. The assesse in the above case was a Government of India undertaking engaged in the business of extraction, purchase and sale of manganese ore. They had mines in the States of Madhya Pradesh and Maharashtra. The assesse had sold manganese ore to Jaypore Sugar Company Ltd., Raigada and the ore was sent partly from Maharashtra and partly from Madhya Pradesh. The Original C Form was submitted before the Assessing Authority at Maharashtra and photocopies of the duplicate portions of the C Form was filed before the Assessing Authority at Madhya Pradesh. The assessee also sought to summon the Assessing Authority at Maharashtra to prove the claim for concessional rate S.T.REV.No.21/2019 -10- on the basis of the C Form. The claim for concessional rate was rejected by the Assessing Authority at Madhya Pradesh on the ground of non-filing of the original C Form. It was in the above factual circumstances that the Court found that since neither Section 8(4) of the Central Sales Tax Act, nor Rule 12(1) of the CST (Registration and Turnover) Rules, specifically state as to which part of the form is required to be filed before the Assessing Authority, filing of duplicate part of Form C is sufficient compliance with the provisions. The above decision cannot be relied on to say that Rule 12(1) as it stands after the amendment is only directory, as regards the requirement of separate declarations for covering transactions in different quarters of the financial year. The above decision is clearly distinguishable on facts. 11. In **State of Tamil Nadu v. India Roslin Industries** (supra), the assessment year in question was 2005-06. The Madras High Court was considering a case where the original part of C Form was not submitted and the duplicate alone was submitted. The Court was considering the correctness of the decision of the Tamil Nadu Sales Tax Appellate Tribunal, which had dismissed the appeal filed by the Revenue relying on the decision of the Madhya Pradesh High Court in **Manganese Ore** S.T.REV.No.21/2019 -11- **(India) Ltd.** ( **supra** ). The Division Bench of the Madras High Court referred to the decision of the Hon'ble Supreme Court in **Gujarat Ambuja Cement** ( **supra** ) and found that there is no merit in the appeal filed by the Revenue and answered the questions of law against the Revenue. On a reading of the judgment, we find that none of the questions of law raised in the case related to the mandatory nature of Rule 12(1). The factual backdrop in which the Court has decided the case is clear from a reading of paragraph 21 of the decision which is extracted below: “21.Though before the appellate Authority, contention has been made that submission of original portion of form, is mandatory for claiming concessional rate and that there is every possibility of misuse of original form, in some other transaction, the said contention has been rejected. Form C (Rule 12(1), is issued by the State authority of the State. It also contains and name of the person signing the declaration. Genuineness of the duplicate forms issued by the authority of the other state to the purchaser-dealer is not disputed. Revenue has not disputed that there was a inter-state sale and that a certificate has been issued by the competent authority. Both the appellate Deputy Commissioner (CT), Chennai, as well as the Tribunal had the opportunity of perusing the duplicate forms. Assessee has relied on Manganese Ore Ltd's case [1991] 83 STC 116 (MP) and revenue has not placed any contra S.T.REV.No.21/2019 -12- decision. On the facts and circumstances of the instant case, the said judgment has persuasive value and rightly applied.” 12. With due respect to the Learned Judges, we are not in a position to agree with the reasoning in the above judgment, particularly in the light of the binding judgment of the Hon’ble Supreme Court in **India Agencies (supra)** . The Hon’ble Supreme Court has categorically held that Rule 12(2) to (4) have to be strictly construed. According to us, permitting the submission of duplicate forms, without complying with the requirements under Rule 12(2) to (4) will go against the judgment of the Hon’ble Supreme Court. The C Form prescribed under the Rules is the original and it has a duplicate and a counterfoil. If the duplicate of the C Form is sufficient to avail the exemption then the purchasing dealer could issue the original and duplicate for two different transactions and suppress one in their books of accounts thus depriving the outside State from the tax due on resale or sale after manufacture. A duplicate can be permitted for the purpose of availing the benefit only as provided under Rule 12 as has been held authoritatively in **India Agencies (supra)** . 13. In the above circumstances, we conclude that Rule 12(1) as it stands now is mandatory as far as it relates to filing S.T.REV.No.21/2019 -13- of separate C Forms for every quarter in a financial year. The question of law as to whether the requirements as prescribed in Rule 12 is mandatory or only directory is answered in favour of the Revenue finding it to be mandatory. 14. Even though the question of law is answered in favour of the Revenue, we are of the opinion that no purpose will be served by a direction of the Appellate Tribunal in its order dated 4.4.2018, to remit back the case to the Assessing Authority for affording a chance to the assessee to cure the defects and produce fresh C Form declarations in compliance with the second proviso to Rule 12(1), after the passage of almost 15 years and there is remote possibility of the purchaser furnishing separate C Forms for each quarter of that relevant assessment year especially since the unused C forms of that period would stand surrendered to the Department. We also notice that the subject amendment was brought in, in the course of the relevant assessment year. It is also pertinent that the entire taxing process has undergone sea change and the GST regime has now taken the place of the value added tax regime. In the result, we answer the question of law in favour of the Revenue, but confirm the order dated 01.11.2013 of the Deputy Commissioner (Appeals), directing the Assessing Authority to S.T.REV.No.21/2019 -14- accept the C Forms produced, if the same were otherwise valid and to modify the assessment accordingly. In the circumstances of the case, there will be no order as to costs. Sd/- **K. VINOD CHANDRAN JUDGE** Sd/- **T.R. RAVI JUDGE** dsn S.T.REV.No.21/2019 -15- ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **ANNEXURE A TRUE COPY OF THE ORDER FOR REFUND OF EXCESS TAX PAID PASSED VIDE ORDER NO.321503384302/2005-06 DATED 19.02.2007**