M/S. I.T.I. Ltd. v. State of Kerala

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR.JUSTICE ASHOK MENON** **FRIDAY, THE 12TH DAY OF OCTOBER 2018 / 20TH ASWINA, 1940** **O.T.Rev.No.77 of 2016** **AGAINST THE ORDER IN TA(VAT) NO.9/2015 DATED 31.03.2015 OF VALUE ADDED TAX ADDITIONAL APPELLATE TRIBUNAL, PALAKKAD [ASSESSMENT YEAR 2006-07]** ## **PETITIONER/APPELLANT/ASSESSEE:** **M/S. I.T.I. LTD., KANJIKODE WEST, PALAKKAD 678 623, REPRESENTED BY CHIEF FINANCE MANAGER, SMT.C.A.MALATHY M.** **BY ADVS.** **SRI.T.M.SREEDHARAN (SR.) SMT.DIVYA RAVINDRAN SRI.V.P.NARAYANAN** ## **RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 12.10.2018, ALONG WITH O.T.REV.NO.49 OF 2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **O.T.Rev.No.49 of 2016 & - 2 - 77 of 2016.** ## **ORDER** **Vinod Chandran,J.** **The assessee is in revision before this Court against the order of the Tribunal raising questions of law, which are re-framed as follows:** **(i) Has not the Appellate Tribunal gone wrong in affirming the assessment made by the Assessing Officer levying a higher tax on that portion of the inter-State sales wherein C-Forms were produced for part of the amount covering the provisional bill raised by the assessee, which, however, did not include the deferred payment to a negligible extent made by the purchaser after the furnishing of C-Forms?** **(ii) Ought not the Tribunal have held that the C-Form issued was with respect to a composite sale transaction and the fact that there was a deferred payment which was not included in the particulars of C-Form would not take the sale out of one under Section 8(1) of the Central Sales Tax Act, 1956?** **2. The learned Senior Counsel appearing for the assessee submits that as a matter of practise as also the instructions of the Government of India, the petitioner is making sales, inter-State after raising provisional bills. After delivery of the goods final bill is raised, which** **O.T.Rev.No.49 of 2016 & - 3 - 77 of 2016.** **latter bill contains the entire sale consideration of the goods. The purchaser, who is also a dealer registered in the outside State, has furnished C-Forms showing the particulars as relating to the provisional bills. There is no separate sale carried out and the delivery is also made on the basis of the provisional bills. However, there is a deferred payment, for which bills are raised and payment received after the sale is completed.** **3. The Assessing Officer [for brevity "AO"] refused to consider the portion which was left out from the C-Form as inter-State sale covered under sub-sections (1) and (4) of Section 8 of the Central Sales Tax Act, 1956 [for brevity "CST Act"] and levied tax at a higher rate as applicable under sub-section (2) of Section 8, within the State. The first appellate authority and the Tribunal affirmed the same. The learned Senior Counsel would also place reliance on** _**Prestolite of India Limited**_ **v.** _**The State of Haryana and Others**_ **[** _**(1988) 70 STC 198 (P&H)**_ **] and** _**Modern Proteins Ltd.**_ **v.** _**Food Corporation of India**_ **[** _**(1983) 52 STC 403 (AP)**_ **] to contend that the C-Forms can be produced at any stage during the assessment proceedings, which include the statutory appeals before the appellate authorities and also revision before the Tribunal. The learned Senior Counsel also contends that the** **O.T.Rev.No.49 of 2016 & - 4 - 77 of 2016.** **assessee has carried out inter-state sales of more than Rs.187 crores, while the deferred payment, which is levied higher tax, is only 4% of the total turnover of inter-State sales. The AO himself has found that there is no separate sale and that the deferred payment is on the basis of the practise existing in the industry argues the petitioner.** **4. The learned Government Pleader submits that the statutory mandate has to be strictly followed, as has been held by the Hon'ble Supreme Court in** _**Indian Agencies, Bangalore**_ **v.** _**Additional Commissioner of Commercial Taxes, Bangalore**_ **[** _**AIR 2005 SC 1594**_ **].** **5. Section 8(1) and 8(4) of the CST Act read with Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 makes it clear that concessional rate can be availed by the selling dealer only if the purchasing dealer furnishes a declaration duly filled and signed by him before the latter's Assessing Officer. C-Form is the necessary requirement for availing concessional rate; which, otherwise, would have to be levied under sub-section (2) of Section 8. It has to be noticed that as per sub-section (4) of Section 8, the declaration has to be duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form and furnished** **O.T.Rev.No.49 of 2016 & - 5 - 77 of 2016.** **from a prescribed authority. The prescribed authority is the AO of the purchasing dealer. The prescribed form is C-Form as is available under the Rules of 1957. The prescribed particulars are also very clear from the C-Form as available in the Rules of 1957 itself, which is in triplicate and inter alia has to contain the particulars of bills or cash memo with the amount; being the sale consideration. Hence, only that portion of the bill amount as available in the C-Form could be levied with tax at the rates applicable under sub-section (1) of Section 8.** **6. The judgments cited by the learned Senior Counsel of the Punjab & Haryana High Court and the Andhra Pradesh High Court are not relevant in the context of the assessee having not produced the C-Forms for the alleged deferred payment at any point before the AO or the appellate authorities or even before this Court. The contention of the learned Senior Counsel is that if time is granted, even now they would produce the C-Form. This is specifically prohibited by a Division Bench decision of this Court in** _**Kochi Refineries Ltd.**_ **v.** _**State of Kerala**_ **[** _**2011 (4) KHC 340**_ **]. The assessment years are 2005-06 and 2006-07 and after more than a decade, the assessee cannot be permitted to produce C- Forms which relates to long prior assessment years.** **O.T.Rev.No.49 of 2016 & - 6 - 77 of 2016.** **7. We garner support in answering the questions of law in favour of the Revenue and against the assessee from** _**Indian Agencies, Bangalore**_ **(** _**supra**_ **), from which we extract paragraphs 10 and 23, which are as follows:** **"10......Section 8(4) specifically provides that the provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner. Rule 8(4)(a) also provides that a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. On the above provision, a registered dealer will not be entitled to the concessional rate of tax in respect of inter-State sales made by him without the production of the declaration referred under clause (a) of sub-section (4) noted above.** **xxx xxx xxx** **24. The learned senior counsel for the appellant submitted that there is no suggestion anywhere that there is anything wrong with the genuineness of the transaction or any doubts as to the possession by the purchasing dealer on a certificate enabling the sellers to obtain the concessional rate of tax under Section 8 of the Act. Under such circumstances, the authorities should not have taken the strict view in rejecting the claim of the concessional rate of tax.** **O.T.Rev.No.49 of 2016 & - 7 - 77 of 2016.** **At first sight, the argument of the learned counsel for the appellant appears to be genuine and acceptable but considering the mandatory nature of the provisions of the Act and Rules, this Court is called upon to decide the questions involved in this case. The provisions being mandatory they should have been complied with. The appellant made no attempt to comply with Rule 12(3) till after his claim was rejected by the Assessing Authority. Having made no attempt to comply with the mandatory provisions, he disentitled himself from getting the concessional rate. Even otherwise, in our view, it is a pure question of law as to the proper interpretation of the provisions of Section 8 of the Central Sales Tax Act and the provisions of Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 and Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957. In view of the decision of this Court in the case of** _**Kedarnath Jute Manufacturing Co.**_ **(supra) [(1965) 3 SCR 626] and of the decision in** _**Delhi Automobiles (P) Ltd**_ **. (supra) [STC Vol.48 1981], it is clear that these provisions have to be strictly construed and that unless there is strict compliance with the provisions of the statute, the assessee was not entitled to the concessional rate of tax".** **The effect of Section 8 of CST Act is succinctly stated by the Hon'ble Supreme Court and it is also declared that the provision is mandatory and has to be strictly complied with.** **O.T.Rev.No.49 of 2016 & - 8 - 77 of 2016.** **The learned Senior Counsel seeks a distinction insofar as, therein only duplicate copies were filed. Even when duplicate copies were filed, the Hon'ble Supreme Court refused to accept the same and in the present case there is no C-Form produced at all, whether it be in the original or duplicate. In fact, the very submission of the assessee that if time is granted to produce C-Forms even now, indicates that there is no C-Form furnished by the purchasing dealer till now. Levy of higher tax under Section 8(2) of the CST Act is perfectly justified. We, hence, answer the questions of law in favour of the Revenue and against the assessee and reject the revisions. The parties are left to suffer their respective costs.** **Sd/-** **K.VINOD CHANDRAN JUDGE** **Sd/ASHOK MENON** **JUDGE** **O.T.Rev.No.49 of 2016 & - 9 -** **77 of 2016.** ## **APPENDIX** ## **[IN O.T.Rev.No.77 OF 2016]** ## **PETITIONER'S/S ANNEXURES:** **ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER NO.32090206465 C DATED 31.3.2012 ISSUED BY THE ASST, COMMISSIONER(ASSESSMENT),SPECIAL CIRCLE PALAKKAD ALONG WITH DEMAND NOTICE FOR AY-2006-07. ANNEXURE B TRUE COPY OF THE COMMON APPELLATE ORDER KVATA NO.1883 AND 1884/2012 DATED 31.7.2014 ISSUED BY THE DEPUTY COMMISSIONER(APPEALS)-1, KOTTAYAM, FOR AY-2006-07. ANNEXURE C TRUE COPY OF THE COMMON ORDER IN TA(VAT) NO.09/2015 DATED 31.3.2015,ISSUED BY THE KVATA APPELLATE TRIBUNAL, PALAKKAD. ANNEXURE D TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE ASST. COMMISSIONER(ASSESSMENT), PALAKKAD, FOR AY-1997-98. ANNEXURE E TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE ASST.COMMISSIONER(ASSESSMENT), PALAKKAD, FOR AY-1998-99. ANNEXURE F TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE ASST. COMMISSIONER(ASSESSMENT), PALAKKAD, FOR AY-1999-2000. ANNEXURE G TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE ASST. COMMISSIONER(ASSESSMENT),SPECIAL CIRCLE, COMMERCIAL TAXES, PALAKKAD FOR THE ASSESSMENT YEAR 1998-99.** ## **' - RESPONDENT S ANNEXURES:** **NIL.** **Vku/-** **[ true copy ]**