Purchasers Of Non-GST Goods Entitled To 'Form C' Under CST For Concessional Rate Even After GST Act : Supreme Court

The Supreme Court has upheld the views taken by various High Courts that the Goods and Services Tax Act does not affect the right of purchasers of goods not covered by the GST to get Form 'C' under the Central Sales Tax Act to avail concessional tax rate.

Six commodities like Petroleum Crude, High Speed Diesel, Motor Spirit (Petrol), Aviation Turbine Fuel, Natural Gas and Liquor have not been brought under GST and they are continuing under the CST with respect to inter-state trade.

After the GST came into force on July 1, 2017, there arose an issue whether dealers who are purchasing these commodities are entitled to avail the concessional rate under the CST against Form C declaration.

Last week, the Supreme Court upheld a judgment of the Madras High Court which held that such purchasers were entitled to retain their entitlements under the CST Act even after the coming of the goods and services tax(The Commissioner of Commercial Taxes and Another vs The Ramco Cements Ltd).

A bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and Krishna Murari, while dismissing the special leave petition of the tax department, noted that the Punjab and Haryana High Court had taken a similar view in the 2018 decision in the case Caparo Power Ltd vs State Of Haryana And Ors. The Special Leave Petition against that judgment was dismissed by the Supreme Court on August 13, 2018( SLP(c) 20572/2018).

The bench also noted that accepting the decision of the P&H High Court, the Union of India has issued an Office Memorandum dated 1st November, 2018,directing all the States/Union Territories to follow the view taken by the Punjab and Haryana High Court.

The top court remarked that the judgment of the Jharkhand High Court, dealing with the same issue in the case 'Tata Steel Limited vs. State of Jharkhand', was exhaustive and answered all the points raised by the department in its special leave petition.

The top court noted that nine High Courts across the country have taken the same view.

"Considering the consistent view of nine High Courts, including dismissal of special leave petitions by different Bench of this Court, and being satisfied about the exposition on the matters in issue by the High Court of Madras vide impugned judgment and order being a possible view, we decline to interfere in these special leave petitions", the bench observed.

In this backdrop, the Supreme Court said that it saw no reason to reopen the matter and dismissed the SLP.

What did the Madras High Court say?

The Madras High Court quashed a direction issued by the  Commissioner of Commercial Taxes, Chennai to deny the benefit of purchases of non-GST goods in the course of inter-State Trade or Commerce against the Declaration of 'C' forms of the CST Act, 1956 at the concessional rate of 2%.

The Commissioner had said in the order that purchasers who are using the non-GST goods to manufacture other goods are not entitled to concessional rate under CST. This was challenged by Ramco Cements Ltd, which was used petroleum crude for the manufacture of cement.

A single bench of the High Court allowed the prayer of Ramco Cements. This was further affirmed by a division bench dismissing the appeal filed by the department.

A division bench of Justices Dr Vineet Kothari and R Suresh Kumar  held :

"...on a conjoint reading of both sub-sections (1)and (2) of Section 7 of the CST Act, it is clear that the Respondents/Assessees and their likes can continue to have registration under the provisions of the CST Act and the contention raised on behalf of the Revenue that they have lost their entitlement to be so registered is misconceived and liable to be rejected. We,accordingly, reject the same".

"The fact that the definition of 'goods' has been amended with effect from 1.7.2017 under the provisions of CST Act to restrict it to six commodities specified in Section 2(d) of the Act does not mean that the entire scope of the operation of CST Act has been amended.The rights of the purchasing Dealers of the goods including the rights to purchase at a concessional rate against Declaration in 'C' forms continues unabated under Section 8(3)(b) of the Act which has not been amended in 2017".

"Since the Purchasing Dealers can continue to hold their registration under the provisions of CST Act despite the GST law coming into force on 1.7.2017, their right to purchase at concessional rate by using declaration in 'C' forms under Section 8(1) of the Act read with Section 8(3)(b) of the Act also continues unabated even after1.7.2017 and therefore, there is nomerit in the contention raised on behalf of the Appellant/Revenue".

"..the intention of the Legislature, by the series of Amendments, cannot be inferred in the manner canvassed by the learned counsel for the Revenue so as to defeat the right of the Purchasing Dealers to purchase at the concessional rate against Declaration in 'C' form even the said six commodities. No law has prohibited any such Dealers, who purchase the six commodities to start even selling these six commodities and therefore, the Respondent/Assessee like M/s.Ramco Cements Limited can even sell any of those six commodities, subject to their complying with other licensing requirements, if any. Therefore, their act of purchasing any of these six commodities under CST Act cannot be adversely affected".

The Punjab and Haryana High Court's decision in Caparo Power dealt with the case of a power generation company which was seeking C Form for intra-state purchase of natural gas used for power generation. In that case, the HC held that the sale tax law as defined in Section 2(i) of CST Act will mean the law for the time being in force in any state for levy of taxes on sale and purchase of goods. It further ruled that the definition is inclusive, and not restrictive, hence will include the HGST Act 2017 as well. The HC further said that the CST Act does not restrict the usage of Form C only for the purpose of resale, but can be used for resale, manufacture, processing or generation/distribution of electricity.

Case Details

Title : The Commissioner of Commercial Taxes and Another vs The Ramco Cements Ltd

Bench : Justices AM Khanwilkar, Dinesh Maheshwari and Sanjiv Khanna

Citation : LL 2021 SC 191

Click here to read/download the SC order

Click here to read/download the Madras HC decision