SOME ISSUES PERTAINING TO C FORMS UNDER CST ACT 1956
Under CST Act 1956 there are lot of Forms and declarations which help in saving CST on the interstate transactions. C form is an important and foremost common among dealers registered under CST Act 1956 engaged in interstate sales or purchases.
Although the CST Act 1956 is on the verge of its end with the advent of GST knocking at the doors waiting to change the whole picture of Indirect taxation in India. But still I feel inclined to discuss some issues relating to C forms under CST Act since due to the pendency of assessments under VAT and CST Acts many dealers have been facing problems in getting and producing the C forms for finalization of their assessments. Some important issues relating to the C forms are discussed as below for the benefit of dealers all around India:
What is C form: As per section 8(1) (b) of CST Act 1956 sales tax on interstate sales is 2% or state rate whichever is lower, if the sale is to a registered dealer and goods are covered in the registration certificate of the purchasing dealer. Otherwise the tax applicable is the state rate applicable on the goods sold.
If the selling dealer pays CST @ 2% i.e @ concessional rate then he has to produce proof to his sales tax assessing authorities that the purchasing dealer is eligible to get these goods at concessional rate. Otherwise the selling dealer will be asked to pay balance tax payable plus penalty as applicable. Therefore section 8(4)(a) provides that concessional rate is applicable only if purchasing dealer submits a declaration in prescribed form C.
Where from to get the C forms: The blank C forms are issued by the sales tax authorities to the purchasing dealer who has made interstate purchases on concessional rate of CST. A dealer is entitled to obtain blank C forms from the sales tax authorities. If the registration is wrong, authorities can amend or cancel the same. However, as long as his registration is in force, blank C forms must be issued to him- Colourgraphs v. STO-(1993) 88 STC 347 (Ker HC).
Similarly it was held in Quality Enterprises v. ADCTO(2002) 127 STC 504 (Mad HC) that issue of blank C forms cannot be denied on the ground that transaction of dealer is taxable only as local purchases. Once a dealer pays necessary charges for C forms, the blank C forms must be issued. If he misuses C forms, he is liable to penalties contemplated in the Act.
However the CST rules may provide for non issue of blank C forms to a defaulting dealer in which case no blank forms may be issued. Similar rule was upheld as valid in S.N.E (India) P Ltd v. CST (2003) 131 STC 417 (Del HC DB).
Number of Transactions per C forms: One declaration in C form can cover all transactions in one quarter, irrespective of total amount/value of transactions during the quarter. (Quarter means period of three months). If a transaction covers more than one quarter, separate C form is required to be issued for each quarter.
Original, Duplicate and Counterfoil copy of C forms: The C form has been prescribed in three parts Original, Duplicate and Counterfoil. All three parts are identical in contents.
Section 8(4) of and Rule 12(1) do not specify which part of C form should be produced before the assessing authority.
Hence, in Manganese Ore (India)Ltd. v. CST MP (1991)TC (MP HC DB), it has been held that filing of copy marked Duplicate is enough compliance of the law and concessional sales tax rate will be available even if copy marked Original is not produced.
However, if CST rules as ammended by states require submission of original copy, then only that copy will have to be submitted.
Therefore one need to check the relevant CST state rules if any, ammended to this effect before furnishing the duplicate copy of C form.
If the buyer sends both the copies of C form marked as Orginal and Duplicate to seller and if both are lost, then the following procedure should be followed:
If duly completed C form is lost when it was in the custody of purchasing dealer or when the form was in transit to selling dealer, the purchasing dealer will have to furnish Indemnity Bond to sales tax authorities from whom the blank C form was obtained. If the duly completed C form is lost by the seller, then he has to submit indemnity bond to sales tax authorities of his state. The prescribed form of Indemnity bond is in Form G.
If C form is lost(both original and Duplicate copies), the purchasing dealer can issue duplicate declaration in C form with clear declaration in red ink that this is a duplicate declaration being submitted. Details of earlier lost certificate number and of selling dealer has to be given.
It may be noted that there is no provision to submit certified Xerox copy of earlier certificate and Xerox copy is not acceptable- J N Jetiwa v. state of maharashtra- (1995) 11 MTJ 491 (Mah Trib).
Selling dealer is not liable for false declaration by buyer: The purchasing dealer can issue C form for purchase of only those goods which are mentioned in his registration certificate, for other goods no C form can be issued by the buyer, if the buyer so issues C form for goods not mentioned in his R.C. then it will be misuse of C form and the penalty can be imposed on buyer.
But the selling dealer has only the obligation to satisfy himself that the purchasing dealer is a registered dealer for this he can rely upon the representation made by the buyer in the C form. If the purchaser misapplies the goods, the penalty can be imposed on the buyer, but selling dealer, who has relied upon C form issued to him, cannot be held liable.
Selling dealer is not required to hold an enquiry with regard to purpose for which the materials have been purchased by purchasing dealer. Once he furnishes necessary declaration forms from purchasing dealer, nothing more is required to be done.- K G Industries v. STO (1999) 113 STC 49 (MP HC).
Duly filled C form should be issued to seller: Sometimes, C form is obtained in advance and particulars of invoice etc. are filled in later. This is not legally correct, as section 8(4)(a) uses the words ‘to whom goods are sold’. Thus, duly completed C form should be obtained only after sale. Otherwise C form can be rejected.- Salem Magnesite v. State of Tamil Nadu (1999) 116 STC 110 (Mad HC DB)
Issue/receipt of C form against goods used in works contract: Goods used in executing works contract are deemed to be sold and there is sale of material used in the execution of works contract. Hence C form can be issued for materials used in works contract, if the goods are included in the registration certificate of the dealer- United Ltd. v. CTO (1991) 83 STC 207(AP HC)
No C form for rejected goods: It was held in Lakshmi and co. v. State of Kerala ( 2001) 121 STC 423 (Ker HC DB) F form can be issued only in case of completed transactions and not in case of rejection goods. Decision in this case of F forms should also be applicable on C forms. The reason is if goods are rejected, buyer cannot issue a certificate that the goods are for manufacture or for resale.
Declaration in C form cannot be rejected for minor defects: In Rajsthan Pipes v. CTO (2004) 138 STC 383 (Cal HC), it was held that benefit cannot be denied on ground of omission like date of registration and minor variation in amount.
The authorities should allow ractification of defects in declarations: If there are minor defects in the C form submitted (e.g. challan no., date etc. not mentioned, or name of dealer is mis-spelt), the officer should give reasonable opportunity to the dealer to remove the defects- Anil Kumar Dutta v. Addl Member (1967) 20 STC 528 (Cal)
In State of Orrisa v. Orissa Polish Works (1970) 26 STC 480 (Ori HC), it was held that C form should be returned to the selling dealer for ractification. Selling dealer should be allowed reasonable opportunity for this purpose.
When to submit the C form with the authorities by the seller: As per rule 12(7) C form can be submitted to the assessing authority within three months after the end of period to which it relates. STO can allow further time for submission of the form, if there is sufficient cause for not submitting the form in time.
C form can be submitted even at appellate stage if sufficient cause shown: I have already earlier written an article on this topic reffering the judgement of Punjab and Haryana High court in R S Cotton Mills v. State of Punjab wherein it was decided that C or D forms could be filled even after the filling of the return or at the appellate stage and same could be taken cognizance of.
Hence the C forms can be submitted even after the filling of annual statement i.e. at the time of assessment or afterwards and the same can be taken cognizance of since no loss is caused to the revenue by not filling the C forms along with annual statement.
C forms generally should be submitted before the first assessing authority. After the assessment, appellate authority can allow submission of C forms if sufficient cause is shown for not submitting the C form before the assessing authority. This is because the appellate authority has powers of reassessment. Appeal in taxation matters is different from power of appellate court in civil matters. The appellate authority is in nature of revising authority. He can revise every process which led to the ultimate computation or assessment- State of AP v Hyderabad Asbestos Cement Products 94 STC 410.
It is advisable that the dealer should maintain proper record of follow up and efforts made with buyer to obtain C forms to prove that he made all possible attempts to obtain C forms within time. In such case it will help proving the sufficient cause for not submitting the C form within time and appellate authority will accept the C forms at appellate stage if obtained after assessment.
If sufficient cause is shown for late submission of C forms, the assessment can be reopened as it was held in Dtate of Tamilnadu v. Arulmurugan and co.- (1982) 51 STC 381(Mad HC DB)
Amit Bajaj Advocate, Jalandhar