I want to know whether c form can be issued or not in the following issue :
My co is purchasing goods from interstate with out issuing 'c' form for concessional rate in CST. Our end product is exempted from VAT. I want to know the tax implication on the above matter that whether we can purchase goods against 'c' form or not.
C form :- Declaration by purchasing registered dealer to obtain goods at concessional rate To be obtained for every quarter & submitted on quarterly basis.
Sale within the State:-
Article 286(1) of Constitution of India specifies that a State shall not impose tax on sale or purchase of goods where such sale or purchase takes place (a) outside the State or (b) in the course of imports of goods into, or export of the goods out of territory of India. Article 286(2) of Constitution states that Parliament may by law formulate the principles for determining when a sale or purchase of goods takes place in any of the ways mentioned above i.e. outside the State or in the course of import/export. In absence of such powers, each State might have had its own definition of â€˜sale outside the Stateâ€™ or â€˜sale during import/exportâ€™, which could have caused confusion or double taxation. In exercise of these powers conferred by Constitution, Parliament introduced section 4 of CST Act to define what is â€˜sale outside a Stateâ€™ and section 5 of CST Act to define what is â€˜sale during course of import/exportâ€™.
Situs of sale in Inter State Sale or during export.
In 20th Century Finance Corporation Ltd. v. State of Maharashtra 2000(5) SCALE 13 = 2000 AIR SCW 2514 = (2000) 6 SCC 12 = 119 STC 182 = AIR 2000 SC 2436 (SC 5 member bench - 3 v. 2 order), it was held that if situs of sale has not been fixed or covered by any legal fiction, the location of sale would be place where property in goods passes. - . - Mere location or delivery of goods would not be situs of sale. - . - Location or delivery of goods within the State would not be the situs of sale. - . - Situs of sale would be where the property in goods passes, namely where the contract is entered into. [Judgment in case of 'lease of property' but may be held applicable to other sales also].
This decision of 5 member Supreme Court bench is that 'situs' of sale is where contract is executed and not where goods are located for use, is likely to create some difficulties in case of transactions like leasing, hire purchase etc., as leasing companies can shift their offices to neighbouring states to avoid sales tax. In fact, Supreme Court has noted this possibility, but has held that Parliament has ample powers to plug the loophole. [Now, this loophole has been plugged by amending CST Act w.e.f. 11-5-2002 by including â€˜leaseâ€™ in definition of â€˜saleâ€™].
Sale in course of export:-
Article 286(1)(b) of Constitution of India prohibits imposition of sales tax on import and export by State Government. Since charging section 6(1) of CST Act levies tax only on inter-State sale, naturally, there is no CST on sale during export/import. [Interestingly, prohibition on taxing sale during export/import is only on State Government and not on Union Government].
Article 286(2) authorises Parliament to formulate principles for determining when sale is in the course of import/export. Under these powers, section 5 of CST Act has been enacted. Principle is that Export sales have to be tax free so that Indian exports become competitive in world market. Similarly, imports are subject to customs duty and hence these should not be subject to sales tax.
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