As we know C forms are required to be submitted by a seller with the sales tax authorities after obtaining the same from the purchaser of goods if the sale is an interstate sales and CST has been charged at concessional rate of 2% as per the requirement of section 8(4) of CST Act 1956. Sometimes a dealer if has made an interstate sales at concessional rate of CST against C form then afterwards, the purchaser doesnot provide the requisite C form to the seller then in such case difficulties are faced by the seller at the time of finalizing of his assessment proceedings.
The question arises whether in such cases any penalty or interest on the additional tax due can be levied on the seller for non submission of requisite C form? An attempt has been made here to find answer to this question as follows:
Levy of Penalty for non submission of C form: First of all it should be noted that availing of concessional rate of CST depends upon filing of the C form. Section 8(4) of CST Act which provides for furnishing of C form for concessional rate of CST, runs as under:
Section 8(4): “The provisions of sub section (1) shall not apply to any sale in the cource of inter-state trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner 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.”
Thus from the plain reading of above provision it is clear that availability of concessional rate of CST is conditional one and is dependent upon the furnishing of prescribed form (i.e. C Form).
Availing of concession is dependent upon filing of Form C. Non-filing of Form C or filing of defective Forms C may only render the assessee liable to pay at the full rate of taxation without the benefit of concessional rate, and the filing of Forms C being optional and a mere condition to avail of the concessional rate contemplated in the statutory provision as such, the lapse, if any, cannot be considered to operate as a penal or forfeiture clause. Being an optional benefit available, non-availing of the same or non-compliance of such provision, in any event, cannot be held to be non-compliance with the provisions of the Act, Rules and Notifications- Gujarat Ambuja Cement Ltd. Vs. Assessing Authority (2000) 118 STC 315 (HP).
Thus in view of the above decision it can be said that no penalty can be levied on the selling dealer for mere non submission of requisite C forms
Liability of Interest on additional tax arising due to non submission of C forms: If a dealer sells goods interstate at concessional rate of CST and afterwards is not able to produce requisite C form, then it’s a controversial point whether any interest will be payable by that dealer on the difference amount of tax payable at the time of assessment.
Section 9(2B) of CST Act provides if a dealer doesnot pay tax in time he shall be liable to pay interest for delayed payment of tax as per the provisions of the general sales tax law of each state. Thus if a dealer defaults in payment of tax within time then he would be liable to pay interest. Now the question is in such cases where a dealer sells goods interstate against C form bonafidely but afterwards purchaser doesnot provide C form then whether such selling dealer can be considered as a dealer in default for non payment of additional tax. If he can be held as a defaulter then he will be liable for payment of interest otherwise not.
In J.K Synthetics Ltd. Vs. CTO(1994) 94 STC 422(SC) following principles were laid down in cases where the dealer has paid tax bonafidely but the amount of tax is enhanced at the time of assessment, which may be useful in deciding the issue in hand:
- If a registered dealer has filed his return of sales truly and bonafidely, there would be no default on his part to meet his statutory obligation and the Assessing officer shall not be eligible to charge interest, if his turnover has been enhanced at the time of assessment.
- If the dealer has furnished full particulars in respect of his business, without willfully omitting or withholding any particular information which has a bearing on the assessment of tax, which he honestly believes to be correct and complete, it would be difficult to hold that the dealer had not acted bonafidely in depositing the tax due on that information before the submission of the return.
- The provisions relating to filing of return and deposit of tax according to return are in the nature of self assessment. The important requirement is that whatever be the amount of tax due on the basis of self assessment, it must be paid along with the filing of the return, which constitutes self assessment. The law doesnot envisage the assessee to predict the final assessment when he files the return and expact him to pay tax on that basis to avoid the liability to pay interest.
- Where the assessee had submitted returns accompanied by receipts evidencing the payment of tax on the basis of the returns by not including amount of freight charges realized in the quantum of taxable turnover, but later on, when the law was settled by the Apex Court holding that the freight charges are liable to be included in the turnover, he filed a revised return including freight charges in the quantum of turnover and also paid the additional tax, he is not liable to pay interest.
The above principles are very important to decide on the liability of a dealer to pay interest on the additional tax arising due to non submission of C forms especially when the interstate sales was made bonafidely by charging concessional rate of tax and the purchasing dealer fails afterwards to issue the requisite forms due to some reasons.
Interest shall not be charged where the statutory forms submitted in respect to registered dealer sale, turnout to be fake subsequently. If the dealer has submitted true and correct and complete information, according to the best of his knowledge while filing the return and the declaration forms were accepted in good faith, it was held that the interest shall not be levialbe on the ground of fake forms furnished by the dealer- Mohindra Enterprises vs CST (1996-97) 36 DSTC (J-220) (Del Trib).
However, the Allahabad High Court held otherwise. It opined that even though declaration form for claiming exemption/concession may be required to be filed during the cource of assessment proceedings but, in cases of non furnishing thereof, tax has to be levied at the normal rate which would become the admitted tax and interest u/s 8(1) of the U.P Act would be leviable from the due date of the return in which turnover was disclosed and exemption/concession has been claimed. There is no scope for consideration of legitimate expectation or hope or bonafide plea u/s 8(1) of the Act- CTT vs Control Switch Gears Co. Ltd. (2011) 10 VSTI 18(All)