Non issuance of Form ‘F’ on Inter-State Stock Transfers due to default in paying Central Sales Tax

HDFC Bank Limited Vs Commissioner DVAT of Trade And Taxes & Anr (Delhi High Court)

Conclusion: Form ‘F’ was not issued in respect of inter-state stock transfers by assessee-bank due to default in paying Central Sales Tax and the order of Supreme Court restraining the respondents from taking any kind of coercive action against assessee for recovering the said demands could not ipso facto operate against the demand for the other financial years and on other issues.

Held: Assessee contended that as a part of its business operation, from April 2016 until June 2017, assessee moved “Bullion” stored in its branches located in the other states of India to its branch located in Delhi, to maintain a single reserve of Bullion instead of storing the same in a scattered manner in different branches. Assessee asserted that since the transactions did not involve sale of “Bullion” to a third party instead, it only involved the transfer of “Bullion” between the two branches of the assessee-Bank, therefore, assessee initiated the process of obtaining the “F^‟ Forms for availing the benefit envisaged under Section 6-A of the Central Sales Tax Act, 1956 (“CST Act^‟). Assessee accessed the said online facility, uploaded the relevant documents and also mentioned the required details, however, the F Forms were not issued to assessee. On approaching assessee was advised to clear all the outstanding VAT demands alongwith the applicable interest and penalty. The said demand for the financial years 2005-06; 2006-07; and 2008-09 was pending challenge before the Supreme Court in form of Special Leave Petition(s). Assessee also made representation to the respondents, however, to no avail. It was held that the Order of the Supreme Court restraining the respondents from taking any coercive action for recovery of demand was confined only to the financial years 2005-06, 2006-07, and 2008-09 and that too, only on the issue of sale of repossessed motor vehicles by assessee. In prima facie opinion, the said Order could not ipso facto operate against the demand for the other financial years and on other issues. It could not therefore, at least be said that Rule 5(4)(ii) of the CST (Delhi) Rules was ultra vires the CST Act. Thus, the relief claimed by assessee was in fact, tantamount to granting the final relief to assessee in the petition itself. Therefore, the same was dismissed.

FULL TEXT OF THE JUDGMENT/ORDER of DELHI HIGH COURT

1. This application has been filed by the petitioner praying for the following relief:

“Allow the present application and grant an interim relief to the Petitioner by directing the Respondent No. 2 to issue the requisite ‘F’ Forms to the Petitioner in respect of the inter­state stock transfers undertaken by the Petitioner during the period starting from April 2016 until June 2017.”

2. It is the case of the petitioner that as a part of its business operation, from April 2016 until June 2017, the petitioner moved ^„Bullion^‟ stored in its branches located in the other states of India to its branch located in Delhi, to maintain a single reserve of ^„Bullion^‟ instead of storing the same in a scattered manner in different branches. The petitioner further asserts that since the transactions do not involve sale of ^„Bullion^‟ to a third party instead, it only involved the transfer of ^„Bullion^‟ between the two branches of the petitioner Bank, therefore, the petitioner initiated the process of obtaining the ^„F^‟ Forms for availing the benefit envisaged under Section 6-A of the Central Sales Tax Act, 1956 (hereinafter referred to as the ^„CST Act^‟).

3. In Delhi, the VAT Authorities have created an online platform for the purpose of issuance of ^„F^‟ The petitioner accessed the said online facility, uploaded the relevant documents and also mentioned the required details, however, the ^„F^‟ Forms were not issued to the petitioner. Each time the online portal denied the issuance of the ^„F^‟ Forms on the ground that, “Your following demands are pending. Kindly pay the due amount and update the information on Payment Reconciliation link before submitting request for Central Declaration Forms”. On approaching the respondent no. 2, the petitioner was advised to clear all the outstanding VAT demands alongwith the applicable interest and penalty. The petitioner also made representation to the respondents, however, to no avail.

4. The learned counsel for the petitioner submits that the VAT demands against the petitioner is primarily on account of VAT on sale of vehicles repossessed by the petitioner from its customers. The said demand for the financial years 2005-06; 2006-07; and 2008-09 is pending challenge before the Supreme Court in form of Special Leave Petition(s), being SLP(C) 40 of 2017; 37919 of 2016; and 38220 of 2016. The Supreme Court, vide its Order dated 05.01.2017, has restrained the respondents from taking any kind of coercive action against the petitioner for recovering the said demands. He submits that demand on similar basis, for the financial years 2009-10; 2011-12; and 2012-13, is pending challenge before this Court in the VAT Appeal(s), being 04 of 2021; 01 of 2021; and 05 of 2021, respectively. He submits that though there is no stay of demand granted by this Court in the said appeals, in view of the Order of the Supreme Court in the abovementioned Special Leave Petitions, the said demand cannot be enforced against the petitioner. He submits that demand on the similar issue, for the financial year 2013-14, is pending challenge before the Objection Hearing Authority under the Delhi Value Added Tax Act, 2004 (hereinafter referred to as the DVAT Act) and an Order of stay has been granted in favour of the petitioner subject to pre-deposit, which has duly been complied with. For the financial years 2014-15; 2015-16; and 2016-17 the same is again in challenge before the Objection Hearing Authority, however, there is no stay in operation against the demand.

5. The learned counsel for the petitioner further submits that the demand against the petitioner also relates to the deduction of tax at source in case of a supply of ^„works contract service^‟ and tax treatment of securitisation in terms of the provisions stipulated under the DVAT Act. He submits that such demands are also pending before various authorities under the DVAT Act and therefore, cannot form a basis for denial of issuance of the ^„F^‟ Forms to the petitioner.

6. The learned counsel for the petitioner further submits that the respondents failed to comply with the provisions of Rule 5(4)(ii) of the Central Sales Tax (Delhi) Rules, 2005 [hereinafter referred to as the ^„CST (Delhi) Rules^‟] which mandate an opportunity of hearing being granted to the petitioner and passing of a reasoned order before denial of the ^„F^‟ Forms to the petitioner. He places reliance on the judgments of this Court in Infiniti Retail Limited Government of NCT of Delhi & Anr., WP(C) 3984 of 2020 dated 07.07.2020 and Otis Elevator Company (India) Ltd. v. Commissioner of Value Added Tax & Ors., WP(C) 5626 of 2019 dated 24.09.2021. He submits that it is only after notice had been issued in the present petition by this Court that the respondents passed an Order dated 16.06.2021, declining the request of the petitioner for downloading of the ^„F^‟ Forms from the web portal, however, again taking the ground of pendency of demands against the petitioner. He submits that this Order cannot be treated as one complying with the mandate of Rule 5(4)(ii) of the CST (Delhi) Rules.

7. The learned counsel for the petitioner further submits that the Rule 5(4)(ii) of the CST (Delhi) Rules insofar as it permits the withholding of issuance of the ^„F^‟ Forms on account of same pending demand, is ultra vires the CST Act. He submits that the State Government is only empowered to ^„administer^‟ the CST Act and therefore, cannot prescribe extraneous conditions for grant of ^„F^‟ Forms on which no tax liability is otherwise owed to the State Government. He submits that in terms of Section 6-A of the CST Act read with Rule 12(5) of the Central Sales Tax (Registration and Turn Over) Rules, 1957, there is no tax demand accruing in favour of the respondents on the ^„Bullion^‟ transfer. The respondents, therefore, cannot withhold the ^„F^‟ Forms to recover its alleged outstanding demands from the petitioner on other transactions. He submits that such condition does not exist in Rules framed by the other State Governments.

8. On the other hand, the learned counsel for the respondents has taken us through a chart depicting the status of demand raised against the petitioner for various financial years. The learned counsel for the petitioner does not deny the said chart. The same is reproduced herein below:

9. The learned counsel for the respondents submits that there are certain typographical errors in the above chart, most notably of the total tax and interest amount outstanding against the petitioner being ₹4,35,86,828/- instead of Rs. 99 lakhs referred in the Chart.

10. The learned counsel for the respondents further submits that in terms of Circular No. 13 of 2013-14 dated 23.08.2013, issued by the Government of NCT of Delhi, Department of Trade and Taxes, the respondents have been mandated to ensure that no dues are pending against the dealer before granting approval for issuance of the Forms, including ^„F^‟ Forms, under the CST Act and the Rules made In the present case, as there were admittedly pending demands against the petitioner, the facility for issuance of the ^„F^‟ Forms has been rightly refused by the respondents.

11. He further submits that an Order dated 16.06.2021 complying with the requirement of Section 5(4)(ii) of the CST (Delhi) Rules has been passed, giving reasons for the denial of the facility of issuance of the ^„F^‟ Forms to the petitioner and therefore, the judgments of this Court in Infiniti Retail Limited (supra) and Otis Elevator Company (India) Ltd. (supra) are not applicable to the facts of the present case.

12. We have considered the submissions made by the learned counsels for the parties.

13. Rule 8(2) of the CST (Delhi) Rules states that the provisions of sub-rules (2) to (4) of Rule 5 of the CST (Delhi) Rules shall also apply to certificate in Form ^„F^‟. The same is reproduced herein below:

“8. Authority from whom Declaration Form ‘F’ may be obtained, used and maintenance of record of such Forms and matters incidental thereto –

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(2) The provision of sub-rules (2) to (4) of Rule 5 in relation to Declaration Form ‘C’ referred to therein shall also apply to certificate in Form ‘F’, with such change, as circumstances required.”

14. Rule 5(4)(ii) of the CST (Delhi) Rules reads as under:

“5. Authority from which Declaration Form ‘C’ may be obtained, use, custody and maintenance of records of such forms and matters incidental thereto.

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(4) If the applicant for Declaration Form ‘C’ has, at the time of making the application- xxxxx

(ii) defaulted in making the payment of the amount of tax assessed, re-assessed or the penalty imposed by the Commissioner under the Delhi Value Added Tax Act, 2004 or under the various Acts repealed as per section 106 of the Delhi Value Added Tax Act, 2004 or the Central Sales Tax Act, 1956 and in respect of which no orders for installment / stay have been obtained from the competent authority under the provision of law.

the Commissioner shall, after affording the applicant an opportunity of being heard, withhold, for reasons to be recorded in writing, issue of Declaration Form ‘C’ to him´

15. A reading of the above provision would clearly show that where the applicant, seeking Form ^„F^‟, has defaulted in making the payment of the amount of the tax assessed, the Commissioner may, after affording the applicant an opportunity of being heard, withhold the issuance of Form ^„F^‟ to him for the reasons to be recorded in writing.

16. In the present case, from the chart of tax demands placed by the respondents and not denied by the petitioner, it is evident that the petitioner owes tax demand. Though the same are pending challenge at various stages or forums, for some there is no order of stay on the said demand. This Court in the present proceedings cannot usurp the jurisdiction of the Courts/Authorities hearing such appeals/objections and hazard a guess as to whether the petitioner is entitled to a stay of demands in those proceedings. The Order of the Supreme Court restraining the respondents from taking any coercive action for recovery of demand is confined only to the financial years 2005-06, 2006-07, and 2008-09 and that too, only on the issue of sale of repossessed motor vehicles by the petitioner. In our prima facie opinion, the said Order cannot ipso facto operate against the demand for the other financial years and on other issues.

17. Insofar as the compliance with the proviso to Rule 5(4) of the CST (Delhi) Rules is concerned, admittedly, the respondents have now passed the Order dated 16.06.2021 giving reasons for refusing the facility of issuance of the ^„F^‟ Forms to the petitioner. The said Order is not in challenge before us. Therefore, the judgments of this Court in Infiniti Retail Limited (supra) and Otis Elevator Company (India) (supra) do not come to the aid of the petitioner at least at this stage of the proceedings. In both the above cases, the respondent had failed to issue any order under proviso to Rule 5(4) of the CST (Delhi) Rules in spite of the petitions being filed by the petitioners therein. The same is not the position in the present case.

18. As far as the challenge to Rule 5(4) of the CST (Delhi) Rules is concerned prima facie, we do not find any force in the same. Section 13(3) and 13(4)(e) of the CST Act empowers the State Governments to make rules, including specifying the conditions subject to which Form ^„F^‟ may be obtained. The same are reproduced herein below:

“13. Power to make rules. —

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(3) The State Government may make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (1), to carry out the purposes of this Act.

(4) In particular and without prejudice to the powers conferred by sub section (3), the State Government may make rules for all or any of the following purposes, namely:—

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(e) the authority from whom, the conditions subject to which and fees subject to payment of which any form of certificate prescribed under clause (a) of the first proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section (1) of section 6A or subsection (4) of section 8 may be obtained, the manner in which such forms shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used and any such certificate or declaration may be furnished.”

19. It cannot therefore, at least at this stage be said that Rule 5(4)(ii) of the CST (Delhi) Rules is ultra vires the CST Act.

20. It is also to be noted that the relief claimed by the petitioner in the present application would, in fact, tantamount to granting the final relief to the petitioner in the petition itself.

21. Therefore, for the reasons recorded hereinabove, we do not find any merit in the present application. The same is dismissed. W.P.(C) 5830/2021

List for hearing on 3^rd February, 2022.

The parties are directed to file a short-written submission not exceeding three pages within a period of four weeks alongwith copies of the judgments that they seek to rely upon.