K. V. Hari Babu, ACMA, CS
1. Section 6-A of the Central Sales Tax Act, 1956 contains the provisions relating to transfer of goods otherwise than by way of sale. The dealer effecting the transfer of goods to any other place of his business or agent or principal is required to prove the transaction as transfer of goods otherwise than by way of sale by providing the declaration issued by his branch/agent/principal situated in other State. The declaration to be furnished is Form ‘F’ as per Rule 12(5) of CST Rules, 1957.
2. Section 8 of the CST Act stipulates the rate of tax in case of inter-state sale of goods covered by registration certificate of the purchasing dealer as 2%, subject to furnishing of declaration form by the purchasing dealer to the selling dealer. The selling dealer is required to submit the same to the assessing authority, to get assessed at concessional rate of tax. The declaration required to be furnished is Form ‘C’ as per Rule 12(1) of the CSt Rules, 1957.
3. The provisions relating to submission of declaration forms, which have been creating difficulties to the trade, are reproduced hereunder for ready reference:
Rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957:
“The declaration in Form ‘C’ or Form ‘F’ or the certificates in Form E-I and Form E-II shall be furnished to the prescribed authority within three months after the end of the period to which the declaration or the certificate relates:
Provided that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, the authority may allow such declaration or certificate to be furnished within such further time as that authority may permit”.
4. In case of ‘C’ forms, second proviso to Rule 12(1) stipulates that a single declaration may cover all transactions of sale, which take place in a quarter of a financial year between the same two dealers.
5. In case of ‘f’ forms, first proviso to Rule 12(5) stipulates that a single declaration may cover transfer of goods by a dealer to any other place of his business or to his agent or principal, as the case may be, effected during a period of one calendar month.
6. The effect of the provisions is summarized as under:
(i) In case of ‘F’ forms, the dealer has to submit forms obtained from his branch outside the State, within three months from the end of the month to which the form relates and one form should cover transactions taken place during one month.
(ii) In case of ‘C’ forms, the dealer has to submit forms obtained from the customer outside the State, within three from the end of the quarter and one form should cover transactions taken place during one quarter.
7. The time limit of three months given in the Statute is too short and practically very difficult to comply with. Dealers are put to lot of hardship in their effort to file the forms within the stipulated time due to various practical problems such as (i) stationery relating to forms not available with the VAT department for long periods at times, (ii) Customer or branch/principal/agent has applied for the forms with their assessing authority, but forms not issued. Generally, the delay is due to slow process followed in the department, while issuing the forms; (iii) Department raising objections on various counts, even though the department is not permitted to raise objections at the time of issue of forms.
8. Without understanding the practical difficulties faced by the dealers in getting the forms, assessing authorities in some of the States are resorting to issue of notices, proposing levy of tax or differential tax, as the case may be, in case of ‘F’ forms and ‘C’ forms respectively, for non-submission of forms along with penalty and interest.
8.1. Some of the assessing authorities are going to the extent of not considering the forms submitted at the time of assessment, on the ground that forms were not submitted within the stipulated time as per the legal provisions. They are advising the dealers to file appeals and get necessary relief from the appellate authorities. The dealers are at loss due to the impractical approach of the assessing authorities. The dealers, in such cases, will be required to make pre-deposit of disputed tax as applicable in those States and file appeals. When the case is remanded back to the assessing authority, again the dealer is at mercy of the assessing authority to get the consequential order passed and get refund of pre-deposit made. Everybody knows how much difficult it is to get refund from the department.
8.2. It is quite disturbing and surprising that the assessing authority are rejecting the forms submitted at the time of assessment, without assigning any reason, even though the proviso to Rule 12(7) empowers the assessing authority to accept the forms if he is satisfied that the dealer is prevented by sufficient cause from furnishing the forms in time.
8.3. Since the assessing authority is empowered to accept the form beyond the statutory period, he is duty bound to record his reasons for not accepting the forms, if the dealer furnishes the problems which are beyond his control.
8.4. It is a known fact that the delay in submission of forms is beyond the control of the dealer. The delay is due to various reasons at the end of his customer or branch/principal/agent situated in other States. Otherwise, no dealer wishes to delay the submission of forms and get notices for levy of tax, interest and penalty. It is also well known that dealers involve themselves in lot of correspondence with the customer, branches/principal/agent outside the State for getting forms, to avoid notices/demands.
8.5. Since the dealer is not in control of the situation, the assessing authorities in all fairness and justice are supposed to accept the forms submitted at the time of assessment or after the statutory time limit, since they are empowered to accept the same, subject to satisfactory explanation by the dealer.
8.6. Raising demands, even though forms are submitted at the time of assessment, on the ground that forms are not submitted within three months from the end of quarter/month as the case may, that too without recording reasons for rejection of the forms submitted, is against the provisions of Rule 12(7) of CST Rules and totally high handed.
8.7. Most of the assessing authorities in majority of the States are accepting the forms on submission of practical difficulties faced by the dealers. But, in few States, the assessing authorities are not accepting the forms submitted after the statutory time limit, without considering the submissions of the dealers and without assigning any reason for rejection. This is resulting avoidable litigation and hardship to the dealers.
9. In order to avoid litigation and hardship to the dealers, it is essential to make amendments to the harsh and impractical provisions.
9.1. Amendments should be made in the CST (Registration and Turnover) Rules, 1957, permitting the dealers to file the declaration forms till the time of assessment. This would enable the dealer to have breathing time in filing the declaration forms, avoid unnecessary demands and associated costs on the dealers, reduce litigation and harassment to the trade.
9.2. In fact, prior 01.10.2005, the provisions permitted the dealers to file forms till the time of assessment and assessing authorities were permitted to grant time even after assessment depending upon the facts of the case. Relevant provisions existing prior to 01.10.2005 are reproduced hereunder:
“The declaration in Form ‘C’ or Form ‘F’ or the certificate in Form ‘E-1’ or Form ‘E-II’ shall be furnished to the prescribed authority upto the time of assessment by the first assessing authority.
Provided that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that authority may permit”
9.3. It was also held by the various courts that forms can be submitted even in appeal proceedings, since appeal proceedings are continuation of assessment proceedings.
State of AP Vs. Hyderabad Asbestos Cement Products 94 STC 410
State of Tamil Nadu Vs. Arulmurugan and Co. (1982) STC 381 Mad HC FB
State of Tamil Nadu Vs. EID Parry Ltd. (1998) 109 STC 148 Mad HC DB.
9.4. Therefore, the actions of the assessing authorities in rejecting the forms filed at the time of assessment and raising demands are not in accordance with the provisions of the Law and decided legal position.
10. In view of the difficulties faced by the trade in the compliance of provisions introduced with effect from 01.10.2005, it is imperative that the provisions that were effective prior to 01.10.2005 should be brought back into the Statue. The difficulties are practical and beyond the control of the dealer, as there is no reason why dealer prefers to delay the submission of forms and invite troubles.
10.1. By curtaining the time available to the dealers, no revenue is generated, except creating difficulties to the dealers. Follow-up and obtaining forms on quarterly basis has been taking lot of time and energy of dealers and leading to unnecessary litigation.
10.2. If the time is given upto the assessment, then dealers will feel lot of relief and able to concentrate on their business and generate more real revenue to the department.