CA K. Jitendra Babu

CA K. Jitendra Babu 1.  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 declaration form to his 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 CSTT Rules, 1957.

2. The selling dealer has to obtain ‘C’ forms from the customer/purchasing dealer outside the State, within three months from the end of the quarter and submit to his assessing authority for allowing concessional rate of tax.

3.  It may so happen that the purchasing dealer could not issue ‘C’ Forms to the selling dealer for various reasons at his end. This is beyond the control of the selling dealer.

4.  In such a case, the selling dealer is not entitled to claim concessional rate of tax and he is required to pay differential tax on the sale transactions made by him at the concessional rate of tax. The differential tax would the difference between (i) the rate of VAT applicable on the materials sold in the State of selling dealer and (ii)  concessional rate of tax charged in the invoices. For ex., if the selling dealer has sold IT Products at concessional rate of tax @2% against ‘C’ Forms and could not furnish ‘C’ forms issued by the purchasing dealer, he is required to remit the differential tax of 3%, since rate of VAT applicable on IT Products is 5% in most of the States.

5. The selling dealer is also required to remit interest from the date of payment of tax at concessional rate till the date of payment of differential tax, since revenue is at loss, due to payment of tax at concessional rate of tax. Interest is compensatory in nature and required to be remitted by selling dealer to make good the loss to the revenue.

6.  As far as payment of differential tax and interest thereon, for non-submission of ‘C’ forms, there cannot be any issue from the selling dealers end.

7.  However, assessing authorities in some of the States are resorting to levy of penalty on the selling dealers, fro non-submission of ‘C’ Forms, in addition to demand for differential tax interest, alleging suppression of liability without any basis. The selling dealers are constrained to move the appellate authorities, for no fault on their part, to get the penalties set aside. They are also required to deposit part of the penalty levied, in case the State VAT Act mandates for pre-deposit of certain portion of disputed demand including interest as a pre-condition for filing appeals. The selling dealers are hard pressed in such cases.

8.  Here is a good news to the selling dealers, who are all saddled with illegal and huge penalties for non-submission of ‘C’ Forms.

9. Hon ‘ble High of Karnataka in the case of FOSROC CHEMICALS (INDIA) PVT LTD. Vs. THE STATE OF KARNATAK [2014-VIL-384-KAR] held that penalty cannot be levied on selling dealer as he is not at default. The Court held that “It is not a case of assessee trying to understate his liability to tax. His conduct in claiming concessional rate of tax in his return cannot be construed as a deliberate act in defiance of law or contumacious or dishonest or acted in conscious disregard of its obligations – When the purchaser is unable to produce the ‘C’ Form for any reason whatsoever, then the liability is cast on the assessee to pay tax under the KVAT Act. The said tax ought to have been paid on the date of sale and if there is a delay in payment of the said tax, by virtue of Section 36 of the Act which makes payment of interest automatic and mandatory, he is liable to pay tax and interest, thus he is compensating the revenue for the delay in payment of tax which should have been legitimately paid on the day he filed the returns. But, by no stretch of imagination it could be said that he had any intention of avoiding any payment of tax or his action is contrary to any law or that he is understating his liability to pay tax in the returns. Therefore, he cannot be saddled with the liability to pay penalty for no fault of his. Therefore, the order passed by the authorities levying penalty is unjustified and illegal. Accordingly, it is hereby set aside”.

Copy of the judgement is attached herewith.

10. All the professional colleagues, trade and industry are requested to take note of the above judgement, cite the same before their assessing authorities and avoid levy of illegal penalty. Assessing authorities are requested to take note of the judgement and not to resort to levy of penalty, which would force the dealers to approach appellate authorities resulting in financial hardship to them and burdening the appellate authorities.

(Author may be contacted [email protected])

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More Under Goods and Services Tax


  1. H k shetty says:

    I had supplied materials under c form for the FY15-16. Not rec’d c form , customer gone on NCLT. assessment order issued. Vat officer sent letter to bank attachment.
    Please suggest what is the solutions.

  2. Chander Mohan Goyal says:

    I have been the material to a company since long. But the company ran away from the country in 2013. They were supposed to pay several laks to my company and C forms for Crores. Not the authorities have charged us difference of the tax, interest and penalties. The local courts had made orders for the directors of the said company as Proclaimed Offenders, the copies were given to the assessing authorities. Please advice. Thanks

  3. K.NAGARAJ says:

    Respected sir,
    I sincerely thank you for this article. I further request
    you to clarify regarding the local vat rate for dessicated coconut powder for the Assessment year 2017-18.
    Yours sincerely,

  4. K.NagarAj says:

    Respected sir, Thanks for this article and very useful information. I sincerely request you to send a copy of judgement to my mail and also inform vat rate for local sale of dcppwder for the asst.year 2017-18

  5. K L Gupta says:

    Dear Sir,
    In the year 2015-16, we have purchased machine from Chennai and transported to Karnataka. We have sent them C forms but we have not received E1 form from them despite several follow ups. Kindly confirm the tax and penalty fOr this


    Dear Sir,
    We have supplied A machine Against 2% C form
    But Our Customer not given a C form . How can we collect The C form or Payment . Is there any Procedure Please clarify
    Machine Valve Rs.875000/- 2% Tax we paid
    We got a notice form VAT CST Department.

  7. ARVIND CHAVDA says:

    Dear Sir,
    I am distributor of Diffusion Engs.Ltd.Nagpur. I’m supply to direct SEZ area. For F.Y 2016-17 & 2017-18 I could not provide I-Form to Diffusion. They have issued a Debit Note to me for recovering difference of VAT-6%+ interest + Penalty and above all of IGST-18% on the total amount. I agree pay Vat. but I’m not capable pay interest + Penalty and IGST-18%
    I Listen some state waiver interest + Penalty and clear all issue before GST,
    Pl. Help me

  8. shivakumar says:

    Dear Sir,

    I have done CST sale in the year 2015-16 from Karnataka to Delhi. I have not received the form C from them inspite of several follow up. now i have revived a notice from commercial tax department to make the difference of amount could you pls advise how to take it further?

  9. Umesh Kumar Gupta says:

    I am distributor( based in haryana) of a company based in Daman. For 2015-16 i could not provide C Form to them. They have issued a Debit Note to me for recovering difference of CST and interest and above all IGST on the total amount.

    Now i want to know whether charging IGST is legal ?

  10. Prashant says:

    I have received your email information from the taxguru website.

    I have a question about form C ? My client has failed to provide me form C for a particular quarter and I am undergoing sales tax audit. Now apart from form C is there any other documents or letter from buyer that will avoid additional difference of sales tax for non submission of form C.

  11. Ravi says:

    if your party not giving you c form and your party is registered in DELHI NCR noida Ghaziabad Gurugram Faridabad call me 7503457727 we can arrange your C Form

  12. Sharadchandra Patel says:

    My case is for FY2007-2008.
    Firm is partnership firm registered in Maharashtra.
    Audit officer took C forms from our Tax practitioner but didn’t give acknowledgement.
    We got an order in 2017 to pay money . We went in appeal.
    Meanwhile officer retired.
    Appellate officer says whatever file we received it doesn’t contains C forms.There are no papers of nothings also !
    Now we have DUPLICATE of the C forms but appellate says as per law I can’t accept.
    Suppose some seller’s C forms are destroyed then he looses his fundamental right of natural justice?

  13. Raj kishor says:

    Dear Sir… our margin is limited to 10-15% and purchaser party is not issuing form C as I have requested so many times. I pay 1.5% cst on interstate sale and VAT on this item is 12.5%. Now assessing authority want me to pay conconcessional tax and that will be around 11% plus interest from 2010 to till date and that means I would have to sale my house and others things to submit the tax. What should I do now. ?

  14. Nishant says:

    The buyer bought products from me at 2% against Form C so that he doesn’t have to pay 12.5% tax otherwise. Now he sold off the products making huge profit and didn’t issue me Form C. Shouldn’t the buyer be held guilty of promising to produce Form C and later running away? Why is the seller (me) penalised when it was buyer who broke the promise? Its the buyer who should be forced to make differential payment of 10.5% + interest and not me. No logic in the rules. No wonder India’s taxation system is pathetic…

  15. vijay kumar sharma says:

    i am a employee, i want to join new company but old company is got given my FNF to me , because one c-form pending , but i also taken the balance payment as security deposit inn company account , but company hold my salary, pls suggest what should i do

  16. niran says:

    Stupid people with theoretical knowledge make rules which cannot be implemented practically.i have received notices for c-form from 2011-12,2012-13 i have to pay more than what i earned all my efforts and work going into drain because of some stupid rules.they make the rules with loopholes so they can harass working people and make money

  17. shashi choudhary says:

    I have made a CST sales to 100% Export oriented units from West Bengal.t bengal.The purchaing dealer have issued a certificate holding 100% EOU.The goods sold to the dealer is non taxable in the state of west bengal.The purchaing dealer could not provide the H form till date. My assessment proceeding is now going on and scheduled.Please suggest me whether the assessing officer can levy the tax at his whims or not.

  18. tarun says:

    Dear sir,
    we sale in Mumbai, what % Octroi is applicable in Mumbai and on which amount to be calculate it, after tax or w’out tax, Please Help Sir..

  19. Nikhil Dave says:



  20. danesh kumar says:

    my client has received notice u/s 9(2) of cst act,196 r.w. sec 39(1) of kvat act,2003
    he has not submitted c forms and department demanding tax @ 14.5%-less 2%=12.5%
    but he is a readymade dealer(5.5%) so tax should be 3.5%(diff) and not 12.5%. but deptt contents that he has pay 12.5% (diff). Is the Deptt. contention is valid ? plz suggest with suitable judgement or section?

  21. Jyothi.G says:

    We have raised a tax invoice to the customer for the period of 2012-13 against E1 sales C Forms. Till now we have not received c Forms yet now what is procedure to follow if we tell them to pay the difference amt what will be the tax, penalty and interest amt.

  22. Subrata says:

    Another case of tax terrorism !!!

    If Dealers have to pay for no fault of theirs for approaching the Appellate Authority to remove the unjust levy of penalty on flimsy grounds by the tax authorities , then the it is better to collect and pay full amount of tax and provide a Credit Note to the customer when the “C” Form is received.

    Can dealers afford this ?

    Tax Authorities should not kill the Geese that lays golden eggs

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December 2021