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 onfcakoduri@gmail.com)

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14 responses to “Non-submission of ‘C’ forms: Levy of penalty Not Legal”

  1. Sachin Gupta says:

    Hi, i have a serious issue towards my supplier. Can u help

  2. 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

    • M Santosh Kumar says:

      Me too facing same issues as non submission of c forms since 2010 till date n every year penalty n difference of taxes to be paid is in lakhs I shud sell all my liabilities n come on road if I need to come out of this… Wat shit rules are these…

  3. 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.

  4. 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..

  5. Nikhil Dave says:

    DEAR SIR,

    OUR COMPANY’S C FORM FOR THE YEAR 2012-13 IS STILL PENDING BY Rs.60,30,000/- I WANT TO CALCULATE INTEREST AND PENALTY ON THAT AMOUNT. PLEASE HELP ME.

  6. 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?

  7. Ravi says:

    Hi Sir,

    What are the consequences for non-issuance of C-Forms from the point of view of Purchaser?

    Thanks in advance

  8. 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.

  9. 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

  10. CA.Balachandra Reddy G says:

    It is really good one and best judgement

  11. Rajesh,Mumbai says:

    It speaks of how our Tax official harasses tax payers.All Legal costs should be recovered from officers involved.

  12. Vedika Bhangre says:

    Thank you for updating.

  13. Saajan H Jain says:

    It Was Really Useful

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