Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
16.
+ W.P.(C) 8272/2015 & CM No. 17432/2015 (for stay)
INGRAM MICRO INDIA PVT. LTD. ..... Petitioner
Through: Mr. Balbir Singh, Senior Advocate with
Mr. Krishnamohan Menon, Ms. Rubal Maini,
Mr.Ujjwal Parera and Mr. Gautam Dhamija,
Advocates.
versus
COMMISSIONER, DEPARTMENT OF TRADE & TAXES
& ANR. ..... Respondents
Through: Mr. Sanjay Ghose and Ms. Pratishtha
Vij, Advocates.
CORAM:
JUSTICE S.MURALIDHAR
JUSTICE VIBHU BAKHRU
O R D E R
% 01.02.2016
Dr. S. Muralidhar,J. :
1. This is a writ petition under Article 226 of the Constitution by Ingram
Micro India Pvt. Ltd. (‘IMIPL’) which is registered as a dealer under the
Delhi Value Added Tax Act, 2004 (‘DVAT Act’) and also under the Central
Sales Tax Act, 1956 (‘CST Act’). The registration certificate of the
Petitioner permits it to deal with electronic goods within the state of Delhi
and also undertake inter-state sales and purchases.
W.P.(C) No. 8272/2015 Page 1 of 13
2. The challenge in the present petition is to an order dated 12th June 2015
issued by the Assistant Commissioner, Department of Trade & Taxes,
Government of National Capital Territory of Delhi (‘GNCTD’) (Respondent
No. 2 herein) rejecting the request made by the Petitioner for issuance of C-
Forms in relation to the inter-state purchases made by the Petitioner during
the third and fourth quarter of Financial Year (‘FY’) 2010-11.
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3. Earlier by an order dated 28 May 2015 in Writ Petition (C) No. 5836 of
2015, Respondent No. 2 was asked to dispose of the representation made by
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the Petitioner on 26 May 2015 in accordance with law. Pursuant thereto the
impugned order was issued. Ten reasons have been given in the impugned
order for rejecting the Petitioner’s request. In short, it is stated that
purchases in the sum of Rs. 4,35,62,335 and Rs. 1,61,49,137 in the third and
fourth quarters respectively of FY 2010-11 were not shown in the returns or
even in the revised returns filed by the Petitioner for those relevant tax
periods. Further, the purchases were not entered in the purchase register to
be maintained in Form DVAT-30; the purchases were not shown in the
documents produced before the Special Auditor when a special audit was
conducted for FYs 2010-11 and 2011-12; at the time of passing of the
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assessment order on 31 January 2015 no declaration was made regarding
the said purchases; the bank statements and stock registers were not
produced in the course of the hearing pursuant to the order of this Court.
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4. Writ Petition (C) No. 5836 of 2015 was disposed of on 28 August 2015
in view of the impugned order having been passed. On that day, notice was
issued in the present petition. A reply thereto has been filed by the
W.P.(C) No. 8272/2015 Page 2 of 13
Respondents.
5. This Court has heard the submissions of Mr. Balbir Singh, learned Senior
counsel appearing for the Petitioner and Mr. Sanjay Ghose, learned counsel
for the Respondents.
6. In terms of Section 8 (1) of the CST Act, a dealer selling in the course of
inter-state sales to another registered dealer goods answering the description
in terms of Section 8(3) of the Act, is liable to pay 2% tax or the rate
applicable to intra-state sales whichever is low. In terms of Section 8(4) of
the CST Act it is mandatory for the selling dealer to furnish to the prescribed
authority a declaration in C-Form to be furnished by the purchasing dealer.
The C-Form has to be obtained from the sales tax authority of the concerned
purchasing dealer and furnished to the selling dealer.
7. Under The Central Sales Tax (Delhi) Rules, 2005 (‘CST Delhi Rules’)
there are provisions regarding the obtaining and furnishing of C-Forms. Rule
5 (1) to (4) of the CST Delhi Rules which is relevant for the purposes of
present case 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.
(1) A registered dealer, who wishes to purchase goods from another
such dealer, on payment of tax at the rate applicable under the Act, to
sales of goods by one registered dealer to another, for the purpose
specified in the purchasing dealer’s certificate of registration, shall
obtain from the Commissioner the blank Declaration Form, that is to
say Form ‘C’ referred to in Rule 12 of the Central Rules, for
W.P.(C) No. 8272/2015 Page 3 of 13
furnishing it to the selling dealer. Before furnishing the Declaration to
the selling dealer, the purchasing dealer, or any person authorised by
him in this behalf, shall fill in all required particulars in the Form, and
shall also affix his usual signature in the space provided in the form
for this purpose. Thereafter, the counterfoil of the Form shall be
retained by the purchasing dealer and the other two portions marked
“Original” and “Duplicate” shall be made over by him to the selling
dealer.
PROVIDED that the counterfoils of the Declaration Forms
should be maintained by the dealer for a period of five years or such
further period as may be prescribed by the Commissioner.
(2) For obtaining a blank Declaration Form ‘C’ referred to in sub-rule
(1) from the Commissioner, a registered dealer shall apply for issue of
Forms to the Commissioner in Form ‘2C’ whenever such forms are
required and shall affix court fee stamp at the rate of fifty paise per
Form on the application.
PROVIDED that for obtaining blank declaration Form ‘C’ for
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the transactions prior to 1 October, 2005, a registered dealer shall
submit a requisition account of declaration forms in Form ‘2A’
together with his last return for the year 2005-06 or by such date as
may be notified by the Commissioner in this regard.]
[(3) If the applicant for Declaration Forms has, at the time of making
the applications, failed to comply with an order demanding security
from him under sub-section (3A) of section 7 of the Act, the
Commissioner shall reject the application.]
[(4) If the applicant for Declaration Form ‘C’ has, at the time of
making the application-
(i) defaulted in furnishing any return including reconciliation return or
returns in accordance with the provisions of law or in payment of tax
due according to such return; or
(ii) defaulted in making the payment of the amount of tax assessed,
W.P.(C) No. 8272/2015 Page 4 of 13
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; or
(iii) not filed proper utilization account in Form ‘2B’,of Forms issued
to him earlier; or
(iv) some adverse material has been found by the Commissioner
suggesting any concealment of sale or purchase or furnishing
inaccurate particulars in the returns;
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:
PROVIDED that the Commissioner may, after affording the
applicant an opportunity of being heard, withhold, for reasons to be
recorded in writing, issue of declaration Form ‘C’ for transactions
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prior to 1 October, 2005 to him if the applicant has not filed proper
requisition account for such declaration forms or the applicant has not
filed proper utilization account in Form 2B of the Forms issued to him
earlier:
PROVIDED FURTHER that the Commissioner may instead of
withholding Declaration Form ‘C’ to the applicant, issue such forms
in such numbers and subject to such conditions and restrictions, as he
may consider necessary.
PROVIDED ALSO that notwithstanding the provisions of any
other rule the issue of Declaration Form ‘C’ to a dealer to whom a
certificate of registration under the Act has been granted for the first
time, shall be withheld by the Commissioner, until such time as all the
returns for the return period commencing from the date of validity of
the certificate of registration are furnished and tax due according to
such return/returns is paid by him:
W.P.(C) No. 8272/2015 Page 5 of 13
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PROVIDED ALSO that for the transactions prior to 1
October, 2005, the Commissioner may, subject to such conditions and
restrictions as may be imposed, issue declaration forms to an
applicant even if he has not filed proper utilization account in Form
‘2B’ of forms issued to him in respect of the transactions subsequent
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to 30 September, 2005.]”
8. In terms of Rule 5 (2) a request has to be made in Form-2C by the dealer
desirous of obtaining C-Forms to the Commissioner of the Department. Inter
alia, in the said Form, the dealer declares that “due return(s) have been filed
for all quarters/months till ....... (mention period ending) and the tax due as
per return has been paid”. As is evident from Rule 5 (2) even blank C-Forms
can be obtained in anticipation of inter-state sales. Secondly, there is no time
limit prescribed under the CST Delhi Rules for issuance of C-Forms.
9. Under Rule 5(4) there are four contingencies when a request made for
issuance of a C-From may be refused by the Commissioner, after affording
the applicant an opportunity of being heard, for reasons to be recorded in
writing. Under Rule 5 (4) (i), C-Forms can be refused where the dealer has
defaulted in furnishing a return, including a reconciliation return or returns
in accordance with the provisions of law or in the payment of tax due
according to such return. Under Rule 5(4)(iv), C-Forms can be refused if
some adverse material is found by the Commissioner suggesting any
“concealment of sale or purchase or furnishing inaccurate particulars in the
returns”. The second proviso to Rule 5 (4) indicates that a Commissioner
may issue C-Forms in such numbers and subject to such conditions and
restrictions as he may consider necessary instead of withholding the C-
W.P.(C) No. 8272/2015 Page 6 of 13
Form.
10. The difficulties in obtaining of C-Forms by the selling dealer from the
purchasing dealer is acknowledged in the Central Sales Tax (Registration &
Turnover) Rules, 1957 (‘CST Rules, 1957’). Rule 12 (7) of the CST Rules,
1957 requires the selling dealer to furnish the declaration in Form-C to the
prescribed authority “within three months after the end of the period to
which the declaration or the certificate relates”. However, the proviso to
Rule 12 (7) of the CST Rules, 1957 states that if the prescribed authority is
satisfied that the selling dealer was “prevented by sufficient cause for
furnishing such declaration or certificate within the aforesaid time” the
authority may allow further time to the selling dealer to furnish such
declaration “as that authority may permit”. A collective reading of the
aforementioned rules reflects the intention of not specifying a rigid and
inflexible time limit for furnishing a C-Form. In any event, as far as a
purchasing dealer making a request for issuance of C-Forms under the CST
Delhi Rules, there appears to be no such inflexible condition as to the time
within which the request should be made.
11. The central thrust of the submission by Mr. Ghose on behalf of the
Respondents has been that the issuance of C-Form is integrally connected to
the purchase figures as disclosed by the purchasing dealer in his returns and
no C-Form can possibly be issued in respect of inter-state purchases which
have not been reflected in the returns of the dealer. The submission is that
notwithstanding that there might be no loss of tax revenue, the issuance of
C-Forms to a dealer who has not cared to disclose the corresponding inter-
W.P.(C) No. 8272/2015 Page 7 of 13
state transactions in his returns would set a bad precedent and make the
administration of tax collection extremely difficult for the Department.
12. In the present case, the Petitioner is candid that it made a genuine
mistake in the figures disclosed in its revised returns for inter-state
purchases made by it. It is pointed out that although in the original returns
disclosures were made of inter-state purchases, there was a mistake owing to
the wrong understanding by the Petitioner of the purchases that pertained to
the FY 2010-11. It is stated that the Petitioner went by the date of delivery
of the goods rather than the dates of invoices as the date of sale. In the
original return filed, the figures mentioned for the inter-state purchases made
during the months of October 2010 to March 2011 were shown as Rs.
168,27,55,275 and after realising the aforementioned mistake it was
corrected as Rs. 159,21,63,988 in the revised return filed. But apparently
this too was not correct. It is stated that on account of clerical mistake made
at the stage of filing the revised return, inter-state purchase transactions of
the value of Rs. 5,97,11,472 were not reflected in the revised returns
although they did form part of the original returns. The net result is that
there were inter-state purchases made to the extent of Rs. 5,97,11,472, in
respect of which the Petitioner was entitled to C-Forms, which were
however not reflected in its revised returns.
13. Turning to the reasons for rejection of the Petitioner’s request as listed
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out in the impugned order dated 12 June 2015 it is seen that one reason is
the failure by the Petitioner to disclose the above purchases in the purchase
register required to be statutorily maintained by it in Form DVAT-30. It is
W.P.(C) No. 8272/2015 Page 8 of 13
pointed out by Mr. Balbir Singh, learned Senior counsel appearing for the
Petitioner, that Form DVAT-30 is maintained both month-wise as well as
yearly and if the purchase register for the entire FY 2010-11 is examined,
the purchases which were not included in the revised return would be
accounted for. Indeed it appears that when the impugned order refers to
purchase register for the relevant period, it is talking of the entries in months
of October 2010 to March 2011, whereas according to the Petitioner the
purchase register for the entire FY 2010-11 ought to have been examined. In
ground (iv) of the writ petition, the Petitioner explains this as under:
“It is submitted that the details of the disputed transactions
were always present (since inception) in the registers which
are maintained in the e-form in an MS Excel sheet. It is
submitted that it was on the suggestions of the special audit
team that the details of the disputed transactions were
temporarily removed from the DVAT 30 registers so as to
match with the incorrectly revised returns. This was so
because, the rejection of second revision was believed to be
the final position by the Petitioner for a period of time.”
14. It is not the case of the Respondents that the above assertion is factually
incorrect. Importantly, the Court does not find it to be the stand of the
Respondents that any of the inter-state purchases, that had escaped inclusion
in the revised returns, were not genuine transactions. It is the Petitioner’s
case that it has produced the relevant invoices, letters from the vendors
seeking C-Forms and proof of payment to vendors. Importantly, the
Petitioner also furnished the details of the subsequent sales relatable to the
very same inter-state purchases, on which value added tax has been paid by
the Petitioner. The Respondents do not state that the rejection of the
Petitioner's request is on account of any fictitious inter-state purchase
W.P.(C) No. 8272/2015 Page 9 of 13
transactions. There is nothing on record to indicate that ground under Rule
5(4)(iv) of the CST Delhi Rules is attracted.
15. The issue boils down to whether Rule 5(4)(i) of the CST Delhi Rules is
attracted. In other words, can it be said that there was a failure on the part of
the Petitioner to furnish a return, including a reconciliation return or return
in accordance with the provisions of law or in payment of tax due according
to such return.
16. A question was repeatedly posed to learned counsel for the Respondents
whether there was any adverse impact as far as the Department was
concerned if the C-Forms in respect of the aforementioned inter-state
purchase transactions as requested by the Petitioner were to be furnished
even at this stage. The reply was in the negative. In other words, there would
be no loss of any tax revenue to the Department. At the same time, it is not
denied that if the Petitioner is unable to obtain and furnish the C-Forms to its
selling dealers, then it cannot take advantage of reduced rate of tax and the
selling dealer is likely to pass on the burden of the differential tax to the
Petitioner. In sum, the denial of C-Forms to the Petitioner would certainly be
prejudicial to it.
17. Mr. Balbir Singh, learned Senior counsel appearing for the Petitioner,
referred to certain decisions in the context of non-issuance of C-Forms to
selling dealers where the Court appears to have taken a liberal view. For
instance, in State of A.P. v. Hyderabad Asbestos Cement Production Ltd.
(1994) 5 SCC 100 , the Supreme Court favoured a liberal stand being taken
by the concerned authority where sufficient cause is shown by the dealer for
W.P.(C) No. 8272/2015 Page 10 of 13
not producing the C-Forms in time. Likewise, in State of H.P. v. Gujarat
Ambuja Cement Ltd. (2005) 6 SCC 499 it was emphasised that the object of
Rule 12(7) of the CST Rules, 1957 “is to ensure that the Assessee is not
denied a benefit which is available to it under law on a technical plea”. It
was emphasised that such C-Form declarations could be filed even “before
the Appellate Authority as an appeal is in continuation of the assessment
proceedings”. In a given case if the Appellate Authority is satisfied that the
Assessee "was prevented by reasonable and sufficient cause which
disenabled him to file the Form in time, it can be accepted”.
18. On his part, Mr. Ghose drew the attention of the Court to the decision in
India Agencies (Regd.), Bangalore v. Additional Commissioner of
Commercial Taxes, Bangalore (2005) 2 SCC 129 which was in the context
of Central Sales Tax (Karnataka) Rules, 1957. The Supreme Court was in
that case of the view that Rule 6(b)(ii) of the said Karnataka Rules had to be
strictly construed and the duty of the authorities was “to simply implement it
without going into the question of any hardship that may be caused even to
an honest dealer”. The Supreme Court pointed out that Rule 12 of the CST
Rules was intended to “prevent misuse of C-Forms by unscrupulous and
mischievous dealers and makes it obligatory for the dealer to furnish
indemnity bond”. The Court further emphasised that the very purpose of
filing the C-Forms was that "there should not be any suppression of inter-
state sales by selling dealer and evasion of tax to State from where the actual
sales are effected. Secondly, the purchasing dealer also cannot suppress such
purchases once he issues C-Form to the selling dealer." The above decision
in India Agencies (Regd.), Bangalore only serves to underscore the
W.P.(C) No. 8272/2015 Page 11 of 13
essential purpose of the CST Rules which is to ensure that inter-state sale
transactions are genuine and that no dealer is permitted to take benefit of a
lower tax rate on a transaction which is not genuine.
19. Turning to the facts of the present case it is not the stand of the
Respondents that the inter-state purchase transactions in respect of which the
C-Forms are being asked for by the Petitioner are not genuine. As far as the
furnishing of bank statements is concerned, it is stated that the Petitioner has
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by a letter dated 10 July 2015 furnished the said documents. As regards the
apprehension expressed by Mr. Ghose that this would open a pandora’s box
and make it difficult for proper administration of collection of taxes by the
Respondents, it is trite that each such request for issuance of C-Forms would
have to be individually examined on a case to case basis. It is incumbent on
the authority while examining such request in light of Rule 5(4) of the CST
Delhi Rules to satisfy himself whether any of the grounds spelt out therein is
actually attracted. In the present case there is a valid explanation offered
regarding the mistake made by it in not including the aforementioned inter-
state purchases in the revised returns filed. Also, the authorities appear to be
satisfied that these are genuine inter-state purchase transactions with no
adverse impact on the revenue of the State. Thirdly, the authority is not
precluded from issuing the C-Forms subject to any condition, like the
furnishing of an indemnity bond by the dealer. Indeed the Petitioner
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enclosed such an indemnity bond with its letter dated 10 June 2015.
20. For the aforementioned reasons, the Court holds that this was not a case
where the Respondent No. 2 was justified in declining to issue C-Forms to
W.P.(C) No. 8272/2015 Page 12 of 13
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the Petitioner. Consequently, the impugned order dated 12 June 2015
issued by Respondent No. 2 is hereby set aside and a direction is issued to
the Respondent No. 2 to issue to the Petitioner a C-Form pertaining to the
aforementioned inter-state purchase transactions undertaken by it in the third
and fourth quarter of FY 2010-11 within a period of three weeks from today.
21. If the Respondents desire an indemnity bond to be furnished by the
Petitioner in any other format, they will communicate such requirement to
the Petitioner not later than two weeks from today and proceed to issue the
aforementioned C-Form not later than three weeks from today subject to the
Petitioner furnishing such indemnity bond in revised format.
22. The writ petition and the application are disposed of in the above terms.
23. Order dasti .
S. MURALIDHAR, J
VIBHU BAKHRU, J
FEBRUARY 1, 2016
dn
W.P.(C) No. 8272/2015 Page 13 of 13