Synopsis: The Hon’ble HC, Jharkhand in the matter of Tata Steel Ltd. v. State of Jharkhand, has quashed the Circular denying issue of Form-C for High Speed Diesel.
Tata Steel Ltd. and others (“the Petitioners”) are aggrieved by the Circular dated October 11, 2017 (“the impugned Circular”), issued by the State of Jharkhand, in its Commercial Taxes Department, denying the issuance of Form-‘C’ for all the items included in definition of ‘goods’ given under Section 2(d) of the Central Sales Tax Act, 1956, (“CST Act”), including ‘high speed diesel’.
The Petitioners involved are the bulk purchasers of ‘high speed diesel’, which they require for their manufacturing process/ mining activities/ generation of power, as the case may be, which is used in manufacturing, mining, or generation of the goods, which are their end products available for sale. Admittedly, their end products do not come within the definition of ‘goods’ as defined under Section 2(d) of the CST Act, whereas ‘high speed diesel’, which they require in their manufacturing process, comes within the definition of ‘goods’ as defined under the CST Act.
Brief of the impugned Circular:
The impugned Circular has been issued on the pretext that after coming into force of GST regime w.e.f. July 1, 2017 in the State, all the six items which have been excluded in Jharkhand Goods and Services Tax Act, 2017, (“State GST Act”), i.e., alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel, on which, the liability to pay tax under the State GST Act was deferred till the Notification issued under Section 9(2) of the said State GST Act, are still governed by the Jharkhand Value Added Tax Act, 2005 (“JVAT Act”). The dealers dealing in the goods, except the aforementioned six items, are no more liable to pay tax under the JVAT Act, and as such, their registrations under Section 7(2) of the CST Act as well, have become invalid w.e.f. July 1, 2017. As such, those dealers shall not be entitled to inter-state purchase of the aforesaid six goods, on the concessional rates of tax under the provisions of the CST Act, on the basis of Form-C. Accordingly, the State Government decided not to issue Form-C to such dealers for Inter-State purchase of the aforesaid six goods.
Whether the impugned Circular is valid or not?
The Hon’ble HC, Jharkhand observed Section 2(d), Section 7(1) & (2) and Section 8(1), (3)(b) & (4) of the CST Act and vide W.P.(T) Number 6048 of 2017 dated August 28, 2019 held as under:
- The Hon’ble Apex Court in Printers (Mysore) Ltd.’s case [1994 (2) TMI 261 – SUPREME COURT], has held that the use of the expression ‘goods’ referred to in the first half of Section 8(3)(b) of the CST Act, i.e., on first three occasions can be understood in the sense it is defined in Section 2(d) of the CST Act, whereas the expression “goods” in the second half of the clause, i.e., on the fourth occasion does not and cannot be understood in the sense it is defined in Section 2(d) of the CST Act, as it refers to the manufactured goods. In the case of the Petitioners, their end products need not be ‘goods’ within the meaning of Section 2(d) of the CST Act.
- The only difference in the definition of pre and post amendment of ‘goods’ as given under Section 2(d) of the CST Act is that earlier the definition was having a wider connotation, empassing into it almost all types of goods, except five goods mentioned therein, i.e., newspapers, actionable claims, stocks, shares and securities, whereas after the amendment the restricted meaning has been given to the word ‘goods’ which shall include the six items only, which are presently there in the Act.
- The dealers are entitled to continue to be registered under Section 7(2) of the CST Act, irrespective of the fact whether they are liable to pay any tax to State or not.
- The court said that there is no merit in the submission of the learned counsel for the State that, since the dealers are no more liable to pay tax under the JVAT Act, in view of the fact that the word “goods” used in Section 2(i) of the CST Act defining the ‘Sales tax law’ shall mean only those six goods as defined under Section 2(d) of the CST Act, their registration under Section 7(2) of the CST Act shall come to an automatic end – thus, the very reasoning for issuance of the circular dated October 11, 2017 has no legs to stand in the eyes of law and the said circular cannot be sustained in the eyes of law.
- As regards the apprehension of the learned Advocate General in his opinion given to the State Government, as also endorsed by the learned counsel for the State, that Form-C may be mis-utilised by some of the dealers, we can only clarify that appropriate action can always be taken after giving due notice to the individual dealers, and after affording them the reasonable opportunity to show-cause, and in accordance with law, but there cannot be a blanket denial of the benefit of Form-C, as has been done by virtue of impugned Circular.
Citation:  109 taxmann.com 220 (Jharkhand)
Section 2(d) of the CST Act:
“Section 2(d) – “goods” means —
(i) petroleum crude;
(ii) high speed diesel;
(iii) motor spirit (commonly known as petrol);
(iv) natural gas;
(v) aviation turbine fuel; and
(vi) alcoholic liquor for human consumption;”
Section 7(1) & (2) of the CST Act:
“7. Registration of dealers.—(1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.
(2) Any dealer liable to pay tax under the sales tax law of the appropriate State, or where there is no such law in force in the appropriate State or any part thereof, any dealer having a place of business in that State or part, as the case may be, may, notwithstanding that he is not liable to pay tax under this Act, apply for registration under this Act to the authority referred to in sub-section (1), and every such application shall contain such particulars as may be prescribed.”