Facts of the Case

The petitioner, M/s. Laxmi Trading Company, was a proprietorship firm engaged in milling and trading different kinds of dals and pulses. It procured dals and pulses from the open market within Telangana as well as from outside the State and sold them to purchasers situated in States including Maharashtra, Karnataka, Tamil Nadu, Orissa and Kerala. According to the petitioner, VAT on dals and pulses was nil in those purchasing States and, therefore, the purchasers were not registered with the respective indirect tax departments and could not issue C-Forms.

The petitioner asserted that its inter-State transactions were supported by invoices, waybills, Agricultural Market Committee clearances and other transport-related documents. The goods were also subjected to checks at State borders before onward transit and ultimate delivery to purchasers.

For inter-State transactions in dals and pulses, the concessional rate claimed was 2% instead of the higher applicable rate. However, the benefit was linked with furnishing C-Forms by purchasers to the selling dealer. Since purchasers in certain destination States could not furnish C-Forms, the petitioner relied upon the history of concessions and waivers granted by the Government.

The Government of Andhra Pradesh had earlier issued G.O.Ms.No.294 dated 09.03.2007, waiving excess demand over and above the prescribed concessional level in respect of inter-State sales of dals and pulses where C-Forms were not produced, for the period from 01.07.2002 to 31.03.2007. Thereafter, G.O.Ms.No.347 dated 17.03.2008 extended the concession for the further period from 01.04.2007 to 31.03.2009. The judgment also referred to governmental memos and procedures concerning documents furnished in lieu of C-Forms.

After bifurcation of the composite State of Andhra Pradesh, the Government of Telangana issued a Memo dated 04.04.2016, under which excess CST demand above the scheduled rate for the period from 01.01.2009 to 31.03.2015 could be waived in the absence of C-Forms for inter-State sales of dals and pulses, subject to production of relevant documentary proof.

The dispute arose for the subsequent period, particularly from 01.04.2015 to 30.06.2017, i.e., before implementation of the GST regime from 01.07.2017. The petitioner and other dealers submitted representations dated 18.06.2019 and 01.07.2019 seeking exemption from filing C-Forms and continuation of the earlier procedure permitting other documents as proof of inter-State sales. Those representations were not accepted in the manner sought by the petitioner, while assessment and demand proceedings were initiated or continued.

The petitioner therefore invoked Article 226 of the Constitution, challenging the respondents’ insistence on C-Forms and seeking consideration of alternative documentary evidence for grant of concessions, exemptions and waiver of higher tax on inter-State sales.

Issues Involved

The principal issues before the Telangana High Court were:

  1. Whether a dealer could claim the concessional rate of CST under Section 8(1) of the CST Act, 1956 without furnishing the prescribed C-Forms after expiry of the specific governmental exemption.
  2. Whether invoices, waybills, Agricultural Market Committee clearances and other documentary evidence proving inter-State movement of goods could substitute the statutory C-Form requirement in the absence of a valid exemption.
  3. Whether the earlier concessions granted up to 31.03.2015 created a legitimate expectation that similar treatment would continue for the period from 01.04.2015 to 30.06.2017.
  4. Whether mere pendency of representations seeking continuation of waiver could confer an enforceable right to concessional taxation.
  5. Whether the writ petition under Article 226 was maintainable against assessment orders when a statutory appellate remedy was available under Section 9(2) of the CST Act read with Section 31 of the VAT Act.

Petitioner’s Arguments

The petitioner contended that the State Government had already recognized the practical difficulty faced by dealers in obtaining C-Forms where dals and pulses were exempt or not subjected to VAT in purchasing States. Based on this difficulty, earlier governmental orders had allowed concessional treatment despite non-production of C-Forms, subject to production of alternative documentary evidence.

It was argued that the petitioner had been availing such benefit under earlier Government Orders and Memos and had been furnishing various documents in lieu of C-Forms to establish genuine inter-State transactions.

The petitioner submitted that the benefit had continued up to 31.03.2015 and that the GST regime commenced from 01.07.2017. Therefore, according to the petitioner, there was no justifiable reason to deny the same benefit merely for the intervening period from 01.04.2015 to 30.06.2017.

The petitioner further relied upon the representations made to the authorities seeking exemption from filing C-Forms and continuation of the earlier procedure of accepting other documents as proof of inter-State sales. The action of insisting exclusively on C-Forms was challenged as illegal, arbitrary, unjust and contrary to the doctrine of legitimate expectation.

Respondents’ Arguments

The respondents contended that the petitioner was registered under both the Telangana VAT Act and the CST Act and was legally bound by the statutory conditions governing concessional inter-State sales.

It was argued that under Section 8(1) read with Section 8(4) of the CST Act and Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, the concessional rate of 2% could be claimed only upon furnishing the prescribed declaration in Form-C.

According to the respondents, in the absence of C-Forms, the turnover became taxable at the higher applicable rate under Section 8(2) of the CST Act. The petitioner could not rely on previous exemptions indefinitely because the Government had granted exemption only up to 31.03.2015 and there was no corresponding exemption for the subsequent period from 01.04.2015 until commencement of GST.

The respondents further submitted that mere pendency of representations before the Government did not create any legal right to obtain concessional taxation without complying with the statutory requirement.

A further objection was raised regarding maintainability of the writ petition. The respondents argued that the petitioner had an adequate and efficacious alternative remedy of appeal under Section 31 of the VAT Act read with Section 9(2) of the CST Act. It was also contended that the writ petition had been filed after expiry of the limitation period for filing the statutory appeal.

Court Order / Findings

The Telangana High Court dismissed the writ petition and held that no merit existed in the petitioner’s challenge.

1. Form-C is required for concessional CST benefit under Section 8(1)

The Court examined Section 8 of the CST Act and observed that under Section 8(1), an eligible inter-State sale to a registered dealer attracts tax at 2% of turnover or the applicable local rate, whichever is lower. However, Section 8(4) stipulates that the benefit of Section 8(1) does not apply unless the selling dealer furnishes the prescribed declaration duly completed and signed by the purchasing registered dealer.

The Court further noted that Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 prescribes Form-C as the relevant declaration.

2. Failure to furnish C-Form attracts Section 8(2)

The High Court clearly held that where a dealer seeks to avail the concessional rate of 2%, the dealer must produce or file Form-C. If Form-C is not furnished, Section 8(2) of the CST Act becomes applicable, and the dealer is liable to pay tax at the rate applicable to the sale or purchase of such goods inside the appropriate State under the relevant State sales tax law.

3. Earlier exemption ended on 31.03.2015

The Court accepted that the State Government had exempted the requirement of furnishing C-Forms for the period up to 31.03.2015. However, it found that there was no such exemption for the subsequent period until the GST regime came into force on 01.07.2017.

Therefore, in the absence of a continuing exemption, the petitioner was bound to furnish C-Forms if it wanted to claim the concessional rate under Section 8(1).

4. Alternative documents cannot automatically replace C-Forms

The judgment makes clear that earlier acceptance of alternative documentary evidence was connected with specific governmental concessions or exemptions. Once no such exemption operated for the disputed subsequent period, alternative evidence by itself could not override the statutory requirement of furnishing Form-C for obtaining the concessional rate.

5. Mere representation creates no enforceable right

The Court held that mere submission of a representation could not confer any right upon a dealer to seek waiver of the requirement of filing C-Forms. Therefore, pending representations seeking continuation of earlier concessions did not create a legal entitlement to concessional taxation.

6. Legitimate expectation cannot be invoked in a taxing statute

A significant finding of the High Court was:

“Principle of legitimate expectation cannot be invoked in a taxing statute.”

Accordingly, the petitioner could not claim continuation of a tax concession merely because similar concessions had been granted for earlier periods.

7. Statutory appellate remedy should ordinarily be pursued

The Court further observed that if the petitioner was aggrieved by the assessment orders, it had a statutory remedy under Section 9(2) of the CST Act read with Section 31 of the VAT Act.

The High Court held that in proceedings under Article 226, the legality and validity of assessment proceedings are not ordinarily examined where the statute provides an adequate and efficacious alternative remedy. The Court found that this was not a case involving violation of principles of natural justice or violation of law warranting exceptional exercise of writ jurisdiction despite availability of the alternative remedy.

8. No equitable consideration in taxation statutes

The High Court additionally emphasized that there cannot be equitable consideration in so far as taxation statutes are concerned. Tax concessions and exemptions must operate according to statutory provisions and valid governmental measures applicable to the relevant period.

Final Order

The Telangana High Court found no merit in the writ petition and dismissed W.P. No. 8243 of 2021 without any order as to costs. Pending miscellaneous applications, if any, were also ordered to stand closed.

Important Clarification

This judgment does not hold that alternative documents such as invoices, waybills or transport records can never be considered for any purpose. The decisive distinction is that the concessional rate under Section 8(1) is subject to statutory conditions, including the prescribed declaration requirement under Section 8(4) read with Rule 12(1), unless a legally operative exemption or concession dispenses with that requirement.

The Court recognized that the State Government had earlier granted exemption from furnishing C-Forms up to 31.03.2015. The petitioner’s claim failed because no corresponding exemption existed for the disputed subsequent period from 01.04.2015 until the GST regime commenced on 01.07.2017.

Therefore, the central legal principle is that a past concession cannot automatically be extended into a later tax period on grounds of fairness, prior practice, pending representation or legitimate expectation.

Sections Involved

  • Section 8(1), Central Sales Tax Act, 1956 – Concessional rate of tax on qualifying inter-State sales.
  • Section 8(2), Central Sales Tax Act, 1956 – Applicable rate where the inter-State sale does not fall within Section 8(1).
  • Section 8(4), Central Sales Tax Act, 1956 – Requirement of prescribed declaration for claiming benefit under Section 8(1).
  • Section 9(2), Central Sales Tax Act, 1956 – Application of State machinery and procedural provisions in CST administration.
  • Rule 12(1), Central Sales Tax (Registration and Turnover) Rules, 1957 – Prescribed declarations and certificates, including Form-C.
  • Section 31, Telangana Value Added Tax Act, 2005 – Statutory appellate remedy.
  • Article 226, Constitution of India – Writ jurisdiction of the High Court.
  • Section 151, Code of Civil Procedure, 1908 – Invoked in interlocutory applications filed in the writ proceedings.

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