In a big relief to companies including Voltas, Ramco Industries, Prism Cement and others, the Supreme Court on Wednesday held that the Maharashtra government was not competent to revise the assessments and demand refund of exempted tax from the companies for failing to submit Form ‘C’ and ‘D’ in support of their inter-state sale, trade and commerce.
It said that the requirement of submitting these forms would apply prospectively after May 11, 2002, the date when amendments were made to the Central Sales Act, 1956.
The issue before the court was whether the amendment to Section 8(5) of the 1956 Act by the Finance Act, 2002, would take away the right that had accrued to the assessee under the Eligibility/Entitlement certificates wherein absolute exemptions were granted without any condition of submission of Form ‘C’ and ‘D’? Whether restriction would apply even to the transactions which had taken place earlier i.e. where eligibility and Eentitlement certificates were issued much prior to the enforcement of the amending Act?
Dismissing the batch of appeal by the Maharashtra government, a bench led by Justice PS Narsimha said that the state government was not competent to issue the impugned notices for revising the assessment of Prism Cement and to demand the exempted tax for the assessment years 2002-2003 to 2004-2005 only for the reason that the assessee had not submitted Form ‘C’ and ‘D’ in support of inter-State sale, trade and commerce.
It said that the assessee was granted sales tax benefits under the Package Scheme of Incentives introduced in 1993 to encourage the establishment of industrial units in backward areas. As per the 1998 eligibility and entitlement certificates, the benefit was available to the company till 2012 or to the extent of Rs 273.54 crore, whichever was earlier. The benefit granted to the company was not with any restriction, much less the condition of submission of Form ‘C’ and ‘D.’
Prism Cement had challenged the three trade circulars and notices issued by the state sales tax department asking it to pay the exempted portion of the sales tax.
Ruling in favour of the assessee, the apex court said that after the amendment, the state government was not authorised to pass a unilateral order affecting the rights of the assessee for claiming absolute exemption from payment of tax. The exemption granted to the assessee was much prior to the enforcement of the Finance Act, 2002 with effect from May 11, 2002.
“The requirement for fulfilling the condition of Section 8(4) of the CST Act(1956) for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from May 11, 2002 and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently,” the SC stated in its judgment.
