M/S.Rungta Sons PVT.LTD. vs. State Of Orissa
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The petitioner challenged a circular dated August 17, 2017, issued by the State Government, which directed persons dealing with High-Speed Diesel (HSD) to pay GST. The petitioner relied on a Punjab and Haryana High Court decision in the case of Carpo Power Limited, which held that 'C' Forms should be issued for natural gas purchased for electricity generation, even after the implementation of GST. This decision was upheld by the Supreme Court. The Central Government subsequently issued a clarification on November 1, 2018, forwarding the High Court and Supreme Court judgments for compliance. The petitioner argued that the issue was settled and that the State Government's circular was contrary to established legal precedents from multiple High Courts, including those in Chhattisgarh, Rajasthan, Madras, and Gauhati, which had also ruled in favour of issuing 'C' Forms for inter-state purchases of goods like HSD for manufacturing, mining, and power generation.
Held
The Court held that the circular dated August 17, 2017, issued by the State Government, is no longer enforceable. This decision is based on the reasoning that the Punjab and Haryana High Court had partially quashed this circular, and its decision was subsequently approved by the Hon'ble Supreme Court. Furthermore, other High Courts have taken a similar view, consistently ruling in favour of issuing 'C' Forms for inter-state purchases of goods like HSD when used for manufacturing, mining, or power generation. The Court found it inappropriate to enforce the earlier circular given these judicial pronouncements. The ratio decidendi is that post-GST, the principles established in cases like Carpo Power Limited and other cited High Court judgments regarding the entitlement to 'C' Forms for specific industrial uses remain applicable. The Court directed the State Government to follow and act in accordance with the ratio of these decisions, and the circular dated November 1, 2018, along with the referred judgments, will prevail. The writ petition was disposed of with these observations and directions.
Key Issues
1. Whether the circular dated August 17, 2017, issued by the State Government, which directed persons dealing with HSD to pay GST, is valid in light of subsequent judicial pronouncements and clarifications, particularly concerning the issuance of 'C' Forms for inter-state purchases of goods used in manufacturing, mining, or power generation? (Question of law) The petitioner contended that the issue is no longer res integra, as the law has been settled by the Punjab and Haryana High Court in the case of Carpo Power Limited, which was upheld by the Supreme Court. They argued that the State Government's circular was contrary to decisions from five other High Courts (Chhattisgarh, Rajasthan, Madras, Gauhati, and Punjab & Haryana), which had consistently held that dealers are entitled to 'C' Forms for inter-state purchases of goods like HSD for manufacturing, mining, or power generation, even post-GST. The petitioner relied on these High Court judgments and the Supreme Court's dismissal of the Special Leave Petition in the Carpo Power Limited case. The revenue or State did not record any specific arguments in the judgment.
Sections Cited
Section 8, Section 7(2), Section 7(4), Section 18
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13.12.2018
Heard learned counsel for the parties.
By way of this writ petition, the petitioner has challenged the circular dated 17.08.2017 (Annexure-5) issued by the State Government whereby the persons who are dealing with H has been directed to pay GST. The issue was before different High Courts, more particularly, learned counsel for the petitioner has relied upon the decision of Punjab and Haryana High Court in the case of Carpo Power Limited –v- State of Haryana and Ors., which was disposed of on 28.03.2018, more particularly paragraphs-26, 27 and 28, reads as under:
“xxx xxx xxx
The provisions of Section 8 of the CST Act, Rule 12 of CST (R&T) Rules and declaration Form C have not undergone any amendment after the implementation of the GST laws. There cannot be any occasion to restrict the usage of `C’ Form only for the purposes of re-sale of the six items mentioned in the amended definition of `goods’ in Section 2 (d) of the CST Act. The purchase of the said goods for purposes of re- sale, use in the manufacture or processing of goods for sale, in the tele-communications network or mining or in generation or distribution of electricity or any other form of power would qualify the purchaser for registration under Section 7 (2) of the CST Act. Section 7 (2) does not stipulate that only a dealer liable to pay tax under the sales tax law of the appropriate State in respect of any particular goods is entitled to apply for registration. Nor does section 7 (2) stipulate that an application for registration can be made or `C' Form can be issued only in respect of the sale of the same goods prescribed in the course of an inter-state sale. A dealer liable to pay tax under the sales tax law of the appropriate State in respect of any goods would be covered by Section 7 (2) of the Act. W.P.(C) No. 8472 of 2018
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There is another aspect of the matter that the registration certificate given to the petitioner under the CST Act till date has not been cancelled. As per Section 7 (4) of the CST Act, the registration certificate granted has to be amended or cancelled. The said provisions have not been invoked.
In these circumstances, the writ petition is allowed. It is held that the respondents are liable to issue `C' Forms in respect of the natural gas purchased by the petitioner from the Oil Companies in Gujarat and used in the generation or distribution of electricity at its power plants in Haryana. In the event of the petitioner having had to pay the oil companies any amount on account of the first respondent's wrongful refusal to issue `C' Forms the petitioner shall be entitled to refund and/or adjustment of the same from the concerned authorities who collected the excess tax through the oil companies or otherwise. The concerned authorities shall process such a claim within twelve weeks of the same being made by the petitioner in writing and the petitioner furnishing the requisite documents/form.”
The aforesaid decision of Punjab and Haryana High Court was the subject matter of S.L.P. to Appeal (C) No. 20572 of 2018 before the Hon’ble Supreme Court, which came to be dismissed on 13.08.2018 after which the Central Government has come out with the clarification by their letter dated 01.11.2018, which reads as under:- “F-No. S-29012/64/2018-ST-II-DoR Government of India Ministry of Finance Department of Revenue State Taxes Section. **** Room No.275 North Block, New Delhi Dated the 1st November, 2018. To
The Commissioner of Commercial Tax
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of All States/Union Territories.
Subject:- Regarding definition of goods in sub- section (3)(b) of section 8 of the Central Sales Tax Act, 1956 and issuance of Form-C.
Sir/Madam,
I am directed to refer to OM dated 07.11.2017 (copy enclosed) regarding clarification of definition of goods in sub-section (3)(b) of section 8 of the Central Sales Tax Act, 1956 and to say that Hon’ble Punjab and Haryana High Court has considered the issue of ‘C’ Forms in respect of Natural Gas purchased by the petitioner in one state and used in another state vide judgment dated 28.03.2018 in CWP No.2943/2017 filed by Carpo Powers Limited which has been upheld by Hon’ble Supreme Court vide its Order dated 13.08.2018 in SLP No. 20572/2018 in this matter.
This matter has been examined in Department of Revenue and it has been decided to forward copy of aforesaid judgment dated 28.03.2018 (copy enclosed) of Hon’ble High Court of Punjab and Haryana and Order dated 13.08.2018 (copy enclosed) of Hon’ble Supreme Court for compliance in the respective States.
Encl: As above.
Yours faithfully (Mahendra Nath) Under Secretary (Sales Tax Section –II)
Tele:23092419
In that view of the matter, learned counsel for the petitioner contended that now the issue is no more res integra. The law is now settled. However, it has also been endeavoured that all issues or activities which are covered under Section 18 of CGST Act were also required to be considered in view of the circular issued by the State Government and non-consideration of which is contrary to
4 the decisions delivered by the following five respective High Courts: (i) Capro Power Limited Vs. The State of Haryana & Ors reported in 2018-VIL-154-P&H:- In this case, after amendment of the definition “goods” in Central Sales Tax Act, 1956, State of Haryana refused to issue Form C in respect of natural gas purchased by the petitioner in the course of the inter-state trade and commerce for generation of electricity on the ground that after implementation of CGST Act, 2017, the petitioner is not entitled to make inter-state purchase of natural gas on the strength of Form C. The Punjab & Haryana High Court after considering various provisions of the CST Act, 1956 as well as CGST Act, 2017 has held that respondents are liable to issue Form-C in respect of the natural Chhattisgarh & Ors reported in 2018-VIL-225- CHG:- In this case, the with effect from 01.07.2017, from the date of implementation of CGST Act, 2017, C Forms was not being issued to the assesses by showing message as ED9 i.e. invoice date should be less than 1st July, 2017. Thereafter, Petitioner being manufacturer of cement approached before Chhattisgarh High court and High Court of Chattisgarh by placing reliance upon the reliance upon the decision of Hon’ble Punjab & Haryana High Court delivered in Capro Power Case (supra) was pleased to hold that Respondents are liable to issue Form C to the petitioner and directed respondents to issue Form C in respect of H to be purchased by the petitioner and used in the course of manufacturing of cement. Even, respondents were directed to remove error on their official website and entertain applications, submitted on-line seeking issuance of Form C. (iii) Rajasthan & Ors. Reported in 2018-VIL-233-RAJ:- Similarly, in this case, petitioner being engaged in mining of Zinc was refused to issue Form C with respect to inter-state purchase of H for running of plant & machinery at mines of the petitioner. The Hon’ble Rajasthan High Court in terms of the decision of Capro power Limited (Supra) has pleased to held
5 that respondents are liable to issue C forms in respect of the H procured for mining purpose through inter- state trade. (iv) M/s. The Ramco Cements Ltd. Vs. The Commissioner of Commercial Taxes, Cehepuk, Chennai reported in 2018-VIL-494-MAD:- In this case, a similar letter dated 31.05.2018 was issued by the Commissioner of Commercial Taxes, Chepuk, Chennai-5 wherein manufacturer as well as mining dealers were made disentitle for inter-state purchase of H at concessional rate on strength of Form C in the writ petitions filed by several dealers, the Hon’ble Court by placing reliance upon the judgment of various High Courts was pleased to hold that the dealer who purchased the goods in the course of inter- Assam & Ors. Reported in 2018-VIL-459-GAU:- In this case a similar circular being circular No.7/2017- GST dated 05.09.2017 was issued by Finance & Taxation Department through Commissioner of Taxes, Assam wherein clarification was given that post GST Regime, purchase of “six goods” for the purpose of being used in manufacturing of any goods other than those six goods, dealers cannot avail the benefit of paying CST at concessional rate by utilizing Form C. In the writ petition filed by the dealer engaged in manufacturing of clinker, the Hon’ble Court was pleased to set aside the circular dated 05.08.2017.”
Taking into consideration, we are of the opinion that the circular dated 17th August, 2017, which is partially quashed by Punjab and Haryana High Court and has been approved by the Hon’ble Supreme Court. Other High Courts also have taken a similar view. In that view of the matter, it will not be appropriate to now enforce the circular dated 17.8.2017 and the circular of 1st November, 2018 will prevail along with the judgments which are referred herein above, the authorities are bound to implement all decisions referred to above and
6 we are approving the ratio laid bound those decisions and we direct the State Government to follow and act in accordance with the ratio of those decisions.
With the aforesaid observation and direction, this writ petition stands disposed of.
Urgent certified copy of this order be granted on proper application.
mp .…….......……………… ( K.S. Jhaveri ) Chief Justice
…………………..……… (Biswanath Rath) Judge
Reproduced from the public record of the Orissa High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.