Ms Steel Authority Of INDIA Limited Through Ramesh Chandra vs. The State Of Jharkhand Through Its Principal Secretary Commissioner Of Commercial Taxes

Held

The Court held that the expression 'goods' in the second half of Section 8(3)(b) of the CST Act, 1956, does not necessarily mean 'goods' as defined under Section 2(d) of the CST Act. The Court found the reasoning of the Hon'ble Supreme Court in Printers (Mysore) Ltd.'s case to be fully applicable to the present facts, establishing that the word 'goods' in that context could refer to manufactured goods, irrespective of the definition in Section 2(d). Furthermore, the Court held that registration of a dealer under Section 7(2) of the CST Act is not subject to their liability to pay tax. Dealers are entitled to remain registered irrespective of whether they are liable to pay tax to the State. Consequently, the Court found no merit in the State's submission that dealers no longer liable to pay tax under the JVAT Act should have their registration under Section 7(2) automatically terminated. The Court quashed the impugned circular dated October 11, 2017, finding its reasoning to be legally unsustainable. The Court directed that provisional credit notes issued to petitioners should be given effect to, and refunds should be provided where applicable. The Court also clarified that appropriate action could be taken against individual dealers for misutilization of Form-C after due notice and opportunity to show cause, but a blanket denial of benefits was not permissible.

Facts

This judgment consolidates multiple writ petitions filed by various companies, including Tata Steel Limited, M/s. Mahalaxmi Infracontract Pvt. Ltd., and Bharat Coking Coal Ltd., against the State of Jharkhand and the Union of India. The core issue revolves around the interpretation of 'goods' under Section 8(3)(b) of the Central Sales Tax (CST) Act, 1956, and its implications for dealers registered under Section 7(2) of the CST Act. The petitioners challenged a circular dated October 11, 2017, issued by the Commercial Taxes Department of the State Government, which they contended led to a denial of benefits, specifically the issuance of Form-C, and consequently, the refund of taxes paid. The petitioners argued that their registration under Section 7(2) should not be terminated solely because they might not be liable to pay tax on certain transactions under the JVAT Act, especially when the definition of 'goods' in Section 2(i) of the CST Act, defining 'Sales tax law', was interpreted restrictively by the State.

Key Issues

1. Whether the expression 'goods' in the second half of Section 8(3)(b) of the CST Act, 1956, must necessarily refer to 'goods' as defined in Section 2(d) of the CST Act, 1956, particularly in light of the amendment to Section 2(d) which restricted its scope. The petitioner argued that the Hon'ble Supreme Court in Printers (Mysore) Ltd.'s case held that 'goods' in the latter part of Section 8(3)(b) could refer to manufactured goods, not necessarily those defined in Section 2(d). They relied on this precedent to argue that their end products need not be 'goods' as per Section 2(d). The State contended that the meaning of 'goods' in Section 8(3)(b) should be restricted to the definition in Section 2(d) of the CST Act, especially after its amendment, and that dealers no longer liable to pay tax under the JVAT Act should have their registration under Section 7(2) automatically cease. 2. Whether the circular dated October 11, 2017, issued by the State Government, which led to the denial of Form-C benefits and the termination of dealer registrations, is legally sustainable. The petitioner argued that the reasoning for the circular was flawed, as registration under Section 7(2) is not contingent on tax liability, citing Commissioner of Sales Tax, M.P. Vs. Madhya Bharat Papers Ltd. The State's apprehension about the misutilization of Form-C was also addressed.