Decision to disallow sales against 'C' Form/CST held ultra vires, HC

Facts in Brief:

1. The Petitioner is the proprietor of a concern which engages in the business of electrical items, including the purchase and sale of meter accessories, old meters, meter parts and other electrical goods.

2. The Vbc 2/11 wpl83.12.22.3 Petitioner has a registration certificate issued under the Rajasthan VAT Act, 2003, dated 26 September 1988 issued with reference to the provisions of Sub-sections (1) and (3) of Section 8 of the Central Sales Tax Act, 1956 inter alia in regard to metal scrap, meter parts, electrical meters and other parts.

3. The Second Respondent issued a notice on its web portal of an e-auction for scrap items lying at the store of the First Respondent at Pune.

4. The e-auction was to take place on 19 January 2012. The Petitioner furnished a demand draft on 16 January 2012 in favour of the First Respondent being a bidder from the State of Rajasthan. Clause 7.8 of the terms and conditions governing the auction sale contain the following stipulation:

" Normally all sale will be treated as Local Sale and the Buyer shall have to pay VAT/Sales tax as per the local Sales Tax Act/Rules/Tariff of the State. Sale against 'C' form/CST will not be allowed."

5. The contention of the Petitioner is that restraining the benefit of a concessional rate of duty against the "C" Form to a purchaser situated outside the State of Maharashtra constitutes a violation of the freedom of inter-state trade and commerce and is, therefore, in breach of Article 301 of the Constitution.

6. Moreover, it is urged that the effect of clause 7.8 is to breach the provisions of Section 8 of the Central Sales Tax Act, 1956 and Vbc 3/11 wpl83.12.22.3 effectively to restrict a bidder participating from outside the State of Maharashtra by stipulating that sales against "C" Form/CST will not be allowed. According to the Petitioner, the First Respondent is an instrumentality of the State and falls within the purview of Article 12 of the Constitution.

7. The impugned condition in the tender is stated to be violative of the provisions of Article 14 of the Constitution.

On appeal HC held as under,

8. We are of the view that the stipulation Vbc 11/11 wpl83.12.22.3 contained in clause 7.8 to the effect that "sale against "C" Form/CST will not be allowed" is ultra vires. We, however, clarify that bearing in mind the judgment of the Supreme Court in Zunaid Enterprises, we have not rendered any finding one way or the other as to whether the sale which is occasioned by the e-auction notice issued by the First Respondent occasions a sale in the course of inter-State trade and commerce under Section 8(1) and (3) of the Central Sales Tax Act which is a matter to be determined by the assessing authority if and when such an issue arises during the course of assessment.

9. Rule is made absolute in the aforesaid terms. There shall be no order as to costs. 

Case Reference - M/S.Anshu Iron & Electricals vs Maharashtra State Electricity .