No change in the amount of tax whether it is CST or VAT, HC

Facts in Brief:

1. This writ petition has been preferred mainly on the ground that respondent No.6 has raised tax invoice levying Central Sales Tax instead of Value Added Tax which is applicable within the State of Jharkhand.

2. Petitioner is aggrieved by Annexure 4 in which CST is charged at the rate of 5% and the total value of CST mentioned in the invoice at Rs.7,65,383.07. Instead of CST, this should have been VAT under the Jharkhand Value Added Tax Act, 2005, because the petitioner is e-auction purchaser of coal within the State of Jharkhand.

3. He is a registered dealer within the Stateof Jharkhand. The seller and purchaser of the goods are within the State of Jharkhand. The whole transaction of sale has been completed within the State of Jharkhand and, therefore, the Annexure 4 as CST Invoice cannot be issued.

4. In fact, it should have been VAT and respondent No.6 is at no loss at all , because the VAT is also at the rate of 5% and the CST is at the rate of 5%, but it would make a difference for this petitioner for getting input tax credit under Section 18 of the Jharkhand Value Added Tax Act, 2005 to be read with Rule 26 of the Value Added Tax Rules, 2006.

5. Similarly, it also makes a difference to the subsequent purchaser of coal, who is at Uttarakhand, because the petitioner is a registered dealer and, therefore, at Uttarakhand, the purchaser of the coal from this petitioner is in a second sale which is also altogether a different transaction, he will have to pay CST at the rate of 2%.

6. This will make a difference to the petitioner as well as the subsequent purchaser of the coal from the petitioner, but, fact remains that so far as respondent No.6 is concerned, it makes not difference, because for VAT as well as for CST, the rate of tax is 5%. Thus, even though, there will be no change in the amount of tax which is Rs.7,65,383.07, the petitioner as well as his subsequent purchaser (at Uttarakhand), it will make a difference if, invoice is changed from CST to VAT.

7. This aspect of the matter has not been properly appreciated by the respondent No.6 and, therefore, the present petition has been preferred for making necessary corrections through respondent No.6 in a Tax Cum Excise Invoice (Rail Sale).

HC held as under,

8. In the present case, there is no conceivable legal link between the auction sale in Tamil Nadu and the movement of goods to Karnataka. The said movement was purely voluntary at the option of the petitioner and not under any legal obligation. Hence, the decision in South India Viscose Ltd. v. State of Tamil Nadu [1981] 48 STC 232 (SC); AIR 1981 SC 1604 is clearly distinguishable."

9. The decision of the Division Bench, cited supra, fortifies the view now taken by this court. For the reasons stated supra and in view of the decision of the Division Bench of this court, the plea of the petitioners that it is an inter-State sale has no legal basis and hence,the said contention is rejected.

10. The challenge to levy of Tamil Nadu value added tax therefore fails."

(xv) In view of the aforesaid decision, even if the movement of goods have taken place out of one State to another State, by per se, CST is not leviable. One has to draw his attention, whether the movement of goods from one State to another has taken place due to e-auction or not. If answer is negative, the CST is not leviable. There may be second sale. Subsequent purchaser may purchase the same goods. Now, if due to subsequent sale, if, the very same goods are moving from one State to another, therefore seller of goods of first transaction cannot levy CST but he can levy only VAT.

11. In view of the facts, reasons and judicial pronouncements, the CST, levied at the rate of 5% by respondent no.6 is impermissible in the eyes of law. Instead of that, it should have been VAT under the Jharkhand Value Added Tax Act, 2005. We, therefore, direct the respondents to make necessary suitable changes at Annexure 4 which is Tax Cum Excise Invoice (Rail Sale). There will be no change in the amount of tax whether it is CST or VAT. The rate of tax is the same i.e. 5%. Therefore, instead of CST in Column 12 at Annexure 4, it should be VAT. This change shall be carried out by the respondent no.6 within a period of four weeks from today. We, therefore, direct the respondents- authorities to issue form JVAT-404 under Jharkhand Value Added Tax Act, 2005 within a period of four weeks from today.

12. This writ petition is allowed without imposing cost upon the respondents. 

Case Reference - Ms Amit Enterprises Through Its ... vs Central Coalfields.