SKP Tax Alert
25 March 2015 | Volume 7 Issue 24
Duplicate copy of 'Form C' accepted in case Original 'Form C' is lost by the Authorities
On inter-state sale transactions in India, Central Sales Tax (CST) is leviable on the sale value of the goods. Under the CST laws, CST would be charged at the rate of VAT as applicable in the seller's state on such goods. However, the dealer is entitled to charge a lower rate of CST i.e. 2%, subject to conditions and provided that a declaration form (i.e. Form C) is obtained from the buyer.
 
Form C is divided in to three parts viz. Original, Duplicate and Counterfoil copy. The portion marked original needs to be submitted with the sales tax authorities in order to avail the benefit of lower rate of 2% by the seller, the duplicate is maintained by the selling dealer for his records and counterfoil is kept by the purchasing dealer.
 
In case the submission could not be made due to loss of the original C Form, the purchasing/selling dealer is required to furnish an indemnity bond in Form G to the notified authority depending on whether Form C is lost in custody of the purchasing dealer or the selling dealer.
 
However, even on submission of the duplicate C Form and indemnity bond, the claim of a lower rate of tax is rejected in most cases, on the ground that submission of the original C Form is not made with the authorities.
 
However, in a recent judgment delivered by the Madras High Court in the case of M/s Sree Kumar Engineering Works Vs The Assistant Commissioner (CT), 2015-VIL-77-Mad, the Court held that the duplicate copy of Form C can be accepted at the Appellate stage in case the original copy of Form C which is submitted to them is lost by the Authorities.

Brief facts of the case and ruling
  • Sree Kumar Engineering Works (Appellant) is engaged in the trade of Magnesite powder(commodity) in India, which is taxable under the Tamil Nadu Value Added Tax (VAT) Act, 2006. The appellant has undertaken inter-state sale of such a commodity on which CST is payable.
  • In the present case, the appellant had submitted the C Form as the original with the authorities for inter-state sale of the commodity, and the original C Form was endorsed by the authorities.
  • However, at the time of assessment, as the authorities were unable to trace the original C Form and on the grounds that on loss of the C Form, the indemnity bond as prescribed was not submitted and the rate of tax prescribed under the VAT laws was levied.
  • The appellant argued that as the authorities are unable to trace the C Form in their records, and that the duplicate copy of the C Form should be accepted, as they are not under an obligation to produce an indemnity bond, when the authorities have lost the original C Form.  
Ruling
  • The High Court observed that as per the State CST Rules, the selling dealer has an option to submit all the declaration forms before the final assessment of the accounts of that year. In the given case, the appellant has submitted the original C Form with the authorities before the final assessment as evidenced by the endorsement to this effect.
  • It was noted that as per the CST Rules where a declaration form is lost in the custody of the purchasing dealer or selling dealer, the dealer would have to furnish an indemnity bond in Form G to the notified authority.
  • Emphasis was laid on the fact that the dealer would be obligated to furnish an indemnity bond only in case where the original C Form is lost in the custody of the dealer. When the declaration is misplaced by the authorities, there is no duty cast upon the dealer to file indemnity bond.
  • The matter was remanded back to the authority for passing appropriate orders after considering the duplicate C Form available with the appellant.
SKP's comments
  • Basis the judgment, taxpayers can adopt a position that in their pending matters, wherein declaration forms such as C, F, H, I, etc. are lost by the authorities, claim of benefit should not be denied on production of duplicate copy of forms, and without furnishing an indemnity bond.
  • Further, in case of loss of original declaration forms, the authorities should accept a duplicate copy of the declaration on furnishing of an indemnity bond as per the provisions of the CST Rules. However, we have observed that in most cases, the authorities reject the claim of lower rate of tax even on compliance with such a condition. Accordingly, taxpayers should be prudent and ensure that sufficient measures are taken to retain original declaration forms.
In case of any questions or clarifications, please feel free to contact us.

SKP
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This SKP Tax Alert contains general information existing at the time of its preparation only. It is intended as a news update and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or opinion or services. This tax alert is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and also refer to the source pronouncement/documents on which this tax alert is based. It is also expressly clarified that this tax alert is not a solicitation or an invitation of any sort whatsoever or a source of advertising from SKP Group or any of its entities to create any adviser-client relationship.

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