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Informist, Wednesday, Feb. 12, 2025

 

NEW DELHI – The Supreme Court Wednesday rejected the Maharashtra government's notices revising the sales tax assessments of Prism Cement Ltd. and other companies and demanding payment of exempted sales tax only because they did not submit Form C and Form D in support of inter-state sales. The court said the requirement of submitting these forms only applied prospectively from May 11, 2002, when the central government amended the Central Sales Tax Act, 1956.

 

The order comes as a relief to Prism Cement, Jindal Photo Ltd., Voltas Ltd., Ramco Industries Ltd., and Blue Star Ltd., all respondents in the case. After Section 8(5) of the 1956 Act was amended, the state government could not pass a unilateral order affecting the rights of the assessees to claim absolute exemption from payment of tax, the court said.

 

"The requirement for fulfilling the condition of Section 8(4) of the CST Act (1956) for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from May 11, 2002, and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently," the court ruled.

 

The case had its genesis from Prism Cement challenging the three trade circulars issued by the commissioner of sales tax, Mumbai, and various notices issued by the deputy commissioner of sales tax revising its assessments for the assessment years 2002-2003 (Apr-Mar) to 2004-2005. The tax department called upon Prism Cement to pay the exempted portion of sales tax in those years as per the provision of the Package Scheme of Incentives, 1993, on sale of goods effected in the course of inter-state trade or commerce. 

 

In 1993, the state government had introduced the Package Scheme of Incentives to encourage the establishment of industrial units in backward areas. The scheme envisaged tax incentives, including partial or total exemption from payment of sales tax under the Bombay Sales Tax Act, 1959, and the Central Sales Tax Act, 1956. Accordingly, Prism Cement was granted exemption under the scheme in 1998 from payment of sales tax to the extent of INR 2.74 billion or up till 2012, whichever was earlier.

 

In 2002, the central government brought an amendment to the 1956 law stating that exemptions granted in the context of interstate trade and commerce would be admissible only if the two forms were submitted.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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