M/S Kataria Automobiles Limited&Anr.V. State of Gujarat, Appeal No. 535 of 2010, dated 18th July, 2016, (Guj).

Accordingly, the appellant had paid tax @ 4% on its inter-state sales affected without C forms. The revenue did not accept the claim in view of the amendment to section 8(5) of the CST Act from 11.05.2002. The Tribunal also dismissed the claim and the appellant filed appeal before the Gujarat High Court against the said decision of Tribunal.

Held:
For applying the rate of tax on inter-State sales, two conditions have been laid down in Section 8. Section 8(1) lays down the condition that if sales are supported by ‘C Forms’, then concessional rate is supposed to be applied and Section 8(2) lays down that if sales are not supported by ‘C Forms’, then higher rate is applicable.

The amendment dated 11.05.2002 has inserted the condition in Section 8(5) that the State Government can exercise the powers vested in them subject to conditions laid down in Section 8(4). Section 8(4) states that benefit of concessional rate as provided for u/s 8(1) is allowable subject to the submission of ‘C Forms’.

In other words, the conditions laid down in Section 8(4) are in relation to Section 8(1) meaning thereby that on fulfillment of conditions, laid down in Section 8(4), the sale would be accepted and treated as sale under Section 8(1) otherwise, it would be considered as sale covered and governed by Section 8(2). Thus, the amendment in anyway, does not affect Section 8(2) as it is in connection with Section 8(1). The State Government had issued several Notifications u/s 8(5) with respect to Section 8(1) until 11.05.2002, which is the date on which the amendment was brought in. By the said amendment, the Legislature intended to restrict the issuance of Notifications with respect to conditions laid down in Section 8(1) and 8(4). If the amendment is treated to be affecting Section 8(2) then the said section would become redundant, which is not the intention of the Legislature.The amendment dated11.05.2002 does not affect or restrict the powers of State Government to issue Notifications u/s 8(5) with respect to Section 8(2).
Therefore, the State Governments can issue Notifications u/s 8(5) reducing the rate of tax with respect to transactions falling u/s 8(2) even after this amendment. In any case, the amendment does not affect the Notifications issued prior to amendment. It is settled position of law that Notifications hold the field unless they are specifically rescinded and the Notification in question, has been rescinded w.e.f. 31.03.2006 and so, it holds the field till then.
Hence, the authorities are bound to follow the same.

Accordingly, the High Court allowed the appeal and held that the rate of CST would be 4% in respect of all inter-state sales affected without C forms under the said notification till it was rescinded.