17 March 2021
A dealer of U.P. (who is a basically a service provider) and registered under section 7(2) of Central Sales Tax Act 1956, subsequently sold Used Heavy Machinery (goods in registration certificate include "Machinery, part and accessories thereof") to a registered dealer in Delhi state and obtain form "C" from purchasing dealer and consequently charge 2% CST on sale. At the time of assessment proceedings assessing officer argues that benefit of concessional rate of 2% can not be given to dealer registered under section 7(2) and registration should have been amended to section 7(1) within 30 days of transaction. Now sale of machinery shall be treated as normal sale in the state and chargeable to full rate of 14% of Tax. Whether he is right or wrong because machinery transferred is of Rs. 2 Crores and tax amount is very huge.
06 July 2024
The issue revolves around the applicability of concessional rate of Central Sales Tax (CST) under section 7(2) of the Central Sales Tax Act, 1956, for the sale of used heavy machinery by a dealer registered in Uttar Pradesh to a dealer in Delhi.
Here are the key points to consider:
1. **Section 7(2) Registration**: Section 7(2) registration under the CST Act is typically for dealers who do not make interstate sales in the course of business but occasionally make sales in the course of interstate trade or commerce. Such dealers are entitled to charge CST at concessional rates when they obtain Form C from the purchasing dealer, which is 2% in most cases.
2. **Amendment to Section 7(1)**: The assessing officer argues that the registration should have been amended to section 7(1) within 30 days of the transaction. Section 7(1) registration is for dealers engaged in the business of interstate trade or commerce and is eligible for concessional rates of CST.
3. **Interpretation of Applicability**: - Section 7(2) dealers can avail the concessional rate of CST (2%) when they sell goods in the course of interstate trade or commerce and obtain Form C from the purchaser. - There is no explicit requirement under the CST Act that section 7(2) registration must be amended to section 7(1) for occasional sales. The crucial factor is whether the sale qualifies under the conditions set out in section 7(2), which typically includes the condition of obtaining Form C.
4. **Assessment Proceedings**: - The assessing officer's argument that the dealer should have amended their registration to section 7(1) within 30 days appears to be a misinterpretation or an overly strict application of the provisions. - As long as the dealer meets the conditions under section 7(2) for occasional interstate sales and complies with the requirement of obtaining Form C, they are eligible to charge CST at the concessional rate.
5. **Legal Recourse**: - It may be advisable for the dealer to challenge the assessing officer's decision through appropriate legal channels, highlighting the correct interpretation of section 7(2) and presenting supporting documents such as Form C obtained from the purchasing dealer. - Consulting with a tax advisor or legal expert specializing in indirect taxation can provide specific guidance and help navigate the legal recourse effectively.
In conclusion, based on the information provided and the usual interpretation of the CST Act, the dealer registered under section 7(2) should be eligible for the concessional rate of CST (2%) on the sale of used heavy machinery, provided they have complied with the conditions of section 7(2) including obtaining Form C.
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