Justice Abhay S. Oka, Justice Ujjal Bhuyan, Supreme Court
State Govt. Can’t Frame Rules Which Will Be Inconsistent With Rules Framed By Central Govt. U/s. 13(1) Central Sales Tax Act: Supreme Court
|The Supreme Court upheld the decision by the High Court, which held that the State had no rule-making power to frame a rule providing for the cancellation of validly issued declarations/forms.
The Supreme Court held that the State Government cannot frame rules in exercise of power under Section 13(3) which will be inconsistent with the rules framed by the Central Government in exercise of powers under Section 13(1) of the CST Act.
The Court upheld the decision by the Rajasthan High Court, wherein the validity of a specific sub-rule within the Central Sales Tax (Rajasthan) Rules, 1957 (Rules) came to be challenged. The High Court held that the State had no rule-making power to frame a rule providing for the cancellation of validly issued declarations/forms under the Central Sales Tax Act, 1956 (CST Act).
A Bench of Justice Abhay S Oka and Justice Ujjal Bhuyan remarked that “the Central Registration Rules have laid down the form of declaration referred to in Section 8(4). A perusal of the Central Registration Rules shows that no power is conferred on any authority to cancel the declaration in Form C. Thus, the rules which prescribe the form of declaration in terms of Section 8(4), do not provide for cancellation of the declaration on the ground that commercial activities were not found at the address mentioned in the declaration.”
AOR Irshad Ahmad represented the Appellants, while Advocate Rajesh Jain appeared for the Respondent.
Brief Facts
Sub-rule (20) of Rule 17, was added to the Rules through an amendment. This sub-rule granted the assessing authority or any other authorised authority the power to cancel declaration forms or certificates if they were generated through misrepresentation, fraud, or contravention of the CST Act and its associated rules, after providing the dealer an opportunity to be heard.
The High Court, however, held that the State did not have the authority to create a rule that allowed for the cancellation of validly issued declarations or forms. The Court held that sub-rule (20) of Rule 17 was ultra vires Sections 8(4), 13(1)(d), 13(3), and 13(4)(e) of the CST Act.
Court’s Reasoning
“The Central Government has the rulemaking power to prescribe the form of declaration and lay down particulars to be contained in any declaration. Therefore, the form of declaration under Section 8(4) and the contents thereof are to be provided by the rules framed by the Central Government in accordance with Section 13(1)(d) of the CST Act,” the Supreme Court noted.
The Bench remarked that “if the State Government exercises the rulemaking power under sub-section (3) of Section 13 by making rules providing for cancellation of a declaration in Form C as provided in Central Registration Rules, the State Rules will be inconsistent with the Central Registration Rules framed by the Central Government in exercise of power under Section 13(1)(d) of the CST Act.”
Consequently, the Court held, “The State Government cannot frame rules in exercise of power under Section 13(3) which will be inconsistent with the rules framed by the Central Government in exercise of powers under Section 13(1) of the CST Act.”
“Therefore, for the reasons set out above, it is not possible to find fault with the view taken by the High Court that sub-rule (20) of Rule 17 of the Rajasthan Rules is inconsistent with the Central Registration Rules framed in exercise of power under clause (d) of sub-section (1) of Section 13 of the CST Act,” the Bench ordered.
Accordingly, the Supreme Court dismissed the Appeal.
Cause Title: The State Of Rajasthan & Ors. v. Combined Traders (Neutral Citation: 2025 INSC 496)
Appearance:
Appellants: AOR Irshad Ahmad
Respondent: AOR Avadh Bihari Kaushik; Advocates Rajesh Jain, Virag Tiwari, K.J Bhat, Ramashish, Tanya Saraswat and Rishabh Jain