Madras High Court Holds State Must Issue C-Forms for ENA Purchases Pending GST Council Decision and Statutory Amendment

Background: The dispute arose when the State refused to issue C-Forms to a manufacturer of alcoholic liquor for human consumption for the purchase of Extra Neutral Alcohol (ENA) from other states. The State’s refusal was based on the introduction of the GST regime from 01.07.2017, which, according to the State, did not permit the issuance of C-Forms for ENA. The respondent challenged this denial by seeking a writ of mandamus before the High Court.

Single Judge’s Order: The Learned Single Judge, after examining the matter, noted that the GST Council had not reached a consensus on the inclusion of ENA within the GST regime. The Council had consciously decided to maintain status quo regarding ENA, pending further legal opinion and possible statutory amendment. In light of this, the Single Judge directed the State to issue C-Forms for ENA purchases until the law was suitably amended.

State’s Appeal and Submissions: The State, aggrieved by the Single Judge’s order, filed an intra-court appeal. It was submitted that an amendment to the VAT Act had since been enacted, specifically excluding un-denatured ENA or rectified spirit used for manufacturing alcoholic liquor for human consumption from the VAT regime, effective from 12.11.2024. The State argued that for the period between 01.07.2017 and 12.11.2024, the respondents were liable to be taxed under the GST Act and were not entitled to C-Forms, as the amendment was prospective.

Division Bench Reasoning: The Division Bench observed that the GST Council, as the supreme authority on tax matters, had not taken a definitive decision on the tax treatment of ENA and had opted to maintain status quo. The Court interpreted this as a continuation of the pre-GST regime, under which C-Forms were issued for such transactions. The Bench emphasized that the indecision of the GST Council could not be allowed to impede the fundamental right to trade of manufacturers dependent on interstate ENA supplies.

Legal Principle and Decision: The Court held that, in the absence of a clear statutory amendment and in light of the GST Council’s decision to maintain status quo, the State was obligated to issue C-Forms for ENA purchases made for manufacturing alcoholic liquor for human consumption. The Court found no error in the Single Judge’s order and dismissed the State’s appeal, directing the State to issue C-Forms to the respondents, subject to compliance with other statutory requirements.

Conclusion: The Madras High Court reaffirmed that the right to trade cannot be curtailed due to legislative indecision and that status quo as maintained by the GST Council must be respected until a clear statutory amendment is enacted. The State was directed to comply with the order and issue C-Forms accordingly.