Divergent views and GST Council indecision cannot deprive liquor

Divergent views and GST Council indecision cannot deprive liquor manufacturers of their entitlement to C-Forms.

Issue

Whether a state government can refuse to issue C-Forms under the Central Sales Tax Act, 1956 for the inter-State purchase of Extra Neutral Alcohol (ENA) used in manufacturing alcoholic liquor for human consumption during the transitional period (1 July 2017 to 12 November 2024), citing ongoing GST Council deliberations and subsequent state VAT amendments.

Facts

The Respondent is a liquor manufacturer who sought C-Forms for the inter-State purchase of ENA, an essential raw material for manufacturing alcoholic liquor for human consumption.
The State refused to issue the C-Forms, arguing that the tax landscape had shifted with the introduction of the Goods and Services Tax (GST) regime on 1 July 2017.
During this period, the GST Council faced divergent views on whether ENA used for manufacturing alcoholic liquor fell under the purview of GST. Consequently, the Council deferred its decision and ordered a “status quo.”
The State later amended its local Value Added Tax (VAT) charging section effective from 12 November 2024. Based on this prospective amendment, the State argued it was not liable to issue C-Forms for the retrospective period starting 1 July 2017.
A Single Judge previously directed the State to issue the C-Forms up until the date of explicit statutory exclusion, leading the State to file the present Writ Appeal.

Decision

Interpretation of “Status Quo”: The Appellate Court held that the “status quo” ordered by the GST Council must be interpreted as maintaining the legal position that existed prior to 1 July 2017 (the pre-GST regime), where C-Form entitlements for such raw materials were valid.
Protection of Trade Rights: The Court ruled that administrative indecision or a deadlock within the GST Council cannot be used as a tool to impede the fundamental right to carry on trade and business. Manufacturers dependent on inter-State ENA purchases could not be left in a regulatory vacuum.
Prospective Amendment: The amendment made to the State’s VAT Act on 12 November 2024 cannot be applied retrospectively to deny benefits for the preceding period (1 July 2017 to 12 November 2024).
Final Verdict: The Single Judge’s order was upheld, the State’s Writ Appeal was dismissed, and the State was directed to issue the C-Forms subject to standard statutory compliance. The ruling stands entirely in favour of the assessee.

Key Takeaways

Council Indecision Does Not Freeze Rights: A “status quo” or deferral by the GST Council preserves legacy tax treatments under Central Sales Tax and local VAT; it does not authorize states to unilaterally withdraw existing tax concessions or forms.
No Retrospective Denial via Prospective Law: Statutory amendments changing the tax or charging structure of an item take effect from their explicit date of enforcement. They cannot be used to justify the denial of tax concessions for past transactional periods.
Protection of Fundamental Right to Trade: Tax authorities cannot create operational or financial blockades for industries by withholding statutory forms (like C-Forms) during periods of legislative ambiguity, as doing so violates constitutional protections governing the freedom of trade.

HIGH COURT OF MADRAS

Additional Chief Secretary/Commissioner of Commerical Taxes

Southern Agrifurane Industries (P.) Ltd.^*

Dr. G. Jayachandran and Shamim Ahmed, JJ.

W.A. No. 3199 of 2024
C.M.P. No. 24743 of 2024

MARCH 24, 2026

Haja Nazirudeen, Adv. and C.Harsha Raj, Special Government Pleader for the Appellant, for the Appellant. Joseph Prabakar for the Respondent.

ORDER

G. Jayachandran J.- Intra-Court Appeal is filed by the State, being aggrieved by the order passed by the Learned Single Judge. The Learned Single Judge, on considering the fact that the Extra Neutral Alcohol (ENA), which is a material required for the production of Alcohol for human consumption and also other industrial purposes, could not be brought under the GST regime soon after the Act came into effect on 01.07.2017, in view of the difference of opinion among the Council members. Hence, on various GST General Council meetings, the issue was deferred and status quo was ordered to be maintained. In such circumstances, the respondent, manufacturer of liquor for human consumption had approached the State Government for issuance of C-Form for the purchase of Extra Neutral Alcohol from the manufacturers in other states, that was denied by the State stating the new regime does not enable to issue C-Forms.

2. Being aggrieved, the respondents have approached this Court seeking a writ of mandamus and succeeded. However, the State was not inclined to issue C-Forms to the respondent in respect of Extra Neutral Alcohol (ENA) products from other states.

3. The Learned Single Judge, in the impugned order had discussed the issue at length and having found that the GST Council, in its meetings held on various dates had taken conscious decision to keep the Extra Neutral Alcohol (ENA), used for manufacture of alcoholic liquor for human consumption, outside the purview of GST and appropriate decision to be taken after obtaining opinion from the Attorney General of India.

4. Accordingly, the Learned Single Judge has directed the State to issue C-Forms to the respondent for the purchase made from the other states until the Law Committee issues suitable amendment in law to exclude ENA, for use of manufacture of alcoholic liquors for human consumption, from the ambit of GST.

5. It is brought to the notice of this Court by the Learned Additional Advocate General that the State has brought necessary amendment to the VAT Act by incorporating the provisions under the GST Act by making an amendment to Section 9 of the Charging Section, thereby excluding undenatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption. This amendment has come into force with effect from 12.11.2024. The submission of the Learned Additional Advocate General is that for the period from 01.07.2017 till 12.11.2024, the respondents are liable to be taxed in terms of GST Act and they are not entitled for any C-Forms. The amendment brought by the State under Section 9 will only have prospective effect.

6. On considering the submission, we find that the GST Council, which is the supreme body to decide about the goods and the rate of tax, was not in a position to take a decision on goods known as ENA and they have consciously decided to maintain status quo, which naturally should be construed as the situation which was prevailing prior to 01.07.2017. Therefore, the manufacturers of Alcoholic liquor for human consumption, who are dependents on supply of ENA from other states for seamless supply has to be provided with C-Forms, if they are entitled. They cannot be denied their right of trade, which is a fundamental right. The indecision of the Council of GST cannot create impediments to the right of trade of the respondent.

7. For the said reasons, the Learned Single Judge has directed the state to issue C-Forms to the respondent till necessary amendment is brought to the statute. We find no error in the order of the Learned Single Judge to interfere.

8. Therefore, Writ Appeal stands dismissed. The State is directed to issue C-Forms to the respondents, if so far not issued, subject to compliance of other statutory requirements. There shall be no order as to costs. Consequently, connected Miscellaneous Petition is closed.