Liquor Manufacturers Are Entitled To C-Forms For Inter-State ENA

Liquor Manufacturers Are Entitled To C-Forms For Inter-State ENA Purchases Pending Final GST Council Decision.

Issue

Whether the State can refuse the issuance of C-Forms for inter-state purchases of Extra Neutral Alcohol (ENA) used in manufacturing alcoholic liquor for human consumption during the transition period from the implementation of GST (July 1, 2017) until the formal statutory amendment (November 12, 2024).

Facts

The respondent is a liquor manufacturer requiring ENA, which is the primary raw material for alcoholic liquor for human consumption.
Following the introduction of GST on July 1, 2017, there was a legal dispute regarding whether ENA falls under the ambit of GST or remains under the State’s Value Added Tax (VAT) and Central Sales Tax (CST) regime.
The GST Council, facing divergent views, deferred a final decision on ENA and ordered the maintenance of a “status quo.”
The State of Tamil Nadu refused to issue C-Forms to manufacturers for inter-state ENA purchases, arguing that the goods were now covered under the GST regime.
A Single Judge previously directed the State to issue these forms, ruling that until ENA is specifically excluded from VAT and included in GST by law, the old system must apply.
The State appealed, citing a later amendment to the VAT charging section effective from November 12, 2024, claiming C-Forms could not be issued for the retrospective period.

Decision

The Court held that the “status quo” ordered by the GST Council must be interpreted as the legal position existing prior to July 1, 2017.
The indecision of the GST Council or the delay in legislative amendments cannot be used as a tool to impede the fundamental right to trade.
Since the manufacturers are dependent on inter-state ENA, they are legally entitled to C-Forms under the CST Act until the tax regime is formally and legally altered.
The Court found no reason to interfere with the Single Judge’s order and dismissed the State’s writ appeal.
The State was directed to issue the requested C-Forms, subject to the usual statutory compliance by the manufacturers.

Key Takeaways

Fundamental Right to Trade: Administrative delays or legislative “limbo” cannot strip a taxpayer of their right to access statutory benefits like C-Forms.
Interpretation of Status Quo: In the absence of a clear new law, the “status quo” preserves the pre-existing tax treatment (CST/VAT) rather than creating a vacuum.
Finality of Pre-Amendment Period: Even if a state amends its tax laws later (e.g., November 2024), it cannot arbitrarily deny benefits for the preceding period where the law was still in a state of transition.

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.