Once 'C' Form Declarations Are Signed, Burden Shifts To Buyer To Prove Payment Of Outstanding Dues: Madras High Court

"Once the 'C' form declarations are signed by the appellant(s), then it is for them to prove that the amount was paid and there was no balance due." Madras High Court, in a significant ruling, held that once a buyer signs and accepts 'C' Form declarations under the Central Sales Tax Act, the burden of proof shifts to them to demonstrate that the entire sale consideration was paid.

A bench of Justice P. Velmurugan and Justice K. Govindarajan Thilakavadi observed that such declarations serve as an admission of the transaction, and the defendant must subsequently discharge the onus of proving the absence of outstanding dues through cogent evidence.

The respondent, a manufacturer of Tapioca Starch and Sago, filed commercial suits for the recovery of outstanding dues amounting to over Rs. 25 lakhs and Rs. 33 lakhs against the appellants for inter-State purchases made since 2016. The appellants contested the claim, alleging that the invoices were fabricated, the goods were never supplied, and all previous dues had been settled in full satisfaction. The Commercial Court at Salem decreed the suits in favor of the manufacturer, prompting the purchasers to approach the High Court in appeal.

The primary questions before the court were whether the suits were barred by the three-year limitation period given the dates of the last payments in 2017. Additionally, the court was called upon to determine if the respondent had sufficiently proved the liability of the appellants based on ledger accounts and 'C' Form declarations.

Suit Claims Within Limitation Due To COVID-19 Extension

The court first addressed the appellants' contention that the suits were barred by limitation, noting that the last payments were made in July and August 2017, while the suits were filed only in May 2022. The bench observed that while the three-year period would ordinarily have expired in 2020, the extraordinary circumstances of the pandemic intervened.

The bench noted that the Hon’ble Supreme Court in Suo Motu Writ Petition No. 3 of 2020, through its order dated January 10, 2022, extended the period of limitation for all proceedings. Consequently, the court held that the suits were filed within the extended period and were maintainable under the law.

'C' Form Declarations Amount To Admission Of Transactions

Turning to the merits of the recovery claim, the Court emphasized the statutory significance of 'C' Form declarations required under the Central Sales Tax Act, 1956. The bench remarked that for inter-State movement of goods, these declarations are essential legal formalities initiated by the purchaser.

The Court observed that "once the ‘C’ form declarations were signed/accepted by the appellant(s) and when they accepted the transactions/purchases... it clearly show that the appellant(s) accepted the transactions." The bench reasoned that these documents, coupled with the invoices, established a prima facie case of the supply of goods.

"Once the ‘C’ form declarations are signed by the appellant(s), then it is for them to prove that the amount was paid and there was no balance due."

Burden Of Proof Shifts To Defendant In Civil Proceedings

The High Court clarified the standard of proof required in commercial recovery suits, distinguishing it from the rigorous "beyond reasonable doubt" standard applied in criminal law. The bench held that in civil cases, the plaintiff only needs to establish their case on a preponderance of probability.

The bench noted that once the respondent produced the ledger accounts (Ex.A6), invoices (Ex.A7), and 'C' Forms (Ex.A8), the onus shifted to the appellants to prove that no liability remained. The Court found that the appellants failed to produce any credible evidence to show that the specific amounts claimed in the invoices were actually remitted.

Mere Production Of Auditor's Report Insufficient Without Examining Author

The appellants had relied heavily on an Auditor’s Inspection Report (Ex.B2) to argue that no purchase orders existed for the disputed bills. However, the Court rejected this evidence on procedural grounds, noting that the appellants failed to examine the Chartered Accountant who authored the report as a witness.

The bench held that "mere production of the document itself is not sufficient and the same has got to be proved" by examining the author. Without the testimony of the auditor, the report carried no evidentiary weight to counter the respondent's documented claims and verified books of accounts.

"In civil case, if the plaintiff is able to prove the case with preponderance of probability, the onus then shifts to the defendant regarding the liability."

Failure To Respond To Legal Notice Indicates Liability

The Court also took a dim view of the appellants' conduct prior to the litigation, particularly their failure to respond to the legal notice issued by the respondent. The bench observed that the respondent had sent a formal demand under Ex.A4, to which the appellants maintained silence.

Furthermore, the bench noted that the appellants did not participate in the pre-institution mediation process, leading to a "non-starter report." This conduct, combined with the lack of contra-evidence to the 'C' Forms, led the Court to conclude that the appellants were attempting to evade lawful dues.

The High Court concluded that the respondent had successfully proved the transactions and the resulting debt through oral and documentary evidence. Dismissing both appeals, the Court upheld the decrees of the Commercial Court, Salem, and directed the appellants to settle the outstanding amounts with interest.

Date of Decision: 17 April 2026