1. Legal Provision Overview
- Section 206C(1B): Mandates that sellers(collectors of TCS) must submit buyer declarations (Form 27C) to the tax authorities within a specified timeline .
- Rule 37C(3): Prescribes the procedure and deadlinefor submitting these declarations.
2. Key Requirements
A. Submission of Form 27C
- Who Submits?: Seller (TCS collector) must forward the buyer’s Form 27C(declaration for manufacturing use, not trading) to the tax department.
- Purpose: Exempts the buyer from TCS if goods are used for manufacturing/processing(not resale).
B. Deadline for Submission
- Rule 37C(3): Sellers must submit Form 27C to the Principal Chief Commissioner/Commissionerby the 7th of the next month from the date the buyer furnishes it.
- Example: If a buyer submits Form 27C on 15th June, the seller must forward it to tax authorities by 7th July.
C. Format & Verification
- Form 27C: Must be in duplicate, signed by the buyer, and include:
- Buyer’s PAN
- Description of goods
- Declaration of manufacturing intent.
- Seller’s Duty: Verify the declaration’s authenticity before submission.
3. Penalties for Non-Compliance
| DEFAULT | CONSEQUENCE |
| Late Submission | Interest @ 1% per month (Section 206C(7)) |
| Non-Submission | TCS becomes payable + penalty up to ₹50,000 (Section 271CA) |
| Fake Declarations | Prosecution under Section 277 (false statements) |
Judicial Precedent:
- Gujarat High Court (Siyaram Metal Case): Minor delays in submission may not invalidate declarations if genuine.
4. Practical Workflow
- Buyer→ Submits Form 27C to seller (declaring manufacturing use).
- Seller→ Verifies PAN & declaration → Submits to tax authorities by 7th of next month.
- Tax Dept→ Validates and updates records → TCS exemption applied.
Example:
- A steel manufacturerbuys scrap worth ₹1 crore and submits Form 27C.
- The scrap dealer(seller) must forward it by 7th of the following month to avoid TCS liability.
5. Exceptions & Special Cases
- Ineligible Buyers: Traders/builders cannotuse Form 27C (must pay TCS).
- Non-Residents: Exempt if no PE in India (Section 206CC exception).
Key Takeaways
✔ Form 27C must be submitted to tax authorities by the 7th of the next month.
✔ Sellers bear compliance responsibility; buyers must provide accurate declarations.
✔ Delays may be excused if declarations are genuine (judicial leniency).
Pro Tip: Use the TRACES portal for seamless submission and tracking. For complex cases (e.g., cross-state transactions), consult a tax advisor.
