Making sense of PhD Transcript
How do I reconcile this situation?


You don't.

It will be clear to the anyone reading you transcript that your university does not provide grades for preliminary stages of your PhD.  Most likely, what they're really asking for is merely proof that you have the degree.  If they actually want more detailed grades, that's too bad for them, because those grades don't exist.


  How does the grading of PhD work in other universities?


In the US, dissertations are not graded; you either get the degree or you don't.

Along the way to the degree, PhD students may take classes (either by requirement or by choice), and grades for those classes typically show up on the transcript just as they do for undergraduates.  US PhD students also typically sign up for research credit hours as a "class" during semesters when they aren't taking real classes, but those "classes" are almost always graded pass/fail or equivalent (for example, at my university, "satisfactory/unsatisfactory").  The actual dissertation and defense never shows up in the transcript, even if a student fails their defense.

I can't think of any circumstance where anyone (at least in the US) would even look at the transcript of someone's completed PhD program.  Proof of degree, sure, but grades?  Never.


  In this situation, why shouldn't a person see "Pass" as a C grade for a PhD!


Because PhDs don't have "grades".