Hi Vishwas, Please find my below comments :-
1. PFX File is no longer in issuance hence Digital Tokens as PFX file are not issued.
2. A Legally acceptable PFX File cannot be created - Neither by Self nor by using a USB Token.
3. Yes, SAP has no facility currently to sign Form-16 using USB Tokens.
4. I found this link useful. They have a software which affixs Digital Signature on Form-16. You can then send email using SAP, as advised.
Many of the companies using SAP use this software. You can check it out at your option.
Hope I have cleared some of your queries
Regards - Akash