Deduction for sales to registered dealers remains conditional on prescribed declaration forms, with anti-evasion safeguards upheld as valid.

The Delhi Sales Tax framework allowed a selling dealer's deduction only on furnishing a true prescribed declaration by the purchasing registered dealer. The Supreme Court of India read the rule-making power broadly, holding that procedural safeguards governing the form, authority, timing and conditions for declaration forms could be prescribed to support tax collection and prevent evasion. Rule 8(4)(c) and the amended proviso to section 4(2)(a)(v) were therefore upheld as intra vires, and the deduction could be denied where non-availability of ST-1 arose from the purchasing dealer's default.

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Issues: Whether rule 8(4)(c) of the Delhi Sales Tax Rules, 1975 and the amended proviso to section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 were ultra vires the Act; and whether the rule could validly authorise withholding of declaration forms ST-1 where the purchasing dealer was in default of tax payment.

Analysis: The deduction claimed by a selling dealer under section 4(2)(a)(v) depended on the furnishing of a true declaration in the prescribed form by the purchasing registered dealer. The statutory scheme of the Act was not limited to levy alone but extended to collection and recovery of tax, and the rule-making power under section 71(1), read with section 71(2)(b) and the residuary clause in section 71(2)(s), was wide enough to prescribe the form, authority, manner, time, and conditions for issue of declaration forms. The impugned rule operated as a safeguard against evasion and did not take away any express right conferred by the Act. The Court held that the selling dealer's entitlement to deduction was conditional and that, where the ST-1 form was unavailable for reasons attributable to the purchasing dealer's default, the tax could not be denied to the State.

Conclusion: The rule and the amended proviso were upheld as intra vires the Act, and the challenge to their validity failed.

Final Conclusion: The statutory scheme allowing deduction on sales to registered dealers was held to be conditional upon production of the prescribed declaration form, and the rule-making provisions were construed broadly to permit safeguards for recovery and prevention of tax evasion.

Ratio Decidendi: Where the parent taxing statute empowers rules to be made for carrying out its purposes, the rule-making authority may prescribe reasonable procedural safeguards and conditions for availing a deduction, including measures to prevent tax evasion, so long as the rules do not contradict an express prohibition in the Act.

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