Evidentiary tax rule upheld as mandatory, while sales tax authorities lacked power to award costs.

Rule 36(1) of the Bihar Sales Tax Rules was upheld as a valid evidentiary provision because it regulates proof of tax-free sales without altering the taxability of goods under Sections 6 and 10 of the Act. The rule was treated as mandatory for a dealer claiming deduction or exemption from gross turnover, so compliance could not be treated as optional. The award of costs by the Board and subordinate sales tax authorities was held unlawful because the Act confers no general power to award costs on those authorities and such power cannot be implied for a statutory tribunal of limited jurisdiction.

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Issues: (i) Whether Rule 36(1) of the Bihar Sales Tax Rules, 1944 is consistent with Sections 6 and 10 of the Bihar Sales Tax Act, 1944 and intra vires the rule-making power; (ii) whether Rule 36(1) is mandatory; and (iii) whether the award of costs by the Board and subordinate sales tax authorities is lawful.

Issue (i): Whether Rule 36(1) of the Bihar Sales Tax Rules, 1944 is consistent with Sections 6 and 10 of the Bihar Sales Tax Act, 1944 and intra vires the rule-making power.

Analysis: The scheme of the Act shows that tax is levied on taxable turnover, while sales of goods notified as tax-free under Section 6 are excluded from tax. Section 10 permits assessment on the basis of returns and evidence, and authorises best judgment assessment where the dealer fails to comply with the prescribed notice. Rule 36(1), made under the rule-making power, merely prescribes the kind of evidence to be produced in support of a claim that part of the gross turnover relates to tax-free sales. It does not convert exempt goods into taxable goods. Construed as a rule of evidence, it operates consistently with the Act and serves its purpose.

Conclusion: Rule 36(1) is intra vires and is consistent with Sections 6 and 10.

Issue (ii): Whether Rule 36(1) is mandatory.

Analysis: The rule uses imperative language and prescribes the evidence required from a dealer who seeks deduction from gross turnover. Once the rule is understood as a valid evidentiary rule, there is no basis for treating compliance as optional for a dealer claiming exemption or deduction under the Act.

Conclusion: Rule 36(1) is mandatory.

Issue (iii): Whether the award of costs by the Board and subordinate sales tax authorities is lawful.

Analysis: The Act contains no general provision empowering the sales tax authorities or the Board to award costs. The only costs provision is the one conferring discretion on the High Court when a reference is made to it. A statutory tribunal of limited jurisdiction has no inherent power beyond the statute creating it, and no power to award costs can be inferred from practice or usage.

Conclusion: The award of costs by the Board and subordinate sales tax authorities is not lawful.

Final Conclusion: The reference was answered by upholding the validity and mandatory character of Rule 36(1), while rejecting the legality of costs awarded by the sales tax authorities.

Ratio Decidendi: A statutory rule requiring specified evidence for an exemption claim is valid if it regulates proof without altering taxability, and a statutory tribunal cannot award costs unless the enabling statute expressly confers that power.

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