Sales exemption for registered dealers upheld despite later cancellation and non-fatal declaration form defects.

Sales to registered dealers were made while valid registration certificates were in force, so later cancellation could not retrospectively defeat exemption. Alleged defects in declaration forms were held not fatal: failure to strike out alternatives and omission of the date below the signature did not invalidate the prescribed forms. The Court also stated that a taxing authority's erroneous refusal of a statutory deduction is a jurisdictional error that may be corrected under Article 227. The Board's inconsistent departure from its own prior view was treated as arbitrary and contrary to natural justice, and the exemption was upheld.

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Issues: Whether the Board of Revenue was justified in refusing exemption for sales to registered dealers on the basis of cancelled registration certificates and alleged defects in declaration forms, and whether such refusal could be corrected in supervisory jurisdiction under Article 227 of the Constitution of India.

Analysis: The sales in question were made to registered dealers holding valid registration certificates at the time of the transactions. Subsequent cancellation of those certificates could not retrospectively invalidate the earlier sales. The rejection of exemption on the ground of suspicion was unsupported after the appellate authority had rejected that basis and had sustained disallowance only on alleged defects in the declaration forms. The alleged omission to strike out alternatives in the form was not a fatal defect having regard to the structure of the prescribed registration and declaration forms. The omission of date below the signature was also not a valid defect because the printed entry for date was not part of the prescribed statutory form. The Court further held that where the taxing authority, by an erroneous approach, refuses a deduction that the statute mandates, the error is jurisdictional and can be corrected under Article 227. The Board's departure from its own consistent view in similar matters was also arbitrary and contrary to natural justice.

Conclusion: The refusal of exemption was unsustainable. The supervisory jurisdiction under Article 227 was available, and the assessee was entitled to deduction of the disputed sales from gross turnover.

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