Valid declarations at the time of sale protect turnover deduction despite later retrospective cancellation of purchaser registration.

A selling dealer's deduction from taxable turnover under section 5(2)(a)(ii) could not be denied merely because the purchasing dealer's registration was later cancelled with retrospective effect. The material time was the date of sale: the purchaser held a registration certificate for the relevant goods, and the prescribed declarations were furnished in the prescribed manner. A later retrospective cancellation could not change the legal character of completed sales or invalidate declarations that were valid when made, especially where the selling dealer was not a party to the cancellation proceedings and no fraud, deception, or misrepresentation was found against it. The disallowance was therefore invalid.

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Issues: Whether a selling dealer can be denied deduction from taxable turnover under section 5(2)(a)(ii) on the basis of a later cancellation of the purchasing dealer's registration certificate with retrospective effect.

Analysis: The deduction under section 5(2)(a)(ii) depended on the position existing during the relevant turnover period. At the time of the sales, the purchasing dealer held a registration certificate for the goods in question and the prescribed declarations were furnished in the prescribed manner. The subsequent cancellation of the purchasing dealer's registration, even if made retrospective, could not alter the legal character of the sales already effected or invalidate declarations that were valid when given. The selling dealer was not a party to the cancellation proceedings, and no finding of fraud, deception, or misrepresentation against the selling dealer had been recorded.

Conclusion: The deduction could not be disallowed on the basis of the later retrospective cancellation of the purchasing dealer's registration, and the impugned disallowance was invalid.

Final Conclusion: The writ petition succeeded, and the disallowance of deduction for sales made to the purchasing dealer was set aside.

Ratio Decidendi: A deduction from taxable turnover available on the basis of a valid registration and prescribed declaration at the time of sale cannot be defeated by a subsequent retrospective cancellation of the purchasing dealer's registration.

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