Permit form withholding rule upheld, but tax authority cannot go behind the return absent express power.

Rule 31-C of the Bihar Sales Tax Rules, 1959 was treated as a valid compliance measure because it merely withheld permit forms from dealers who had not filed the required returns or paid the tax shown as due, and did not impose any independent or excessive restraint on trade under Article 19(1)(g). At the stage of considering an application for permit forms, the prescribed authority's inquiry was confined to whether the statutory return and challan requirements had been met. It could not go behind the return, examine its correctness, or refuse forms on the view that further tax, including purchase tax, was payable. The impugned refusal was therefore quashed and the forms were directed to be issued.

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Issues: (i) Whether rule 31-C of the Bihar Sales Tax Rules, 1959 unreasonably restricted the petitioner's right to carry on trade or business under Article 19(1)(g) of the Constitution of India by linking issue of permit forms to compliance with return and tax obligations; (ii) Whether the prescribed authority, while considering an application under rule 31-C, could examine the correctness of the return filed and refuse the permit forms on the ground that further tax was payable.

Issue (i): Whether rule 31-C of the Bihar Sales Tax Rules, 1959 unreasonably restricted the petitioner's right to carry on trade or business under Article 19(1)(g) of the Constitution of India by linking issue of permit forms to compliance with return and tax obligations.

Analysis: Rule 31-C did not compel a dealer to file returns or pay tax beyond what the statute already required. It only directed withholding of permit forms from a defaulter who had failed to furnish returns or revised returns together with the receipted challans showing payment of tax due according to such returns. The rule operated only to ensure compliance with existing obligations under section 14 and section 20 of the Bihar Sales Tax Act, 1959 and did not impose an independent or excessive restraint on trade.

Conclusion: Rule 31-C was not unconstitutional and was valid.

Issue (ii): Whether the prescribed authority, while considering an application under rule 31-C, could examine the correctness of the return filed and refuse the permit forms on the ground that further tax was payable.

Analysis: At the stage of an application for issue of forms, the rule authorised only a limited inquiry into whether the applicant had defaulted in furnishing the required return and challan. It did not authorise the authority to adjudicate upon the correctness of the return or to determine that additional tax was payable. Once the petitioner had filed the return and, on that return, the admitted tax was nil, the condition in rule 31-C was satisfied, and refusal of forms on the basis of a view that purchase tax was still due was beyond jurisdiction.

Conclusion: The authority had no jurisdiction to reject the application on the ground that the return was incorrect or that further tax was payable.

Final Conclusion: The writ petition succeeded only to the extent that the impugned refusal of permit forms on the basis of alleged unpaid purchase tax was quashed, and the application for issue of permit forms had to be granted.

Ratio Decidendi: A rule withholding statutory forms for tax defaulters is valid if it merely enforces existing filing and payment obligations, but at the stage of issuing such forms the authority cannot go behind the return and decide the correctness of the tax liability unless the rule expressly authorises such inquiry.

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