1973 (9) TMI 85 - HC - VAT and Sales Tax

Court upholds declaration forms pre-cancellation, deems challan omission non-substantial. Cash transactions don't bar deductions. Assessment order quashed.

Phanindra Nath Manna and Company Versus Commercial Tax Officer and Others

Phanindra Nath Manna and Company Versus Commercial Tax Officer and Others - [1974] 33 STC 292 (Cal) Issues Involved:1. Disallowance of sales to registered dealers due to subsequent cancellation of their registration certificates.2. Validity of declaration forms with missing challan numbers.3. Validity of sales made in cash under Section 5(2)(a)(ii) of the Act.4. Whether 'G.I. sheets' include 'G.C. sheets' under the registration certificate.Detailed Analysis:1. Disallowance of Sales to Registered Dealers Due to Subsequent Cancellation of Their Registration CertificatesThe petitioner, a private limited company dealing in iron and steel goods, claimed exemptions under Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, based on declaration forms issued by purchasing dealers. The Commercial Tax Officer disallowed the claim because the registration certificates of the purchasing dealers were cancelled after the sales. The court held that the subsequent cancellation of registration certificates does not invalidate the declaration forms issued before the cancellation. The court emphasized that the selling dealer's duty is to ensure that the purchasing dealer is registered and that the goods are specified in the registration certificate at the time of sale. The subsequent cancellation cannot retrospectively invalidate the transactions.2. Validity of Declaration Forms with Missing Challan NumbersThe Commercial Tax Officer also disallowed the sales on the ground that the challan numbers were not mentioned in the declaration forms. The court analyzed the relevant provisions of the Act and the Rules, concluding that the omission of the challan number is not a vital and substantial omission. The court held that while certain particulars in the declaration form are necessary to identify the purchasing dealer, the failure to mention the challan number does not render the declaration form invalid. The court emphasized that the declaration forms, bills, and vouchers were available for inspection, and the omission did not frustrate the aim and object of the statute.3. Validity of Sales Made in Cash Under Section 5(2)(a)(ii) of the ActThe respondents argued that the sales were mostly cash transactions, which justified the disallowance. The court rejected this argument, stating that the law does not require sales to be made on credit to claim deductions under Section 5(2)(a)(ii). The court noted that while cash transactions might raise suspicion, suspicion alone cannot be treated as evidence to conclude that the purchasing dealer was not in existence or that no sales took place. The court emphasized that valid declaration forms duly filled in by the purchasing dealer are prima facie proof of sales to a registered dealer.4. Whether 'G.I. Sheets' Include 'G.C. Sheets' Under the Registration CertificateThe sales to Parkash Impex were disallowed on the ground that 'G.C. sheets' (galvanized corrugated sheets) were not covered by the registration certificate, which specified 'G.I. sheets' (galvanized iron sheets). The court held that 'G.I. sheets' include both plain and corrugated sheets. The court referenced commercial parlance and the Indian Standard Institute's classification, concluding that corrugated sheets do not lose their character as iron sheets. Therefore, the registration certificate of Parkash Impex covered the goods sold, and the disallowance was not sustainable.ConclusionThe court quashed the assessment order dated 23rd March 1973, and the notice issued under Section 11 of the Act. The court mandated that the respondents reassess the period in accordance with the principles laid down in this judgment. For the subsequent period ending 30th Chaitra, 1376 B.S., the court directed that any future assessment be conducted in line with the principles established in this case. The petition was allowed, and the rule was made absolute to the extent indicated.