1977 (5) TMI 76 - HC - VAT and Sales Tax

High Court ruling on deduction of credit sales to registered dealers under Rule 18

The High Court ruled in favor of the assessee regarding the deduction of credit sales to registered dealers, stating that rule 18 was directory and not ... - Issues Involved:1. Whether the credit sales to registered dealers should be deducted for the purpose of arriving at the taxable turnover under section 5 of the Bihar Sales Tax Act, 1947.2. Whether the non-production of declarations under rule 18 of the Bihar Sales Tax Rules, 1949, affects the claim for deduction.3. Whether the decision of the Board of Revenue bars the assessee's plea for deduction.4. Whether the provisions of rule 18 are mandatory or directory.5. Whether the petitioner is entitled to claim deduction from the gross turnover on account of aggregate sales to registered dealers.Detailed Analysis:1. Deduction of Credit Sales to Registered Dealers:The petitioner argued that credit sales to registered dealers should be deducted from the taxable turnover under section 5 of the Bihar Sales Tax Act, 1947. The Deputy Commissioner and the Board of Revenue held that declarations were required for such deductions, even for credit sales. The Supreme Court later directed the High Court to re-examine whether the assessee could claim the deduction and if the Board of Revenue's decision barred such a claim.2. Non-Production of Declarations:The petitioner contended that rule 18 of the Bihar Sales Tax Rules, 1949, did not mandate the production of declarations for credit sales. The assessing officer and subsequent authorities disallowed the deductions due to the absence of declarations. However, the Supreme Court referenced the case of State of Orissa v. M.A. Tulloch and Co. Ltd., where it was held that similar rules were directory, not mandatory, and substantial compliance was sufficient.3. Decision of the Board of Revenue:The petitioner argued that the Board of Revenue's decision was an interlocutory order and could be challenged after the final order. The High Court agreed, stating that the remand order did not terminate the proceedings and could be contested in an appeal from the final order. The principle of res judicata did not apply, as the remand order was not final.4. Mandatory or Directory Nature of Rule 18:The High Court, referencing the Supreme Court's judgment in the State of Orissa case, held that the provisions of rule 18 were directory. Therefore, the assessing officer should have allowed the petitioner to produce secondary evidence in the absence of declarations. The Advocate-General conceded this point, acknowledging that the rule was not mandatory.5. Entitlement to Claim Deduction:Despite ruling that rule 18 was directory, the High Court concluded that the petitioner was not entitled to claim the deduction. This decision was based on a previous judgment (Budhram Kashiram v. State of Bihar), where it was found that the petitioner had not provided sufficient evidence to satisfy the taxing authority. The High Court held that this finding was binding and conclusive, as no appeal had been made against it.Conclusion:The High Court answered question No. (1) and the earlier part of question No. (2) in favor of the assessee, acknowledging that rule 18 was directory and not mandatory. However, the latter part of question No. (2) was answered against the assessee, concluding that the petitioner was not entitled to claim the deduction due to the binding findings of a previous judgment. The reference was answered accordingly.