Sales tax deduction on sales to registered dealers fails where authorities find the transactions were only paper sales.

Deduction under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 was denied where the revenue authorities found that the alleged sales to registered dealers were not genuine. Although declaration forms were produced and the buyers were registered at the relevant time, concurrent findings showed cash transactions, absence of genuine business activity by the purchasers, and paper transactions designed to avoid sales tax. The court declined to reappraise the evidence and upheld the factual conclusion that the sales were in substance made to unregistered persons, so the deduction claim failed.

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Issues: Whether the assessee was entitled to deduction under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, in respect of sales shown to have been made to registered dealers when the taxing authorities found that the transactions were not genuine.

Analysis: The assessee had produced declaration forms and relied on the fact that the purchasing dealers were registered at the material time. However, the authorities below recorded concurrent findings that the transactions were cash transactions involving large sums, that the purchasing dealers were not carrying on genuine business, that the sales were in truth made to unregistered parties, and that the alleged sales to registered dealers were only paper transactions intended to avoid sales tax. On those findings, the court held that it could not reappraise the evidence to dislodge the factual conclusion reached by the revenue authorities.

Conclusion: The deduction was rightly disallowed and the question was answered in the negative, against the assessee and in favour of the sales tax authorities.

Ratio Decidendi: A claim for deduction based on declarations from registered dealers can be rejected where the revenue authorities, on relevant material, find that the ostensible sales were merely paper transactions and were sales to unregistered persons; the declaration forms do not conclusively establish entitlement to the deduction.

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