Directory declaration-form rules and substantial compliance protected sales tax deduction despite defects and later purchaser deregistration.

Deductions under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 read with rule 27A(1) of the Bengal Sales Tax Rules, 1941 could not be refused merely because declaration forms contained defects such as failure to strike out alternatives, missing particulars, later cancellation of the purchasing dealer's registration, or absence of proof of purchase orders. The governing provisions were treated as directory, and substantial compliance was sufficient. A later cancellation of the purchaser's registration did not invalidate forms issued while the dealer was registered. The revenue also failed to establish that the sales were fictitious or that the supporting materials were unacceptable on a proper appraisal of evidence, so the disallowance of deduction was held erroneous and the assessment orders were quashed.

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Issues: Whether deductions under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 read with rule 27A(1) of the Bengal Sales Tax Rules, 1941 could be refused on the ground of defects in declaration forms, including non-striking out of alternatives, missing particulars, later cancellation of the purchasing dealer's registration, or absence of proof of purchase orders.

Analysis: The provisions governing declaration forms were treated as directory and not mandatory. Earlier binding decisions held that mere defects such as failure to strike out alternatives did not automatically invalidate the declaration form if there was substantial compliance. The cancellation of the purchasing dealer's registration at a later date did not affect declaration forms issued when the dealer was still registered. The revenue authorities also failed to record a clear finding that the alleged sales were fictitious or that the supporting materials, including cash memos and challans, were unacceptable on a lawful appraisal of the evidence. On that footing, the refusal of deduction was held to be based on error and inadequate consideration of the relevant materials.

Conclusion: The deduction could not be denied merely for the stated defects in the declaration forms or because the purchasing dealers were later no longer registered. The assessment orders were rightly quashed and the assessee succeeded.

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