Declaration forms cannot be withheld for alleged incorrect returns; tax liability issues must be examined at assessment stage.

Rule 27AA of the Bengal Sales Tax Rules, 1941 distinguishes between rejection of an application for declaration forms on bona fide-use grounds and withholding where returns with receipted challans have not been filed. The Calcutta HC noted that the dealer had filed returns and paid tax according to those returns, so withholding could not rest merely on alleged omissions in the returns or past use of forms in connection with used vehicles. The authority also had no power at the application stage to compel rectification of returns or payment of further tax; such issues belong to assessment. The withholding order was therefore unsustainable and the forms had to be issued.

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Issues: Whether the Commercial Tax Officer could withhold declaration forms on the ground that the dealer's previous use of such forms was not bona fide and that the returns filed were incorrect, and whether the officer could require rectification of returns and payment of additional tax at the stage of considering the application for declaration forms.

Analysis: Rule 27AA of the Bengal Sales Tax Rules, 1941, contemplates different courses depending on the ground on which the authority acts. If the authority is not satisfied about the bona fide use of declaration forms previously issued or the bona fide requirement of the forms applied for, the application may be rejected under rule 27AA(2)(a)(i). Withholding of issue is specifically provided under rule 27AA(2)(c) where the applicant has defaulted in furnishing returns together with receipted challans evidencing payment of tax due according to such returns. The material on record showed no default in filing returns or paying tax according to the returns filed. The objection was only that the dealer had not included certain sales in the returns and that the forms had been used in connection with purchase of used vehicles which were later broken up and sold in parts. That circumstance did not establish mala fides in the use of the declaration forms. The authority also had no power under the rule, or otherwise, to direct rectification of the returns and payment of further tax as a condition for issue of declaration forms; that question could arise only at the assessment stage.

Conclusion: The withholding order could not be sustained. The dealer's application for declaration forms was entitled to be granted, and the impugned order was liable to be set aside.

Final Conclusion: The appeal was allowed and the authority was directed to issue the declaration forms in accordance with law, while leaving assessment of tax liability open to the commercial tax authorities.

Ratio Decidendi: A declaration-form application under rule 27AA cannot be withheld on the ground of alleged incorrect returns unless the statutory conditions for withholding are actually satisfied, and questions of tax liability must be dealt with at assessment, not at the stage of issuing declaration forms.

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