1994 (9) TMI 326 - HC - VAT and Sales Tax

Court clarifies burden of proof in Tamil Nadu tax case: Rule 4(3A) directory, not mandatory

A Dhandapani Versus State of Tamil Nadu and Another

The court held that Rule 4(3A) of the Tamil Nadu Rules is directory, not mandatory, and aids the burden of proof under Section 6A of the Central Sales Tax ... - Issues Involved:1. Nature of Rule 4(3A) of the Tamil Nadu Rules.2. Conflict between Rule 4(3A) of the Tamil Nadu Rules and Section 6A of the Central Sales Tax Act.3. Burden of proof regarding branch transfer vs. inter-State sale.4. Validity and enforcement of Rule 4(3A) of the CST (TN) Rules.5. Maintenance of records by dealers.6. Enquiry under Section 6A(2) of the Central Sales Tax Act.7. Reopening of assessments and pending cases.Summary:1. Nature of Rule 4(3A) of the Tamil Nadu Rules:The court held that Rule 4(3A) of the Tamil Nadu Rules is directory in nature and not mandatory. Non-compliance with this rule does not render the assessees liable for penal actions. The rule aids, supplements, and supplants the methodology of burden of proof contemplated under Section 6A of the Central Sales Tax Act (CST Act).2. Conflict between Rule 4(3A) of the Tamil Nadu Rules and Section 6A of the Central Sales Tax Act:There is no conflict, repugnancy, or inconsistency between Rule 4(3A) of the Tamil Nadu Rules and Section 6A of the CST Act. Rule 4(3A) is not 'impliedly repealed' by the enactment of Section 6A and Rule 12(5) prescribing a declaration in Form 'F'.3. Burden of proof regarding branch transfer vs. inter-State sale:The burden of proof that the movement of goods is by way of branch transfer and not by way of inter-State sale is always upon the assessee-dealer and it never shifts. This burden can be discharged either by producing a declaration in Form 'F' and evidence for the despatch of goods or by other evidence without the declaration in Form 'F'.4. Validity and enforcement of Rule 4(3A) of the CST (TN) Rules:Rule 4(3A) of the CST (TN) Rules is within the rule-making power of the State Government under Section 13(4)(b), (c), (d), and (e) of the CST Act. The rule is directory and not mandatory, and it does not require dealers to maintain additional records beyond those required under Section 40 of the Tamil Nadu General Sales Tax Act and Rule 26(5A) of the Tamil Nadu General Sales Tax Rules.5. Maintenance of records by dealers:Dealers are required to maintain records as per Rule 26(5A) of the Tamil Nadu General Sales Tax Rules, which are not different from those required under Rule 4(3A) of the CST (TN) Rules, except for the requirement under Rule 4(3A)(d) for maintaining copies of bills issued by agents to purchasers.6. Enquiry under Section 6A(2) of the Central Sales Tax Act:The enquiry under Section 6A(2) of the CST Act is confined to determining the truth of the particulars contained in Form 'F'. The assessing authority can call for any other information, except the copies of bills required under Rule 4(3A)(d), to verify the truth of the particulars in Form 'F'.7. Reopening of assessments and pending cases:The court directed that closed cases prior to March 31, 1992, should not be reopened. Pending cases, including remanded cases, should be dealt with based on the judgment. If the department decides to pursue action based on previously issued notices, they must give dealers a minimum of eight weeks to file objections.Conclusion:The judgment of the learned single Judge was modified to clarify that Rule 4(3A) of the CST (TN) Rules is directory and not mandatory, and it aids and supplements the burden of proof under Section 6A of the CST Act. The assessment orders based on non-compliance with Rule 4(3A) were set aside, and the cases were remitted for reassessment in light of this judgment.