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Issues: (i) Whether rule 4(3A) of the Central Sales Tax (Tamil Nadu) Rules is mandatory or merely directory, and whether non-compliance attracts penal consequences. (ii) Whether the enquiry under section 6A of the Central Sales Tax Act is confined to the truth of the particulars in Form F and whether the assessing authority can demand documents beyond the scope of that enquiry. (iii) Whether the assessment made solely for non-compliance with rule 4(3A) required interference and remand.
Issue (i): Whether rule 4(3A) of the Central Sales Tax (Tamil Nadu) Rules is mandatory or merely directory, and whether non-compliance attracts penal consequences.
Analysis: The statutory scheme under sections 3, 4, 6 and 6A of the Central Sales Tax Act places the burden on the dealer to prove that movement of goods was by way of transfer and not sale. Rule 4(3A) was held to be only an evidentiary and procedural requirement, not a substantive condition overriding the Act. The rule did not require the dealer to maintain records beyond what was already contemplated by section 40 of the Tamil Nadu General Sales Tax Act and rule 26(5A) of the Tamil Nadu General Sales Tax Rules, except for the copy of purchasers' bills under clause (d), which was not insisted upon. The rule therefore operated to assist proof, not to create an additional liability.
Conclusion: Rule 4(3A) is directory and not mandatory. Breach of the rule by itself does not warrant punishment, and the rule is not repugnant to the Central Act.
Issue (ii): Whether the enquiry under section 6A of the Central Sales Tax Act is confined to the truth of the particulars in Form F and whether the assessing authority can demand documents beyond the scope of that enquiry.
Analysis: Section 6A requires the dealer to establish that the movement of goods was occasioned otherwise than by sale. If Form F is furnished, the assessing authority may enquire into the truth of the particulars in the declaration, and may consider other evidence produced by the dealer for that limited purpose. The enquiry cannot travel beyond the truthfulness of the declaration to demand every item mentioned in rule 4(3A), and the bills issued by the agent to purchasers under clause (d) were specifically held unnecessary. If the particulars in Form F are not proved true, the consequence is that the transfer is treated as a sale for the purposes of the Act.
Conclusion: The section 6A enquiry is limited to verifying the truth of Form F and related evidence. The assessing authority may call for relevant supporting information, but not the agent's bills contemplated by rule 4(3A)(d).
Issue (iii): Whether the assessment made solely for non-compliance with rule 4(3A) required interference and remand.
Analysis: One assessment had been completed on the footing that rule 4(3A) had not been complied with, without the enquiry being confined to the requirements of section 6A as explained by the Court. Since the rule was held to be directory and the assessment proceeded on an incorrect basis, the order could not stand and the matter had to be reconsidered in accordance with the proper legal framework.
Conclusion: The assessment was set aside and remitted for fresh decision in accordance with law and the judgment.
Final Conclusion: The challenged rule was upheld as a directory evidentiary measure, but the assessment based only on its non-compliance was invalid and required fresh consideration under section 6A.
Ratio Decidendi: A procedural rule framed for proving a branch transfer cannot override the statutory burden-and-enquiry scheme under section 6A of the Central Sales Tax Act; it is valid only as an evidentiary aid and cannot be enforced as a mandatory condition precedent to exemption from inter-State sales tax.
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