Deduction certificates accepted as proof of tax payment where government departments deduct sales tax at source.

Deduction certificates issued by Government departments under the sales tax deduction-at-source mechanism had to be accepted in place of treasury challans, crossed cheques or demand drafts required under the return procedure. Where the assessee produced such certificates and its registration and departmental recognition supported the claim, the tax officer could not insist on separate remittance proof from the assessee. That would undermine the Government-approved method of tax deduction at source. The amounts deducted were therefore required to be credited and adjusted against the assessee's sales tax liability.

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Issues: Whether the Commercial Tax Officer was bound to accept deduction certificates issued by Government departments in lieu of treasury challan, crossed cheque or demand draft under the sales tax return procedure, and credit the amounts so deducted towards the assessee's tax liability.

Analysis: The return procedure under rule 17 required proof of payment along with the return. The Government policy, reflected in the relevant U.O. note, authorised Government departments purchasing goods to deduct sales tax at source and issue certificates evidencing such deduction. The assessee produced such certificates and also showed that its registration and departmental recognition supported its claim. In these circumstances, insisting upon separate remittance proofs from the assessee would defeat the very mechanism adopted by the Government for tax deduction at source.

Conclusion: The deduction certificates had to be accepted and the corresponding amounts credited and adjusted towards the assessee's sales tax liability.

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