1998 (2) TMI 554 - HC - VAT and Sales Tax

Court clarifies exemption requirements under Central Sales Tax Act; E-I and C forms sufficient, additional documents not needed

The court held that the assessing authority cannot reject exemption claims under Section 6(2) of the Central Sales Tax Act based on the lack of additional ... - Issues Involved:1. Validity of pre-assessment notices.2. Requirement of additional documentary evidence for exemption claims under Section 6(2) of the Central Sales Tax Act, 1956.3. Authority of the Board of Revenue to issue circulars mandating additional documentation.4. Powers of the assessing authority in verifying exemption claims.Detailed Analysis:1. Validity of Pre-Assessment Notices:The primary issue in the writ petitions is the validity of pre-assessment notices issued by the assessing authority. These notices propose to reject the claim of exemption for turnover of sales in transit due to the petitioners' failure to produce additional documentary evidence such as copies of endorsement of title and the consignee copy of lorry receipt or railway receipt. The court examines whether such additional documents are obligatory under the Central Sales Tax Act and the Rules made thereunder, beyond the E-I and C form declarations.2. Requirement of Additional Documentary Evidence:The petitioners, dealers in paper and paper products, argue that they have been claiming exemptions for nearly twenty years by producing E-I forms from sellers outside Kerala and C forms from buyers within Kerala. The procedure followed involves endorsing the lorry receipt to the local purchaser and delivering it along with the invoice. They assert that there is no statutory requirement under the Central Sales Tax Act or the Rules to maintain or produce photocopies of endorsed lorry receipts for claiming exemptions under Section 6(2).The court notes that Section 6(2) of the Central Sales Tax Act, 1956, provides for exemption from sales tax for subsequent inter-State sales made by endorsement of title to goods, provided the dealer furnishes a certificate in the prescribed form (E-I or E-II) and a declaration in form C. Rule 12(4) of the Central Sales Tax (Registration and Turnover) Rules, 1957, prescribes these forms. The court concludes that the only requirement for claiming exemption under Section 6(2) is the production of E-I and C forms, and there is no further obligation to produce additional documents such as endorsed lorry receipts.3. Authority of the Board of Revenue to Issue Circulars:The court examines the circulars issued by the Board of Revenue, which directed assessing authorities to insist on additional documents like endorsed lorry receipts or railway receipts for granting exemptions under Section 6(2). The petitioners challenge the authority of the Board of Revenue to issue such circulars, arguing that the Board has no power under the Central Sales Tax Act to mandate additional documentation.The court agrees with the petitioners, stating that the Board of Revenue has no authority under the Act or the Rules to issue directions inconsistent with the statutory provisions. The court declares the circulars non est in law, as they were issued without any statutory authority and are inconsistent with the provisions of the Act and the Rules.4. Powers of the Assessing Authority in Verifying Exemption Claims:The court addresses whether the assessing authority has the power to demand secondary evidence to substantiate the particulars contained in the E-I and C form declarations. The court notes that the proviso to Section 6(2) mandates only the production of E-I and C forms for claiming exemptions. The assessing authority has no power to verify the correctness of the particulars contained in these forms by demanding additional documents unless there is a specific statutory provision allowing such verification.The court also highlights that the assessing authority can ascertain the genuineness of the E-I and C forms from the persons who issued them. Only if these persons cannot be found can the assessing authority address the petitioners for further verification.Conclusion:The court concludes that the assessing authority cannot reject the exemption claims under Section 6(2) of the Central Sales Tax Act merely because the petitioners did not produce additional documents like endorsed lorry receipts. The only requirement for claiming the exemption is the production of E-I and C forms. The circulars issued by the Board of Revenue mandating additional documentation are declared non est in law. The assessing authority is directed to complete the assessments in accordance with the statutory provisions and the observations made in this judgment. The original petitions are allowed to this extent.