Concessional tax exemption cannot be denied on later doubts about purchaser records absent proof of forgery, collusion, or bad faith.

A selling dealer cannot be denied concessional exemption merely because the purchasing dealer later cancelled registration, closed business, or maintained inconsistent internal records, where the statutory declaration forms were facially genuine and there is no proof of forgery, collusion, or lack of bona fides. Under the U.P. Trade Tax scheme, the seller must act prudently, but is not required to prove exhaustive enquiry into the purchaser's internal affairs. Where genuineness is disputed, the assessing authority must make proper enquiry and, if adverse material is relied on, afford cross-examination before drawing an adverse inference. On that basis, the adverse view against the assessee was legally unsustainable.

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Issues: Whether exemption under the concessional form scheme could be denied to the selling dealer merely on the basis of departmental information that the purchasing dealer had not issued the declaration forms, had later cancelled or closed its registration, or had made different entries in its own records, without proving collusion, forgery, or lack of bona fides on the part of the selling dealer; and whether, in cases of disputed genuineness, the matter required proper enquiry and opportunity of cross-examination.

Analysis: The scheme under Section 4-B of the U.P. Trade Tax Act, 1948 and Rules 25-A and 25-B of the U.P. Trade Tax Rules, 1948 contemplates exemption where the purchasing dealer holds a recognition certificate and furnishes the prescribed declaration form. The selling dealer is required to act as a prudent and careful businessman, but the law does not cast on him the burden of proving by exhaustive enquiry that the purchasing dealer's internal records are accurate or that no subsequent misuse has occurred. Where the forms were on their face statutory forms bearing official seal and signature, and there was no finding that they were forged, fabricated by the assessee, or accepted in collusion with the purchaser, the exemption could not be denied merely because the purchaser's certificate was later cancelled, the firm was later closed or reconstituted, or the department had information inconsistent with the entries shown in the forms. In respect of forms said to have been issued to some other dealer or alleged to be unsupported by the purchaser's records, the assessing authority ought to make proper enquiry from the concerned purchaser and, if adverse material is relied upon, afford the assessee an opportunity of cross-examination before drawing an adverse inference. On the facts, the Tribunal's view that the original exemption had been wrongly granted was found to be legally erroneous.

Conclusion: The assessee could not be denied exemption on the disputed forms on the present record, and the adverse findings were unsustainable without proper enquiry into genuineness, issuance, and any alleged collusion.

Ratio Decidendi: A selling dealer who accepts a facially genuine statutory declaration form in the ordinary course of business is not liable to be denied concessional tax benefit merely because the purchasing dealer's later records or registration status cast doubt on the form, unless the revenue proves forgery, collusion, or lack of bona fide conduct after proper enquiry.

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