Transit sale exemption cannot be withdrawn merely because the purchaser's declaration is later found false.

A seller-dealer on a completed transit sale cannot lose exemption merely because the purchaser's C form is later found to be false. Where the original assessment was granted on the basis of the E1 form and the purchaser's declaration, the benefit cannot be withdrawn unless there is concrete material showing that the sale itself was not genuine or that the seller was involved in the fraud. The Revenue's proper remedy is to proceed against the purchaser-dealer in accordance with law. The reassessment disallowing the exemption was therefore unsustainable and was quashed.

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Issues: Whether exemption on transit sales could be disallowed and reassessment sustained merely because the C form produced by the purchaser was later found to be not genuine.

Analysis: The exemption in the original assessment had been granted on the basis of the E1 form from the original seller and the C form furnished by the purchaser. Once the transit sale was completed, the seller had no control over the purchaser or the genuineness of the purchaser's declaration. The seller had acted on the documents furnished in the ordinary course of the transaction. Unless there was concrete material showing that the transaction itself was not genuine or that the seller was party to the fraud, the benefit already granted could not be withdrawn merely because the purchaser had produced a false form. The proper course was for the Revenue to proceed against the purchaser-dealer in accordance with law.

Conclusion: The reassessment disallowing the exemption was unsustainable and was quashed. The issue is answered in favour of the assessee.

Final Conclusion: The writ petitions succeeded, and the Revenue was left at liberty to take action against the purchaser-dealer for any contravention in accordance with law.

Ratio Decidendi: A seller-dealer cannot be denied exemption on a completed transit sale merely because the purchaser's declaration is later found false, unless the sale itself is shown to be non-genuine or the seller is implicated in the fraud.

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