Form XVII declaration breach does not shift differential tax or penalty to the selling dealer

Where a selling dealer grants concessional sales tax treatment on the basis of a purchaser's Form XVII declaration, breach of that declaration does not justify fastening differential tax or penalty on the seller. The legal consequence of misuse of the declaration lies against the purchasing dealer, not against the seller who acted on the declaration furnished. On that basis, the levy of differential tax and penalty on the selling dealer was held unsustainable and set aside.

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Issues: Whether a selling dealer can be saddled with differential tax and penalty for contravention of Form XVII declaration, and whether the concession under section 3(3) of the TNGST Act, 1959 is denied to the seller in such circumstances.

Analysis: The revision concerned a selling dealer who had extended concessional tax treatment on the basis of the purchasing dealer's declaration in Form XVII. The order notes that in an earlier decision on similar facts, the Court had followed the ruling in Sree Murugan Engineering Products and held that, on breach of the conditions attached to Form XVII, liability for tax and penalty could not be fastened on the seller. The consequence of misuse of the declaration was held to lie against the purchasing dealer, and not against the selling dealer who acted on the declaration furnished.

Conclusion: The levy of differential tax and penalty on the assessee, being the selling dealer, was not sustainable and was set aside.

Final Conclusion: The revision succeeded, and the assessee was relieved of both the differential tax demand and the penalty arising from the Form XVII issue.

Ratio Decidendi: Where a selling dealer extends concessional sales tax treatment on the basis of a purchaser's declaration in Form XVII, breach of that declaration does not justify imposition of differential tax or penalty on the seller; the consequence falls on the purchasing dealer.

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