Taxable turnover deduction upheld where valid ST-1 declarations and supporting records proved genuine sales to registered dealers.

Deduction from taxable turnover could not be denied where the selling dealer proved sales to registered dealers against valid ST-1 declarations and supporting invoices, ledger accounts, bank records and proof of consideration. Rule 7(1) of the Delhi Sales Tax Rules, 1975 required production of bills or cash memos and duly filled ST-1 forms, and those conditions were satisfied. Discrepancies in the purchasing dealers' ST-2 accounts, later non-traceability of the buyers, or receipt of advance payments did not cast a statutory duty on the seller to investigate the buyers' subsequent conduct. The record showed genuine sales and compliance with the deduction conditions, so denial of the deduction was unjustified.

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Issues: Whether deduction from taxable turnover could be denied in respect of sales made to registered dealers against valid ST-1 declarations on the basis of discrepancies in the purchasing dealers' ST-2 accounts and alleged failure to prove genuineness of sales.

Analysis: Rule 7(1) of the Delhi Sales Tax Rules, 1975 required the selling dealer to produce the relevant bills or cash memos and a duly filled and signed ST-1 declaration from the purchasing dealer. The declarations produced by the assessee were genuine, were issued by the department, and related to registered dealers. The selling dealer had also produced invoices, ledger accounts, deposit slips, bank statements and proof of receipt of consideration. The assessee was not responsible for any discrepancy in the purchasing dealers' ST-2 accounts, nor was it required to investigate the subsequent conduct or accounting of the purchasing dealers. A finding that the sales were not genuine merely because some payments were received in advance, or because the purchasing dealers were not traceable years later, was unsupported and perverse. The record established compliance with the statutory conditions for deduction.

Conclusion: The denial of deduction was unjustified and the assessee was entitled to the deduction claimed on sales made against ST-1 forms.

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