Chequed payment condition under exemption notification was directory where co-operative societies substantially complied through own bank funds.

The exemption notification condition requiring payment by cheque drawn on a co-operative society's bank account was held to be directory, not mandatory, where the purchases were in fact made by registered co-operative societies and payments by demand draft or pay order came from their own bank accounts or funds. The condition was aimed at ensuring genuine society purchases and preventing third-party transactions; that object was not defeated by the form of payment. As the department did not rebut the society certificates and the assessees had substantially complied with the notification requirements, denial of exemption was unsustainable.

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Issues: Whether the requirement in the exemption notifications that payment for the goods should be made by cheque drawn on the co-operative society's bank account was mandatory or directory, and whether payment by demand draft or pay order drawn from the society's bank account amounted to substantial compliance.

Analysis: The condition in the notifications was intended to ensure that the purchases were made by registered co-operative societies themselves and not on behalf of third parties. The record showed that the buyers were co-operative societies and that the payments by demand draft or pay order were made from their own bank accounts or funds. The department did not rebut the society certificates, and the variation from cheque to demand draft did not defeat the underlying object of the notifications. The payment condition was therefore treated as one of substance rather than strict form.

Conclusion: The cheque requirement was directory and the assessees had substantially complied with the notification conditions. The denial of exemption was unsustainable, and the appeal was allowed with consequential relief to the appellants.

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