TaxTMI 
TaxTMI 
1985 (9) TMI 329
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....another registered dealer in order to secure the revenue (sic). A number of ST-1 forms were then obtained by the petitioner from the sales tax department, and they enabled it to effect purchases without the payment of sales tax. To the extent, the purchases were so effected, there is no controversy. However, for the assessment year 198081, the sales tax authorities noticed a number of irregularities in the purported sales effected by the petitioner. A raid had also been organised at its premises, and some documents seized and impounded on 28th March, 1984. The assessment proceedings revealed that the petitioner had effected large sales to a number of other dealers on obtaining ST-1 forms from them which entitled them to effect purchases without the payment of sales tax. However, enquiries from those dealers as well as the scrutiny of these ST-1 forms revealed that either those dealers had not purchased the goods from the petitioner, or the purchaser effected were of small amounts which had been converted into far larger amounts going up to lacs in those forms. Thus the concern Chaudhary Sales Corporation to whom the petitioner claimed to have sold goods worth Rs. 4,43,107.75 denied....
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....tter to 21st March, 1985, with the observation that it was hoped that some ST-1 forms would be issued to the petitioner in the meantime. On the adjourned date, the court noted that it appeared that the earlier application for ST-1 forms was returned, and in the circumstances it would be convenient if the petitioner moved the application again before the Sales Tax Officer, and also produced an account of the utilisation of the previous forms, as per requirements of ST-2 register. The Sales Tax Officer was then required to issue the forms or refuse the application or pass any other order as he thought fit. It was directed that the matter should be dealt with next day. The petition was adjourned to 26th March, 1985. 4.. However, on 22nd March, 1985, the sales tax authorities made an order, requiring the petitioner to furnish securities to the extent of Rs. 3,50,000 under the local Act, and Rs. 50,000 under the Central Act, and then only his application for issue of ST-1 forms would be considered. The court then noted on 27th March, 1985, that there were five parties from whom the petitioner had effected substantial purchases and ST-1 forms should be issued to the petitioner for uti....
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.... 7.. Sales tax is a single point levy in Delhi. In order to facilitate this, persons who are purchasing goods in Delhi not for their personal use, but in order to resell them or utilise them in the course of their manufacturing activity or for purpose of packing of goods can get themselves registered as "dealers" under the Delhi Sales Tax Act. Before however, they can purchase goods for any of these purposes free from payment of sales tax, they are required to obtain ST-1 forms from the sales tax authorities. In such forms there are columns which require the filling in of bill numbers, nature of goods purchased and the price thereof. The dealer, thereafter while effecting purchases, hands over ST-1 form after duly filling that up to the seller which enables him to not charge sales tax on the goods so sold. To this extent the purchaser of the goods is exempt from payment of the sales tax. In the same manner when he again sells goods, either in the form they were purchased or after converting them through the manufacturing process which he carries on, he can do so without charging sales tax provided the purchaser in turn hands him over ST-1 form. This process of non-charging of sa....
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....rs stood registered as a dealer and had also entered into a number of transactions with established business concerns and, therefore, should be made entitled to ST-1 forms for that period. 10.. The third proviso to section 4(2) provides that where any goods are purchased by a registered dealer for any of the purposes mentioned in subclause (v), but are not so utilised by him, the price of the goods so purchased shall be included in the taxable turnover of the purchasing dealer. 11.. Section 18 of the Delhi Sales Tax Act empowers the Commissioner to require the furnishing of security by a dealer that appears to be necessary for the proper realisation of tax and for proper custody and use of forms. Security can also be demanded as a condition of the grant of certificate of registration or its continuance. However, before doing so, an opportunity of being heard has to be provided to the dealer. 12.. Rule 8 of the Delhi Sales Tax Rules next makes provision for the issue of ST-1 forms and enjoins that the declaration ST-1 forms can be issued to a dealer only after he has rendered a satisfactory account of the forms, if any, issued. Sub-rule (4), which is of considerable ....
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....return period commencing from the date of validity of the certificate of registration are furnished and all arrears of tax according to such returns are paid by him. (d) Where the appropriate assessing authority does not proceed under clause (a), clause (b) or clause (c) it shall issue the requisite number of declaration forms to the applicant." 13.. Sub-rule (8) requires every registered dealer to maintain register in form ST-2 containing a true and complete account of every declaration form received from the appropriate assessing authority. 14.. We are not inclined to accept that purchases and sales have to be looked at in isolation and independent watertight compartments. They are integral part of the overall business activity of the dealer. The totality of the business affairs has to be viewed in its overall conspectus. The petitioner in the present case is not a manufacturer. Its entire activity is trading. It has been in the past availing ST-1 forms to enable effecting of purchases free of sales tax. However, in case the authorities are able to lay hand on some material which shows that the purchases so effected, are being disposed of neither to a registered d....
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....h follow. After all the purchases are not an end by themselves. The repeat emphasis in rule 8(4)(c) on bona fides in the context of requirements of forms has also significance. Since forms have relevance to purchases, those purchases must also be for bona fide purpose and not for ulterior object. Thus a facility extended to the dealer to effect purchases without payment of sales tax has as well to be responded to with an equally bona fide conduct of not playing deception with the revenue or acting in a manner detrimental to the interest of this benefactor. The obligation is mutual. Existence of right must ensure adherence to the corresponding duty. If, therefore, the overall conspectus of the business reveals that the declaration forms have been abused and the goods purchased have been disposed of in a manner other than the one as envisaged by law and to the detriment of revenue, the absence of bona fide would be deducible. One instance can be of having purchased goods on the basis of forms, they are utilised for personal benefit. Similarly their disposal by a mode not warranted by the Act can as well be treated as not bona fide. Furthermore the recourse to making substantial ad....
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....tretching the language too far or violating its provision if the word "and" in between clauses (i) and (ii) in rule 8(4)(c) is read as "or". That, according to him, would alone bring in coherence and purpose to the different situations that these clauses purport to meet. There is no gainsaying that in certain circumstances, the word "or" can be read as "and" and vice versa. The ordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent the manifest intention of the legislature from being carried out. At the same time in the case, State of Bihar v. S.K. Roy AIR 1966 SC 1995, the Supreme Court read the word "or" occurring in section 2(b) of the Coal Mines Provident Fund and Bonus Schemes Act, 1948, as "and", as it found that any other interpretation would lead to anomalous and startling consequence. This had reference to the definition of the word "coal mine". In the case, State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699, the word "or" was similarly read as "and" in section 2(1)(d) of t....
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....ct or even fraud of a registered purchasing dealer cannot result in penalising the innocent selling dealer in the absence of evidence of his having been a party to any fraud, deception or misrepresentation. 20.. However, as observed by the Supreme Court in the case, State of Madras v. Radio and Electricals Ltd. [1966] 18 STC 222 (SC), the sales tax authority assessing the selling dealer is competent to scrutinise the certificate to find out whether the certificate is genuine. He may also, in appropriate cases, when he has reasonable grounds to believe that the goods purchased are not covered by the registration certificate of the purchasing dealer, make an enquiry about the contents of the certificate of registration of the purchasing dealer. But it is not for the Tax Officer to hold an enquiry whether the goods specified in the certificate of registration of the purchaser can be used by him for any of the purposes mentioned by him in form C, or that the goods purchased have in fact not been used for the purpose declared in the certificate. The authority issuing the certificate of registration has, before issuing a registration certificate to be satisfied after making such enqui....