AI Drafter 
TaxTMI 
TaxTMI 
2014 (4) TMI 365
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....ms carrying on business as a wholesale and retail distributor. A fire broke out in their business premises on the night of 9th July, 1991, which, (according to it) devastated all records including statutory forms obtained from the purchasing dealers to whom the assessee had made sales both under the Sales Tax Act, 1956 and the Central Sales Tax Act, 1956, ("the local Act" and "CST") respectively. On 11.7.1991, M/s. Anand Traders intimated, through a letter to the Commissioner of Sales Tax, "regarding the fire in the business premises". The letter stated as follows: "This is to inform you that due to the Short Circuit of Electricity, fire broke out in our business premises bearing No. 3680, Chawri Bazaar, Delhi on 9th July 1991 around 9:50 p.m. As a result of this fire, the entire building on 1st, 2nd and 3rd floors of the above building was engulfed in fire causing damage to the building, the stocks, books of account and the record. To control the fire, it took about 4 hours to about 23 fire tenders. Further investigations are being carried out by the concerned department, i.e. Fire Brigade and the police. On receipt of their report, a formal application shall be submitted. T....
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....oduce all or any of the statutory declarations referred to in Rule 7 (1)(b). The Commissioner noted that the local ST authorities did not dispute that the fire had occurred at No. 3680, Chawri Bazaar, Delhi, and at No. 3679, Chawri Bazaar, and that an FIR had been lodged in respect of the fire incident. In the order concerning M/s. Anand Traders, the finding was as follows: "6..................it is seen that they were registered under the Central Sales Tax Act (Registration & Turnover) Rules, 1975 on 1/12/60 and under the Bengal Finance (Sales Tax ) Act, as extended to Delhi in April 1960. In the latter, the head office is mentioned as being situated at 2578 Nai Sarak. This Certificate also recognises that the dealer had additional place of business and warehouse at 3680,Chawri Bazaar, Delhi w.e.f. 1/7/91 apart from a show room opened at Asaf Ali Road." 7. It was observed that since the Chawri Bazar premises were mentioned in the registration certificate as an additional place of business, there was warrant for concluding that those premises were meant to be construed as such and not merely as a godown. Therefore, in exercise of revisional power, under Section 47 (1) of the ....
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.... Sales Tax Appellate Tribunal ("STAT"), which dismissed the appeal, and held that the disallowance of the deductions (due to the failure to produce the statutory declarations) was correct. The question before the STAT was "whether Rule 7(3) appended to the Delhi Sales Tax Rules, 1975 is applicable to cases under the Central Sales Tax Act." The STAT held that Rules 7(3) embodies substantive law, rather than a procedural aspect, and as the liability to pay taxes under the Central Act (along with the question of deductions etc.) must be judged by reference to the provisions of that Act, and not by invoking provisions of the Local Act. The STAT relied on the decisions of the Supreme Court in Khemka and Co. (Agencies) Private Ltd. v. State of Maharashtra, (1975) 35 STC 571, and Nav Bharat Enterprises Ltd. v. Sales Tax Officer, 66 STC 254 for the proposition that proceedings under the Central Act and the Local Act are independent, in terms of the liability, assessment and procedure for imposing tax. On this basis, the STAT held as follows: "18. It is noteworthy that according to section 9(2) of the Central Sales Tax Act, levy and collection of taxes and penalties have to be made subje....
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....were framed. The assessee filed a review petition against that order, which was dismissed by the STAT by an order dated 31.3.2001. Contentions 13. The assessees contend that the scheme of the CST is such that the mechanism for assessment and recovery of tax is left to that devised by the respective states, through local State enactments and laws. The intention of Parliament was to enact the policy underlying CST, but rely on state local laws for the machinery to enforce its policy, embodied in express provisions of CST. So viewed, there can be no doubt that Rule 7 (3) was procedural and had to be applied uniformly. It was highlighted, during the hearing that the facts of the present case demonstrate an absurd and incongruous result due to the flawed interpretation given to the CST and Rule 7 (3) by the lower authorities and the Tribunal. It was urged that whereas the local sales tax authorities had no difficulty in accepting the request from the assessees whose premises were gutted by fire, and relieving them of the rigors of local laws, in respect of production of relevant documents, the same authorities, donning the hat of administrators of CST, chose to adopt a different a....
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....ST levies, the grant of relief from the obligations cast in Section 5 (2) are substantive matters that, in the absence of express provisions in the CST cannot be given a go by, in seeking recourse to State laws. Counsel relied on Kedarnath Jute Manufacturing Co. Ltd. v. Commercial Tax Officer and Others AIR 1966 SC 12 in support of the revenue's submission on this aspect. The applicable provisions 16. Rule 7 (3) of the Delhi Sales Tax Rules, which is central to this case, is extracted below: "Notwithstanding anything contained in Sub-rule (1), the Commissioner on an application made by the dealer and after making such enquiries as he may consider necessary, is satisfied that the dealer is not in a position to furnish all or any of the declarations referred to in Sub-rule (1) above on loss of such declaration or declarations due to the fire or flood or riots beyond the control of the dealer and the application of sub rule (1) will cause hardship to the dealer, he may by an order in writing exempt such dealer from furnishing such declaration or declarations subject to the conditions as are hereinbelow mentioned and to such further conditions as may be specified by the Commis....
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...., and was for the purpose of complying with, the agreement or order for or in relation to such export. (4) The provisions of subST. section Section 5 (3) do not apply to any sale or purchase of goods unless the dealer selling them furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority. Section 9 (1) and Section 9 (2), vital for a discussion of the controversy in the present case, reads as follows: "9. Levy and collection of tax and penalties The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of subsection (2), in the State from which the movement of the goods commenced: PROVIDED that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a ....
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.... movement of the goods commenced." The mechanism to be used is the State Sales Tax laws, for the purposes of assessment, re-assessment, appeals, recovery of penalty, etc. The Constitution Bench judgment in Khemka & Co. (supra), analyzed the provisions of Section 9(2) of the Central Sales Tax Act. Ray, C.J., taking the majority view, observed: "13. Section 9(2) of the Central Act first provides that the authorities empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess and enforce payment of tax including any penalty payable by a dealer under the Central Act. The State Sales Tax authorities are thus created agents of the Government of India. The second important part in section 9(2) of the Central Act is that the State authorities shall assess, re-assess, collect and enforce payment of tax including any penalty payable by the dealer under the Central Act as if the tax or penalty payable by such a dealer under the Central Act is a tax or penalty payable under the general sales tax law of the State. This part of the section sets out the scope of wo....
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....assessment, re-assessment, collection and enforcement of payment of tax including any penalty payable under the Central Act." 21. Chief Justice Ray concluded by holding that the provision in the State Sales Tax Act imposing penalty for non-payment of sales tax within the prescribed time period was not attracted to impose penalty on dealers under the Central Sales Tax Act in respect of tax and penalty payable under the Central Act. A penalty was a statutory liability. The Central Act contained specific provisions in respect of penalty. Those were the only provisions available against dealers under the Central Act. Each State Sales Tax Act contained provisions for penalties. These provisions in some cases were also for failure to submit a return or failure to register. These provisions could not apply to dealers under the Central Act because the Central Act made no similar provisions. It was also said that: "28. .........................The Central Act is a self contained code which by charging section creates liability for penalty and impose penalty. Section 9(2) of the Central Act creates the State authorities as agencies to carry out the assessment, re-assessment, collection....
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.... 25. The authority cited on behalf of the dealer, i.e. K. Ramudu Chettiar (supra), Orissa Cement Limited (supra), Mahim Patram (supra) and India Carbon (supra) generally suggest that the mechanism provided by the local State laws for assessment/reassessment, collection and enforcement of payment of tax would be applicable to assess liabilities of a dealer under the Central Sales Tax. K. Ramudu Chettiar (supra) states that Section 9(2): "embraces all the powers that the assessing authority under the Sales Tax Act law of the State in force during the relevant assessment year." 26. India Carbon (supra), on the other hand, was a case concerning claim for interest which was sought to be imposed upon the dealer under the Central Sales Tax by drawing inspiration from the State law. The Court, in that decision stated that having regard to the law declared by the Supreme Court in Khemka and Company (supra), only procedural provisions are made applicable and that provision relating to Sales Tax can be employed by utilizing Section 9(2) only if the Central Act made substantial provisions for levy of tax and interest and not otherwise. Orissa Cement (supra) was an interesting case wher....
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.... by this Court and this Court does not have any legislative powers." 28. A debate on this aspect would not be complete without noticing the ruling in Kedarnath Jute Manufacturing Company (supra). In that judgment, the Supreme Court held that Section 5(2)(a) prescribes an exemption and, therefore, requires to be strictly construed. Following observations, in the opinion of this Court, are extremely pertinent for the purpose of decision in this case: "8. Section 5 (2) (a) (ii) of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly construed. The substantive clause gives the exemption and the proviso qualifies the substantive clause. In effect the proviso says that that part of the turnover of the selling dealer covered by the terms of sub-clause (ii) will be exempted provided a declaration in the form prescribed is furnished. To put it in other words, a dealer cannot get the exemption unless he furnishes the declaration in the prescribed form. It is well-settled that "the effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out of t....