TaxTMI 
TaxTMI 
2010 (9) TMI 957
X X X X Extracts X X X X
X X X X Extracts X X X X
....ability to pay the sales tax is of the first seller from whom the assessee was buying these goods, as the assessee was not the first seller of the goods. It was the case of the assessee that it had been purchasing these goods from the registered dealers, namely, M/s. Videocon International Ltd., M/s. Whirlpool India Ltd. and M/s. Expo Machinery Ltd., etc. The assessment order in question, relating to the local Act is 1996-97. For this assessment year, the assessment orders which were framed by the assessing officer were ex parte and framed on February 25, 2000. The assessment was made applying the best judgment assessment for want of requisite material given by the assessee who also did not participate in the proceedings and remained ex parte. The assessment was done both under the local Act as well as the Central Sales Tax Act (hereinafter would be referred to as, "the Central Act") raising a demand of Rs. 36,79,144 and Rs. 90,172, respectively, under the aforesaid Acts. This order reads as under: "The trader runs AC and refrigeration work. The quarterly returns were filed late, hence penalty of Rs. 1,000 for the same is imposed on the trader. The penalty for the fourth quar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment order was made on February 25, 2000, naturally, the assessee had not produced those bills in the absence whereof tax liability was raised while framing the assessment order. The plea of the assessee in appeal filed by it and also in the proceedings arose out of interim orders passed by the first appellate authority and as noted above, was that since sales tax had already been paid at the point of first sale, there was no liability on the part of the assessee to pay this tax and the assessment of sales tax was without jurisdiction. When the matter was remanded back to the assessing officer, the assessee again failed to produce these invoices. According to the assessee, it lost its books of account in September, 2001 for which FIR was lodged on September 9, 2001 and, therefore, it was not in possession of the books of account or original invoices. Again the assessee, though, attended the proceedings before the assessing officer in the beginning when it was given repeated opportunities to produce the books of account, the assessee did not turn up on January 10, 2005 which was the final opportunity given for this purpose. In these circumstances, again an ex parte assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd the appeal also on the merits finally there and then reserved the orders. The orders were pronounced on March 31, 2010 dismissing the appeal. This is how the assessee has approached this court by way of present appeal challenging the said order of the Tribunal. Though, many questions of law are proposed, according to us controversy highlighted above gives rise to the following two questions of law: "(i) Whether the inference drawn by the Tribunal that the appellant was in possession of the books of account and, therefore, there is no reason for them not to produce them before the assessing authority is not contrary to the facts of the case, especially when an FIR regarding the loss of books of account had been lodged on September 9, 2001 and the remanded assessment order in this matter was passed on January 13, 2005 (and not February 25, 2000)? (ii) When the goods dealt in by the appellant were first point goods on which liability to tax is on first sale, then could the liability be fastened on the appellant: (a) they were not the first seller of the said goods, (b) in discharge of their onus in terms of notification dated February 31, 1988, they had produced phot....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tribunal at the time of hearing of appeal under section 43(5). It amply proves that the appellant had the requisite purchase voucher/bills in respect of the tax-paid purchases which were subsequently lost along with the books of account on September 9, 2001, however, copies of purchase bills are available." We may again clarify that this was the contention of the assessee before the said authority. His further submission was that in order to get the benefit, there was no requirement of producing the original bills. The assessing officer had only to satisfy itself about the fact that tax had been paid which could be gathered from the fact that items in which the assessee was dealing were liable to tax on first sale whereas the sales made by the assessee to the consumers were second sale. Further, the assessee had produced the photocopies of the bills duly verified by the registered dealers evidencing the payment of sales tax. Mr. Jain referred to the following judgments in support of his plea that when the first seller of the goods is identifiable who alone is liable to tax, then subsequent tax is exempted from taxation: (1) B. Narasaiah & Co. v. State of A.P. [2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....329. We have considered the rival submissions. We find from the order of the Tribunal that it has drawn its conclusion, based upon the judgment of the Supreme Court in the case of India Agencies (Regd.), Bangalore [2005] 139 STC 329. The attempt made by the learned counsel for the appellant is to distinguish that judgment. Therefore, it would be appropriate to start discussion from that judgment and to find out as to what that case actually decides. That case arose out of the Central Sales Tax Act, 1956. Section 8 of the said Act provides for rates of tax on sales in the course of inter-State trade and commerce. Sub-section (4) whereof lays down the circumstances under which the sales tax to any sale in the course of inter-State trade and commerce would not be leviable. Clause (a) thereof provides that the dealer selling the goods shall not be liable to pay this tax if he furnishes to the prescribed authority in the prescribed manner, a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. These prescribed forms are known as form C. The appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for our purposes. The Supreme Court referred to the provision of section 8 of the Central Act as well as rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 made by the Central Government in exercise of its power conferred under section 13 of the Central Act. Provisos (2) and (3) to this rule deal with the situation where original forms are lost and reads as under: "Provided also. . . (2) Where a blank or duly completed form of declaration is lost, whether such loss occurs while it is in the custody of the purchasing dealer or in transit to the selling dealer, the purchasing dealer shall furnish in respect of every such form so lost, an indemnity bond in form G to the notified authority from whom the said form was obtained, for such sum as the said authority may, having regard to the circumstances of the case, fix. Such indemnity bond shall be furnished by the selling dealer to the notified authority of his State if a duly completed form of declaration received by him is lost, whether such loss occurs while it is in his custody or while it is in transit to the notified authority of his State. Provided that where more than one form of declaration i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the prescribed authority. On the above provision, a registered dealer will not be entitled to the concessional rate of tax in respect of inter-State sales made by him without the production of the declaration referred under clause (a) of sub-section (4) noted above. 13.. Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is required to submit along with his return the original of the prescribed forms. As could be seen from the rule extracted above a registered dealer who claims that he has made a sale to another registered dealer is required to attach the original of the declaration forms on the certificate in the prescribed form received by him from the prescribed dealer along with his return filed by him. . . Thus, the dealer has to strictly follow the procedure and the rule 6(b)(ii) and produce the relevant materials required under the said rule. Without producing the specified documents as prescribed thereunder a dealer cannot claim the benefits provided under section 8 of the Act. Therefore, we are of the opinion that the requirements contained in rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory. . ." The court gave the foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it." . . . There is an understandable reason for the stringency of the provisions. The object of section 5(2)(a)(ii) of the Act and the Rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will wellnigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the twofold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 22.. The case of Manganese Ore (India) Ltd. v. Commissioner of Sales Tax, Madhya Pradesh [1991] 83 STC 116 (MP) was relied on by learned counsel for the appellant. In the above case, in order to obtain the benefit of section 8(1) of the Central Sales Tax Act, it was argued before the High Court that form C consists of three parts-original, duplicate and counter-foil and all the three parts are identical in terms of them and form part of form C and that section 8(4) or rule 12(1) does not say which part of the form is required to be filed before the assessing authority. In that case, the dealer filed the duplicate part of form C instead of the original. The High Court held that there was sufficient compliance with the provisions of section 8(4) of the Central Sales Tax Act and those of rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 so as to entitle the dealer to get the benefit of concessional rate of tax under section 8(1) of the Central Sales Tax Act. The High Court as a result of their discussion held that the filing of original parts of declaration in C form is not mandatory but directory under the Central Sales Tax Act, 1956 read with rules the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cal Act, once the point of sale at which the classes of goods taxed, notified by the first sale, all subsequent sales of such goods shall be exempt from payment of tax. For claiming this deduction, procedure is laid down in section 4 of the local Act as well as rule 9 of the Delhi Sales Tax Rules and notification dated December 30, 1988. We, thus, reproduce these provisions, i.e., section 4, section 5 of the local Act, rule 9 of the Delhi Sales Tax Rules and notification dated December 30, 1988: "4. Rate of tax.-(1) The tax payable by a dealer under this Act shall be levied- (a) in the case of taxable turnover in respect of the goods specified in the First Schedule, at the rate of twelve paise in the rupee; (b) in the case of taxable turnover in respect of the goods specified in the Second Schedule, at such rate not exceeding four paise in the rupee as the Central Government may, from time to time, by notification in the official gazette determine; (c) in the case of taxable turnover in respect of any food or drink served for consumption in a hotel or restaurant or part thereof, with which a cabaret floor show or similar entertainment is provided therein, at the rate of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....him as raw materials in the manufacture in Delhi of any goods, other than goods specified in the Third Schedule or newspapers,- (1) for sale by him inside Delhi; or (2) for sale by him in the course of inter-State trade or commerce, being a sale occasioning, or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or (3) for sale by him in the course of export outside India being a sale occasioning the movements of such goods from Delhi, or a sale effected by transfer of documents of title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; or (B) of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him in Delhi, or for sale by him in the course of inter-State trade or commerce or in the course of export outside India in the manner specified in sub-item (2) or sub-item (3) of item (A), as the case may be; and (C) of containers or other materials, used for the packing of goods, of the class or classes specified in the certificate of registratio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the prescribed manner and within the prescribed time, by the dealer who purchases the goods: Provided further that the Administrator may, if he is of opinion that it is necessary in the public interest so to do, by notification in the official gazette, exempt, subject to such restrictions and conditions as may be specified therein, any dealer or class of dealers from furnishing declaration under the first proviso." Rule 9 of the Delhi Sales Tax Rules, 1975: "9. Conditions subject to which a dealer may claim deduction from his turnover on account of sales of goods at a point other than the last point in the series of sales.-1. A dealer who wishes to deduct from his turnover the amount in respect of any sale on the ground that he is entitled to make such deduction under the provisions of sub-clause (i) of clause (a) of sub-section (2) of section 4 shall, unless otherwise exempted under the provisions of the second proviso to section 5, produce a declaration in from ST-3 duly filled in and signed by the dealer selling the goods: Provided that a single declaration in from ST-3 may cover any number of transactions of sales by a dealer, effected during a quarter. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oods or the class of goods notified to be taxable at first point goods in this administration's Notification No. F.4(1)/78-Fin.(G)(i) dated the January 31, 1978 and further notified from time to time from furnishing under the first proviso to the said section 5 declaration in form ST-3 in respect of a sale of first point goods purchased on or after the first day of February, 1978 subject to the condition that the dealer claiming exemption shall produce bill(s)/cash memo(s) in support of purchase of such goods in Delhi. This notification shall be enforced with effect from February 1, 1978. By order and in the name of Administrator of the Union Territory of Delhi Sd/ (T. C. Nakh) Deputy Secretary (Finance) Dated: January 3, 1989 No. F. 2(18)/77-PPR/PF/9426-9777" Having regard to the ratio of the judgment of the Supreme Court in India Agencies (Regd.), Bangalore [2005] 139 STC 329, we need to give strict interpretation to the aforesaid provisions. It would mean that there has to be strict compliance by the dealer, in order to avail of the benefit under these provisions. Rule 9 of the Delhi Sales Tax Rules requires the dealer to produce a declaration in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this provision. Be that as it may, when the appellant did not even move the Commissioner for exemption from filing the original ST-3 form, the conditions specified in rule 9 of the Delhi Sales Tax Rules were not satisfied by the dealer. In the absence thereof, the appellant could not claim deduction without producing the original ST-3 forms. The appellant merely wanted to rely upon the photocopies of such forms. That would not amount to fulfilling the conditions to enable the appellant to claim deduction from his turnover on account of sale of goods at first point. The purpose of furnishing ST-3 form is to prove that sales tax has already been collected. In the absence of such forms, the appellant has not been able to demonstrate this. The authorities cited by the learned counsel for the appellant to the effect that when the first seller of the goods is identified who alone is liable to tax, then subsequent tax is exempted from taxation, is not applicable to the present situation. It is not a case of fixing the responsibility. Here, the appellant wants the benefit of tax, which allegedly is already paid. However, the appellant has to file satisfactory proof thereof, in the ma....