TaxTMI 
TaxTMI 
2015 (9) TMI 314
X X X X Extracts X X X X
X X X X Extracts X X X X
....eration." 2. The Appellant/Assessee is aggrieved on account of being denied deduction in respect of sales made by the Appellant to registered dealers against ST-1 Forms. The Assessing Authority (hereafter 'AA') had found that the relevant account (ST-2 account) filed by certain dealers ( hereafter referred to as 'purchasing dealers') who were stated to have purchased goods from the Appellant against the ST-1 Forms, had reflected the ST-1 Forms to have been issued to persons other than the Appellant. Both in the initial round of assessment as well as in the remand proceedings, the AA was of the view that the Appellant could not substantiate its claim with regard to the movement of goods sold and thus, concluded that the appellant had colluded with the purchasing dealers to arrange the ST-1 forms and consequently disallowed the exemption claimed by the Appellant in respect of the sales made against ST-1 forms. According to the Assessee, it had discharged its burden of proof for claiming deduction from its taxable turnover and the AA has wrongly disallowed the same. 3. Briefly stated, the relevant facts for addressing the issue involved in the present appeal are as under:- 3.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to Rs. 13,40,735/- against 7 ST-1 Forms which remained unverified because the concerned purchasing dealers had shown the said forms to be issued to persons other than the Assessee. The Assessee was also asked to produce documentary proof of the transfer of property in goods and to produce the concerned purchasing dealers with their Books of Accounts. The AA also issued notices to the concerned purchasing dealers, however, none of those dealers were found to be in existence at the material time. The Assessee reiterated it's stand that it had received payments through bank drafts and cheques but could not produce the purchasing dealers or their books of accounts. The AA, further, passed an Assessment Order dated 28th March, 1993 (hereafter referred to as 'remand assessment order') disallowing deduction of sales of Rs. 13,40,735/- from the taxable turnover of the Assessee. The particulars of the said disallowances are as under:- S.No. ST-1 No. Form issued to:- Amt. As per ST-1 Form As per ST-2 a/c Form issued to: - 1. A/5 541089 M/s Simple Traders (Wards-42) Rs.2,00,323/- Rs.82,535.71/- M/s Nirmal Metal Inds. 2. A/5 390986 M/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment to the purchasing dealers. He further submitted that it was not in dispute that the purchasing dealers were registered with the Sales Tax Department in respect of the goods sold by the petitioner. Mr. Mahna submitted that in view of the above, the Assessee being the selling dealer was not required to carry out any further investigation and in any event, was not responsible for any of the acts of the purchasing dealers including the ST-2 Account submitted by them. He referred to the recent decisions of this Court in Milk Food Ltd. v. Commissioner, VAT &Ors.:(2013) 59 VST 1 (Delhi) and Powerlite Electricals India P Ltd vs. Commissioner Trade and Taxes Delhi: St. Appl. 78/2012, decided on 23rd March, 2015 in support of his contentions. 5. Mr. Peeyoosh Kalra, Addl. Standing Counsel for the Revenue submitted that there was no dispute as to the obligations of the dealer making sales against receipt of ST-1 Forms. He, however, emphasized that the present case was not one where the Assessee was being faulted for any defect in the Accounts maintained by the purchasing dealers or misutilisation of goods purchased by them, but the sales made by the Assessee were itself questioned. He....
X X X X Extracts X X X X
X X X X Extracts X X X X
....over during that period on - xxxx xxxx xxxx xxxx xxxx (v) sale to a registered dealer- (A) of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by 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 tile 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 occasio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to clause 4(2)(a) of the Act should be in 'Form ST-1' which would be printed under the Authority of the Commissioner and could be obtained from the appropriate Assessing Authority by a registered dealer intending to purchase goods on the strength of his certificate of registration. The relevant extract of Rule 8 of the Rules is quoted below:- "8. Authority from whom the declaration form may be obtained, and use, custody and maintenance of records of such forms and matters incidental thereto.- (1) The declaration referred to in the second proviso to clause (a) of sub-section (2) of section 4 shall be in Form ST-1 which shall be printed under the authority of the Commissioner and shall be obtained from the appropriate assessing authority by the registered dealer intending to purchase goods on the strength of his certificate of registration. (2) No selling dealer shall accept any declaration from a purchasing registered dealer unless it is furnished in Form ST-1 and not declared invalid or obsolete by the Commissioner: Provided that the declaration Form ST-1 issued to a dealer before the 1stFebruary, 1978 and remaining unused shall become invalid and obsolete except ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e utilized; or (iii) been found by an appropriate assessing authority having some adverse material against him, suggesting any concealment of sale or purchase or of furnishing inaccurate particulars in the returns, the appropriate assessing authority shall, after affording the applicant an opportunity of being heard, withhold, for reasons to be recorded in writing, the issue of declaration forms to him and the appropriate assessing authority shall make a report to the Commissioner about such withholding within a period of three days from the date of its order:" xxxx xxxx xxxx xxxx &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed are specified in his certificate: but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form 'C' the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under s. 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer...." (underlining added) 14. The aforesaid decision was rendered in the context of Central Sales Tax Act and the sales made by the purchasing dealers against declarations in Form-C. However, the ratio of the said decision would be equally applicable to sales made against ST-1 Form. The aforesaid decision has also been followed by this Court in Powerlite Electricals India P. Ltd. (supra) and Milk Food Ltd. (supra). 15. In view of the above, it is well established that a selling dealer would have no duty to examine the correctness of the Form ST-1 submitted; the selling dealer woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fact that the Assessee had produced documents for the sale of goods and the duly receipted invoices along with original ST-1 Forms coupled with receipt of consideration through bank drafts and cheques that would clearly establish the transactions claimed by the Assessee. The AA was unduly influenced by the ST-2 Account filed by the purchasing dealer and the fact that the purchasing dealers were not found in existence at the time of making the remand assessment order. Insofar as the ST-2 Account furnished by the purchasing dealer is concerned, it is well established that the Assessee cannot be held responsible for any discrepancy in that regard. As indicated above, the originals of ST-1 Forms in the name of the Assessee had been produced and the Assessee could not be penalised for any contrary return filed by the purchasing dealers. As regards the existence of the purchasing dealers is concerned, there is no dispute that the said dealers were in existence when the transactions had been effected; admittedly, the ST-1 Forms had been issued by the Commissioner to such dealers. It is relevant to note that ST-1 Forms are printed under the Authority of the Commissioner and are issued by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be unmerited in view of the fact that the Assessee had produced invoices which were duly receipted by the purchasing dealers. The ST-1 Forms, in addition to the other particulars, also specifically recorded the receipt of goods by the purchasing dealer. In addition, the receipt of consideration for the sale of goods had been established by showing (a) deposit slips in certain cases; the bank statement (which was not noted by the Tribunal); and the ledger account of the purchasing dealers, which also noted the particulars of the cheques received from the purchasing dealers in consideration of the sale. 21. It is also relevant to note that the department had no other evidence/material apart from the ST-2 Account submitted by the purchasing dealers to doubt the sales made by the Assessee against ST-1 Forms. No investigations had been conducted by the AA at the material time on the purchasing dealers - the Assessment Order had been passed without summoning the purchasing dealers or making any further enquiries as to the correctness of the ST-2 Account submitted by them. 22. In view of the above, we find it difficult to sustain the denial of deduction claimed by the Assessee for t....