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2013 (3) TMI 41 - HC - VAT and Sales TaxGenuinety of forms issued by the registered purchasing dealers in ST-1 - Whether the Tribunal was right in placing the burden upon the dealer to prove it - Held that:- As decided in The State of Madras Versus Radio and Electricals Ltd. and Another [1966 (4) TMI 59 - SUPREME COURT OF INDIA] it is not the burden of the selling dealer to show that the declaration in form No.ST-1 submitted by the purchasing dealer were not spurious or were genuine or that the conditions subject to which the forms were issued to the purchasing dealer by the sales tax department were complied with. The burden will shift to the selling dealer only if it is shown that the selling dealer and the purchasing dealer had acted in collusion and connived with each other in order to evade tax by obtaining spurious forms of declaration. The assessment order dated 28.03.1988 makes no such allegation. It refers only to certain discrepancies between forms ST-1 and the ST-2 accounts given by the purchasing dealers. That is not for the selling dealer to explain. The “on-the-spot” verification supposedly carried out by the sales tax authorities does not appear to have unearthed any material or evidence to show that there was any collusion or connivance between the appellant and the purchasing dealers. The fact that the colour of the form gave rise to the suspicion that the forms are not genuine could be a starting point for further enquiry but by itself does not establish any guilt on the part of the selling dealer. There appears to have been no further enquiry conducted by the sales tax authorities to prove that the forms are spurious, neither is there any evidence to show that the appellant was in any way connected with the alleged fraud committed by the purchasing dealer. Thus wrongly placed the burden upon the selling dealer, which is contrary to the law laid down in the above decisions - in favour of the appellant and against the revenue. Refusal to allow deduction of the sales made by the appellant to dealers under section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 - penalty of ₹ 5,00,000/- had also been imposed on the dealer for furnishing non-genuine ST-1 forms in relation to the aforesaid sales - Whether the Tribunal was right in law in sustaining the penalty to the extent of ₹ 25,73,072/- imposed under section 50(1)(a) of the DST Act? - Held that:- Reading section 50(1)(a) together with section 56(2), it is seen that they provide for penalty on the dealer who holds, gives, produces or accepts a declaration under the second proviso to section 4(2)(a)(v) which he knows or has reason to believe to be false. It is the burden of the assessing authority to show that the appellant knew or had reason to believe that the ST-1 forms were false. Nothing has been brought on record to discharge this burden. According to the Tribunal, the mere fact that the forms were found in the premises of the appellant during the survey conducted on 13.07.1983 was sufficient to show that the appellant knew that the forms were false is unable to be accepted as in several judgments it has been held that it was for the Sales Tax authorities to establish that the certificates were false to the knowledge of the selling dealer or that there was collusion between the selling and purchasing dealers. This indicates that for the acts of the purchasing dealer, the selling dealer cannot be held responsible. The ST-1 forms are issued by the sales tax authorities to registered dealers. The selling dealer is accordingly entitled to rely upon the certificates as having been genuinely issued. The inaction, neglect or even a fraud of a registered purchasing dealer cannot result in penalising the innocent selling dealer in the absence of his having been a party to the fraud, deception or misrepresentation. There is no evidence to show that the appellant was in any way involved in the procurement of the allegedly fake or false ST-1 forms, so that any culpable knowledge can be imputed to it - The Tribunal failed to note that the main ingredient of section 50(1)(a) that the dealer should know that the forms are false or had reason to be believe that they are false has not been proved by the Sales-Tax authorities, thus Tribunal committed an error in sustaining the penalty to the extent of ₹ 25,73,072/- - in favour of the appellant dealer and against the Commissioner of Sales Tax.
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