TMI Blog1986 (3) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... bove must be answered in the negative and in favour of the dealer. - Civil Appeal No. 162 (NT) of 1974, STR No. 603 of 1971 - - - Dated:- 18-3-1986 - PATHAK R.S. AND SABYASACHI MUKHARJI JJ. E.C. Agarwal, Senior Advocate (V.K. Pandita and P.P. Srivastava, Advocates, with him), for the appellant. S.C. Manchanda, Senior Advocate (J.D. Jain and Mrs. Kanwaljit Kochar, Advocates, with him), for the respondent. -------------------------------------------------- The judgment of the Court was delivered by SABYASACHI MUKHARJI, J. -This is an appeal by special leave from the decision of the High Court of Allahabad in Sales Tax Reference No. 603 of 1971 under section 11(5) of the U.P. Sales Tax Act, 1948 (hereinafter called "the Act"). The question referred to the High Court under section 11(5) of the Act was as follows: "Whether, on the facts and in the circumstances of the case, the dealer could be declared non-taxable on sales of yarn for Rs. 8,70,810 which he made against III-A forms though the purchaser instead of selling the said yarn in the same condition consumed the same." The Division Bench of the Allahabad High Court was of the opinion that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attention of the dealer was drawn to the letter of the Sales Tax Officer, Bijnor. A list of dealers to whom sales were made was also obtained from the dealers and the Sales Tax Officer in his order under section 21 of the Act had stated that the same was verified. In the list there were five names indicating the amount of cotton yarn sold to them. The Sales Tax Officer in his order under section 21 had stated that on verification, it was learnt that two dealers had consumed the entire cotton yarn in manufacturing handloom cloth and another dealer had consumed the yarn of Rs. 44,676.12 only out of the amount of Rs. 55,991.87 sold to him and he had resold the balance in the same condition and paid the sales tax due thereon. It was further recorded that dealer No. 2 in the said list had purchased cotton yarn worth Rs. 60,514.87 and not for Rs. 55,991.87 as given by the kanth dealer. The other dealer, namely, dealer No. 4, mentioned in the list had admitted the purchases of yarn and had also paid sales tax on the sale of yarn so purchased but the dealer at serial No. 5 in the list had deposed that he had consumed the entire cotton yarn in manufacturing coarse handloom cloth. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the notice under section 21, the assessee had disputed his liability to tax on the ground that since it had sold the yarn after scrutiny of requisite declaration, it was not liable to tax and further that it had no power of control over the yarn sold to the purchaser. The Sale Tax Officer rejected this plea of the assessee and held that the declaration forms given by the purchaser-dealers were 'farzi' and that the opposite party was in collusion with them. He had held that the purchasing dealers had consumed cotton yarn. The assessment order was followed up by opposite party by appeal and the appellate authority nullified the same and held that the assessee was not liable to tax. The State had preferred a revision which was dismissed and the Additional judge stated that he found that there was not a single bit of evidence for showing that III-A form certificates were 'farzi' in the sense that it did not bear any signature of the buyer nor was there any collusion between the buyer and the appellant. The dealer had sold the goods and accepted the forms in good faith and that was so. The dealer had no control over the yarn of the purchaser. In those circumstances the question a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms: "12-A. Exemption of sales under section 3-AA.-A sale of any of the goods specified in section 3-AA shall be deemed to be a sale to the consumer, unless it is to a dealer who furnishes a certificate in form III-A to the effect that the goods purchased are for resale in the same conditions. Details of all such certificates shall be furnished by the selling dealer with his return in form IV." The cotton yarn is to be taxed at a single point, i.e., when the sale takes place to the consumer. Section 3-AA and the scheme thereunder was formulated under the provisions of section 14 of the Central Sales Tax Act, 1956. Section 14 of the Central Sales Tax Act specifies certain goods as goods of special importance in inter-State trade or commerce and clause (ii-b) includes cotton yarn, but not including cotton yarn waste. Section 15 imposes certain restrictions and conditions in regard to tax on sale or purchase of declared goods within a State, and clause (a) imposes conditions that the tax payable under any law in respect of any sale or purchase of such goods inside the State shall not firstly exceed four per cent of the sale or purchase price thereof and secondly such tax sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o does not purchase them for resale in the same condition in which he has purchased them, or to an unregistered dealer shall, for purposes of this section be deemed to be a sale to the consumer." It means that a sale of any of the goods specified in sub-section (1) to a registered dealer who has purchased them or to any unregistered dealer, shall for the purpose of this section, be deemed to be a sale to the consumer unless the purchasing dealer purchases the said goods for resale in the same condition. It merely strengthens the provisions of sub-section (2) of section 3-AA, i.e., unless the dealer proves otherwise, every sale shall, for the purpose of sub- section (1), be presumed to a consumer. The combined effect of sub-sections (1), (2) and (3) of section 3-AA of the Act is that tax would be payable if the goods in question, i.e., cotton yarn, in this case, are sold to a dealer for consumption. Unless the dealer proves otherwise every sale by a dealer shall for the purpose of sub-section (1) be presumed to be a sale to a consumer. A sale of any of the goods mentioned in sub-section (1) to a registered dealer who does not purchase them for resale in the same condition, witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 12-A was to prescribe certification by the purchasing dealer as the only means of protection for the selling dealer which enabled him to repel the statutory presumption most conveniently. The rule in addition, the learned judge observed, to preventing the commission of fraud and introducing administrative convenience, was designed to facilitate the task of the dealer who sold. It was further observed by the learned judge that it was, therefore, reasonable and valid and did not go beyond the object of section 3-AA. It was further observed by Beg, J., that the question whether the fair and reasonable but obligatory presumption raised by section 3-AA(2) read with first part of rule 12-A was rebutted or not in a particular case, could be decided, on the totality of evidence before the Sales Tax Officer, when the evidence had to be weighed and assessment order had to be passed. At that time, the Sales Tax Officer might fairly use non-compliance with the last part of rule 12-A as a piece of evidence for concluding that some certificates filed before him in assessment proceedings were not genuine. It was further observed that although the prescribed certificate might provide prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n form III-A as indicated therein. But the question with which we are concerned in this case did not arise in the form in either of the two cases. It is not the question whether it raises a presumption or not. But the question is whether it raises an irrebuttable presumption, i.e., a presumption which cannot be rebutted by the relevant assessing authority. In other words even if the assessee had furnished a certificate in form III-A, and the details as stipulated in form IV, can the selling dealer be called upon to prove further how the purchasing dealer has dealt with the goods after purchasing the goods. Mr. Agarwal, learned counsel, contended that after a certificate was given, it should be deemed to be not for consumption and the certificate raised an irrebuttable presumption in favour of the dealer and no further examination of evidence was permissible. In support of this contention, reliance was placed on certain observations of this Court in State of Madras v. Radio and Electricals Ltd. [1966] 18 STC 222 (SC); [1966] Supp SCR 198. This Court had occasion to deal with sections 7 and 8 of the Central Sales Tax Act, 1956, and Rules framed thereunder. There, Shah, J., speaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate specifying the goods which were to be purchased and furnished the required declaration to the selling dealer, the selling dealer became, on production of the certificate, entitled to the benefit of section 8(1) of that Act. It was of course open to the sales tax authorities to satisfy themselves that the goods which were purchased by the purchasing dealer under certificate in form C were specified in the purchasing dealer's certificate in form C. These observations as has been noted before were made in the context of the rules and the provisions of the Central Act, which were on similar lines, though their provisions were not in pari materia. But it was contended by counsel for the dealer that in order to make the provisions of the Act operative and effective, this was the intention in the instant case and though the rule did not say so that it raised an irrebuttable presumption. We are of the opinion that this submission has to be accepted. After all the purpose of the rule was to make the object of the provisions of the Act workable, i.e., realisation of tax at one single point, at the point of sale to the consumer. The provisions of the rule should be so read as to fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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