TMI Blog1997 (1) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... le was ultra vires the Central Sales Tax Act, 1956, hereinafter called "the Act". The appellant, M/s. Phool Chand Gupta, was at all material times a dealer in oil-seeds. This firm was assessed under the Act by the Commercial Tax Officer, Vizianagaram, for the relevant assessment years 1971-72 and 1972-73. He granted exemption on a turnover in respect of mohwa seeds on the plea that the seeds were purchased by the firm while in transit and were sold to dealers outside the State. The Deputy Commissioner, however, noticed that the assessee had actually purchased the railway receipts relating to the mohwa seeds from non-resident dealers while the goods were in transit from places outside the State and were sold to non-resident dealers. He, therefore, opined that the exemption granted was irregular since the transaction fell within section 3(b) and hence was not eligible for exemption in view of section 6(2) of the Act unless the dealer furnished a certificate in form E-I obtained from the vendor and a declaration in form C received from the registered dealer to whom he sold the goods. Since no document in form C was furnished, it was held that the assessee was not entitled to exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods during their movement from one State to another; any subsequent sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject to tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner a certificate duly filled and signed by the registered dealer from whom the goods were purchased, containing the prescribed particulars." After its amendment with effect from 1st April, 1973, the said sub-section reads as under: "6(2) Notwithstanding anything contained in sub-section (1) or sub- section (1-A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods- A) to the Government, or (B) to a registered dealer other than Government, if the goods are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and certificate referred to shall be in forms "C " and "D", respectively. Sub-rule (4) next provides that the certificate referred to in section 6(2) shall be in form E-I or E-II as the case may be. Next, we may reproduce rule 12(3)(ii) of the State Rules. It reads: "Rule 12(3)(ii): For the purpose of claiming exemption from tax on his subsequent sale under sub-section (2) of section 6, the purchasing dealer who effects a subsequent sale to another registered dealer by transfer of documents of title to the goods during their movement from one State to another, shall furnish to the appropriate assessing authority,- (i) the portion marked 'original' of the form E-I received by him from the registered dealer from whom he purchased the goods, and (ii) the original of the declaration in form C received from the registered dealer to whom he sold the goods." On a conjoint reading of the various sub-sections of section 8 it appears that the concessional rate of three per cent of the turnover is admissible on all inter-State sales when the goods in question are of the description referred to in sub-section (3). Thus, the concessional rate prescribed under sub-section (1) is availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate referred to must be in form "E-I" or "E-II" as the case may be. It is the requirement of furnishing form "C" under rule 12(3)(ii) of the State Rules which is the bone of contention in the present proceedings. It is contended that if this rule is not construed to be directory in character, it will be ultra vires the Act. It is true that while the proviso to section 6(2) of the Act imposes the liability of production of form "E-I", rule 12(3)(ii) of the State Rules imposes the additional requirement of filing form "C" as well. As pointed out earlier to secure exemption under section 6(2), proof of the subsequent sale is a sine qua non. Unless the subsequent sale to a registered dealer in the course of inter-State trade or commerce of goods of the description referred to in section 8(3) is shown to have been effected by the transfer of documents of title to such goods, there could be no question of grant of exemption from payment of tax. In order to claim and secure exemption, this fact has to be proved by the production of form "E-I" under rule 12(4) of the Central Rules and form "C" under rule 12(3)(ii) of the State Rules. We may now consider the challenge to the vires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business as may be necessary for the purposes of this Act." Section 13(3) confers wide powers on the State Government to make rules to carry out the purposes of the Act, provided the said rules are not inconsistent with the Act and the Rules framed by the Central Government in exercise of power conferred by sub-section (1) of section 13. Without prejudice to this power, the State Government may make rules for all or any of the matters enumerated in sub-section (4) thereof which includes the matter in clause (c) extracted earlier. A provision requiring the production of the declaration in form "C" for receiving the benefit of exemption under section 6(2) does not run counter to any provision in the Act or the Central Rules and seems to be within the scope and ambit of the rule-making power under section 13(3) as well as within the specific provision in clause (c) of section 13(4) which empowers the making of any rule which requires the furnishing of information relating to purchases, sales and delivery of goods by any dealer. The requirement of the production of form "C" in addition to the requirement of production of form "E-I" cannot be said to be inconsistent with the Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the provision is held to be directory, substantial compliance would suffice. That would permit the dealer to adopt any other mode of proof. It would be for the authorities to accept it as sufficient or to reject it. If the authorities reject it as insufficient, it would lead to avoidable litigation. It was, therefore, open to the State Government to accept the recognised mode as the exclusive mode of proof to avoid disputes on the sufficiency or otherwise of the proof and also to make the process of granting exemption easy and uniform. Such a rule must be held to be within the scope and ambit of section 13(3) read with section 13(4) of the Act and not inconsistent with the Act or the Central Rules. This is the view taken by the High Court under the impugned decision based on the view taken by a learned single Judge of the same High Court in the case of Govindarayulu Brothers v. Sales Tax Appellate Tribunal, Andhra Pradesh [1974] 33 STC 580. However, our attention was drawn to the decisions of the Madras, Gujarat and Madhya Pradesh High Courts which have taken a different view. We will briefly deal with these cases. In the case of the State of Madras v. P. Subbiah Pillai [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Madras case was accepted as correct. The Madhya Pradesh case, Commissioner of Sales Tax, M.P. v. Shivnarayan Jagatnarayan [1978] 42 STC 315, follows the line of reasoning adopted by the Madras and Gujarat High Courts. Dealing with the decision of the Andhra Pradesh High Court in the case of Govindarayulu [1974] 33 STC 580, the Division Bench of the High Court distinguished it on the ground that it arose out of a writ petition challenging the validity of similar rule framed by the State Government requiring production of form "C" to claim exemption under section 6(2) of the Act. That was, therefore, a case in which the validity of the rule was questioned. Since no such question arose in the case on hand and since the court had presumed it to be valid, the Andhra Pradesh High Court decision was held to be clearly distinguishable. It was, therefore, held that the rule was directory and not mandatory. From the aforesaid decisions of the Madras, Gujarat and Madhya Pradesh High Courts, it seems clear to us that they upheld the validity of a similar provision but held that in so far as its application to claims for exemption under section 6(2) is concerned, it is directory and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 8(2)(b) read with 8(3) is form "C" alone, and if that provision is intra vires, it is difficult to appreciate how it becomes ultra vires when applied under section 6(2) of the Act. If the mode of proof is left to the dealer to choose, each dealer may choose his own mode and the concerned authority would be required in each case to apply his mind to each situation and come to an independent conclusion which may on the same set of facts vary from authority to authority and thus introduce uncertainty and consequently lead to avoidable delay and litigation. To avoid such a situation, if the State Government decided to restrict the mode of proof to one, namely, the production of form "C", it is difficult to see how the provision can be construed as directory as such an interpretation would destroy the very purpose of the rule. We are, therefore, inclined to take the view which the High Court of Andhra Pradesh took in Govindarayulu's case [1974] 33 STC 580, and which has been approved by the impugned decision. Before we part, we must notice one observation found in the impugned judgment. In Govindarayulu's case [1974] 33 STC 580 (AP) the learned single Judge referred to the prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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