TMI Blog1969 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ule was ultra vires, and the Supreme Court repelled the contention that the question could have been examined and decided by the authorities constituted under the statute. Then, there is the circumstance that the questions raised in these writ petitions are questions which should be decided authoritatively at the earliest as they affect a large number of cases where appeals are filed and are rejected because of apparent non-compliance with the rules. It is in the public interest that such questions should be resolved by adjudication by this court expeditiously so that the statutory authorities are afforded adequate guidance in respect of matters which arise daily before them. The appeals have been dismissed as defective because in all the three memoranda the petitioner failed to disclose the tax admittedly due. In the memoranda originally filed the petitioner stated that the tax admitted to be due was nil, and thereafter sought permission to amend the memoranda by inserting the figures of the admitted tax. The appellate authority rejected the prayer for amendment on the ground that it was not competent to permit any amendment. I agree with my brother Beg, J; that the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was wrong in holding that it was not open to the petitioner to show that the statement made in the memorandum of appeal was incorrect. In my opinion, the question whether the appellate authority enjoys the power to permit an amendment of the memorandum of appeal does not arise because the statement which the petitioner sought to correct is not a statement required by the Act and the Rules to be mentioned in a memorandum of appeal. Shri K.N. Singh, the learned Chief Standing Counsel for the respondents, fairly concedes that the appellate order is erroneous and is liable to be quashed. The matter could have ended there so far as we are concerned. The consequence of the finding that the appellate orders are erroneous and must be quashed is that the appellate authority must now take up the appeals again and dispose them of in accordance with law. But two questions have been raised on the merits. One is whether the assessing authority was justified in refusing to consider the Form III-A filed by the petitioner during the assessment proceedings. Those forms were filed not with the quarterly returns but some time after. It is not in dispute that they were filed before the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for resale in the same condition in which he has purchased them, but sells them after processing them or altering them to produce a new article. The other is where the sale is made to an unregistered dealer. Both categories are deemed for the purpose of section 3-AA to be sales made to the consumer. There can be little doubt that the word "deemed" in the explanation has been used to give an extended meaning to the ordinary connotation of the expression "sale to the consumer". That the word "deemed" can be so used is now well settled: Khatizabai v. Controller of Estate Duty[1959] 37 I.T.R. (E.D.) 53; A.I.R. 1960 Bom. 61, 70. Now one thing is clear, and that is that the tax is levied only at the point of sale by the dealer to the consumer. In construing the provisions of section 3-AA and rule 12-A that must be kept clearly in mind. The Legislature appears to have anticipated that there would be considerable difficulty in determining whether a particular sale was made to the consumer. To obviate that difficulty, the Legislature enacted sub-section (2) of section 3-AA. It provides that unless the dealer proves otherwise every sale by him would, for the purposes of sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The goods are purchased by the purchasing dealer for resale in the same condition in which he purchased them. He sells them to a consumer. Inasmuch as the sale by him is a sale to the consumer, it is the purchasing dealer who is liable to tax. Ordinarily, the purchasing dealer would furnish a Form III-A to the selling dealer and on production of that form the selling dealer could establish that he was not liable to tax. But there may be cases where the purchasing dealer does not furnish Form III-A to the selling dealer. In four sales tax references, Commissioner of Sales Tax v. M/s. Lary Leather AgencyS.T.R. No. 255 of 1966 decided on May 2, 1969., Commissioner of Sales Tax v. M/s. Society Leather StoresS.T.R. No. 256 of 1966 decided on May 2, 1969., Commissioner of Sales Tax v. M/s Star Leather AgenciesS.T.R. No. 257 of 1966 decided on May 2, 1969. and Commissioner of Sales Tax v. M/s. Abdul Razzaq Leather Stores S.T.R. No. 258 of 1966 decided on May 2, 1969. , this court had recently to consider a situation where the assessee had admittedly made the sale to the consumer and had not furnished Form III-A to the dealer from whom he had purchased the goods. The contention of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t produced Form III-A before the assessing authority. It is immaterial that there is an understanding between the dealers that the purchasing dealer will furnish Form III-A to the selling dealer or even that there is a contract between them to that effect. Breach of contract is not unknown, and there will always be a case, no matter what the understanding or the circumstances, where Form III-A is not supplied by the purchasing dealer to the selling dealer. If Form III-A is the only proof permitted by the law to the selling dealer, then on his failure to produce it, it will be presumed that the sale by him is to the consumer. In the case taken by me of many successive dealers, the Sales Tax Officer will be bound to levy the tax at as many points of sale as there are selling dealers who have not been given Form III-A by their purchasing dealer. There can be little dispute that thus an essential requirement of sub-section (1), namely, that the tax be levied at single point, will be flagrantly violated. Rule 12-A, it must be remembered, embodies a rule of evidence. Provisions relating to evidence, specially those made in the exercise of a rule-making power, cannot be so construed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section narrower by prescribing a particular mode. The Supreme Court observed: "The rule lays down one uncontestable mode of proof which the court will always accept but it does not exclude the operation of the proviso when equally satisfactory proof is made available to the officer hearing the appeal and it is proved to his satisfaction that the payment of the tax has been duly made and in time. In this sense, the rule can be regarded as directory since it lays down one of those modes which will be unquestioned for its validity. The other modes of proof are not necessarily shut out." And I might here add the Supreme Court's further observation: "It is to be remembered that all rules of procedure are intended to advance justice and not to defeat it." What we must not forget, I think, is that the provision for proof by furnishing Form III-A has been made by a rule and not by a section of the Act itself. Had that not been so, the problem would have taken on a different complexion, as is to be found in section 8(4) of the Central Sales Tax Act and section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, where the Legislature itself declares that the exemption contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en said that the word "unless" in rule 12-A makes the filing of Form III-A mandatory. That may be so in the usual kind of case, where it is a case of obtaining an exemption merely and the impact of that exemption is confined to the point of sale by the particular assessee-dealer. But I feel great difficulty in agreeing, where that construction would lead to a conflict between the rule and the section and where it would lead to results opposed to the very intent of the Legislature. If rule 12-A is not open to the construction I have suggested then, in my opinion, it will have to be struck down. To read it in the way I have done will enable it to survive and to provide a convenient mode for the assessee to discharge the burden of proof cast upon him by sub-section (2) of section 3-AA. The respondent relied upon Mansey Lakhansey Co. v. State of Uttar Pradesh[1962] 13 S.T.C. 898., where a learned Single Judge construed rule 12-A to the contrary. With respect, I am unable to agree with the opinion expressed in that case. On the other question, namely, whether the blankets under consideration are entitled to exemption from tax, it was stated on behalf of the petitioner that it was a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ends, constitute garments when they were sold, as was held by a Division Bench of this court in Firm Jaswant Rai Jai Narain v. Sales Tax Officer and Others[1955] 6 S.T.C. 386 (S.C.). with regard to saris, lihaphs, phards and bed-covers, or, did they still fall under the classificacation "cotton fabrics of all varieties" which are generally measured and cut at the time of sale? This question has not been argued before us by either side as it was assumed that it is to be decided by the sales tax authorities themselves on the facts of the case. We, therefore, refrain from deciding it. Two other questions, which have been argued before us, remain to be decided by us. The first is whether the Sales Tax Officer was right in refusing exemption to sales of yarn to the extent of Rs. 59,38,364.83 for the assessment year 1961-62, of Rs. 63,13,981.01 for the assessment year 1962-63 and of Rs. 60,59,755.30 for the assessment year 1963-64, on the ground that the petitioner had not submitted certificates in Form III-A, showing that these goods were sold to a dealer for resale in the same condition, either with its quarterly returns in Form IV or within a time obtained especially for filing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or of any rule made thereunder. In K.S. Venkataraman and Co. (P.) Ltd. v. The State of Madras[1966] 17 S.T.C. 418 (S.C.)., the view of the majority of their Lordships of the Supreme Court, expressed by Subba Rao, J., with regard to the jurisdiction exercised under section 66 of the Income-tax Act, 1922, was: "It has been held by this court that the jurisdiction conferred upon the High Court by section 66 of the Income-tax Act is a special advisory jurisdiction and its scope is strictly limited by the section conferring the jurisdiction. It can only decide questions of law that arise out of the order of the Tribunal and that are referred to it. Can it be said that a question whether a provision of the Act is ultra vires of the Legislature arises out of the Tribunal's order? As the Tribunal is a creature of the statute, it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act. The question of ultra vires is foreign to the scope of its jurisdiction." In Beharilal Shyamsunder v. Sales Tax Officer, Cuttack[1966] 17 S.T.C. 508 (S.C.)., the question raised was whether an imposition of tax was "without authority of law or ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 136 of the Constitution. Moreover, as the referring order indicates, the questions raised by the petitioner before us are of sufficient importance to deserve an early authoritative pronouncement by this court. We, therefore, overrule the preliminary objection. Now, taking up the first of the two questions we have to decide, the impugned rule 12-A relied upon by the Sales Tax Officer may be quoted. It reads as follows: "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 condition. Details of all such certificates shall be furnished by the selling dealer with his return in Form IV." This is clearly a rule of evidence made for the purpose of enabling a satisfactory adjudication on the statutory right given by section 3-AA(1) of the Act to obtain an exemption of certain sales of goods, including those of cotton yarn, from sales tax "except at the point of sale by a dealer to the consumer" and that too at a rate not exceeding two naye paise per rupee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. It does not really conflict with section 3-AA(2), but fills a gap on a matter on which section 3-AA(2) is silent. Its effect is that the dealer is obliged to obtain the best and most convenient form of evidence, to show that he is entitled to get an exemption, at a time and in a manner which ensure that it is above suspicion and is not lost. The last sentence of the rule which directs the dealer to furnish details of prescribed certificates with his returns in Form IV seems also intended to guard against spurious certificates supplied later and to enable authorities to check up in time the correctness of details given. The selling dealer can certainly refuse to sell without charging sales tax unless and until the purchasing dealer either certifies or undertakes to certify in the prescribed form. I am unable to see how prescribing the most convenient and reasonable mode of proof, in the circumstances of the case, so as to safeguard the interests of dealers as well as of the revenues of the State, can be prohibited even if, by prescribing such a mode of proof only, other modes of proof are necessarily barred by implication. Statutory provisions requiring certain transactions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a declaration form, could not be defeated. by so interpreting it that it became redundant and otiose. It rejected the submission that the proviso meant: "If the declaration form is furnished, well and good: but, if not furnished, other evidence could be produced." The ground given for rejecting such a contention was that the clause could not be rewritten so as to ignore the proviso. In my opinion, the word "unless" used in rule 12-A clearly gives to what follows after it, an effect exactly similar to that of the proviso considered by the Supreme Court. Such a conclusion appears inescapable to me on the language of the rule. In Kedarnath Jute Manufacturing Co.'s case[1965] 16 S.T.C. 607 (S.C.); A.I.R. 1966 S.C. 12 at p. 14. , the Supreme Court, after explaining the objects of the proviso considered there, observed: "The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provision of the said clause seeks to avoid." It seems to me that rule 12-A In addition to serving these very objects, was designed to facilitate the task of the dealer who sells. It is, therefore, reasonable and valid and does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every case. It leaves room for giving evidence of certification in very exceptional cases where, due to no fault of the assessee, the sales, though shown to have been certified, cannot be supported by the prescribed certificates at the time of assessment, e.g., due to destruction by fire or flood. Satisfactory proof, in such extraordinary cases, that the sales were duly supported by the prescribed certificates furnished by the purchasing dealers, will still meet the requirements of the rule. The rule, as it stands, certainly has the effect of compelling an assessee who claims the benefit of section 3-AA of the Act to prove certification by purchasing dealers. But, the rule cannot, in my opinion, be held to be ultra vires on this ground alone. The obligation imposed on assessees is quite reasonable and necessary. Even if a hypothetical situation, which has not arisen in any case before us, were to arise in which a purchasing dealer wrongly or dishonestly refuses to certify a purchase which is for resale in the same condition, the Sales Tax Officer is not powerless. The power, impliedly contained in section 14(2)(h) of the Act, can be used, in such eventualities, to compel the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. There is, however, no need here to resort to this principle. On the clear and explicit language of rule 12-A, all that the assessee need do, when filing his returns, is to fill up the columns giving the required particulars. Rule 12-A could not be held to be invalid simply because it makes a supply of this information in Form IV obligatory on an assessee. It does not go so far as to lay down that the presumption found in the earlier part of rule 12-A cannot be rebutted if the obligation imposed by the last sentence of rule 12-A is not discharged. On the language of rule 12-A itself, a distinction must be drawn between the results of the assessee's failure to discharge the obligation to prove certification, which means that the presumption raised is unrebutted, and of a non-compliance with the last sentence, the effect of which is not given by the rule but is left to be determined by the Sales Tax Officer. The question whether the fair and reasonable but obligatory presumption, raised by section 3-AA(2) read with the first part of rule 12-A, is rebutted or not, can only be decided, on the totality of the evidence before the Sales Tax Officer, when the evidence has to be weighed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1961-62 may be reproduced. They are as follows: Tax turnover, which is objected to Rs. 75,01,716 Tax assessed on above, not admitted payable Rs. 1,50,034 Tax admitted payable thereon and paid since the aforesaid order Nil Date of receipt of order ... ... 10-2-65 Court-fee stamp affixed ... ... Rs. 50 Subsequently, the petitioner filed a supplementary memorandum of appeal in each case giving an amended form in which the third head was altered into: "Tax admitted payable and already paid." After this change of caption, the assessee mentioned the actual sum paid in each case. To give an example, again from the case for assessment year 1961-62, the exact form of the amended statement is given as follows: "Tax admitted payable and already paid: Rs. 978.25." This was the only amendment the assessee wanted to make in the memoranda of appeals. The Assistant Commissioner, Sales Tax, held that he had no power to allow an amendment of the original memorandum of appeal in each case by reason of the second proviso to section 9 of the Act which reads as follows: "Provided, secondly, that the appellate authority shall not exercise any powers or perform any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given below: I the appellant do hereby declare that the contents of this ----------------------------------on behalf of the appellant memorandum are true to the best of my knowledge and belief. (2) The memorandum of appeal shall be accompanied by adequate proof of payment of the fee and a certified copy of the order appealed against, and the challan showing deposit in the treasury of the tax admitted by the appellant to be due, or of such instalments thereof as might have become payable." It has been contended before us, on behalf of the petitioner, that even if it is assumed that there was a defect in each memorandum of appeal, the appeal itself would not become incompetent. It has been held by the Supreme Court in Garikapati Veeraya v. N. Subbiah Chowdhry and OthersA.I.R. 1957 S.C. 540., and also in Daji Saheb and Others v. Shanker Rao Vithalrao Mane and AnotherA.I.R. 1956 S.C. 29., that a statutory right of appeal is a vested right. Such a right cannot, therefore, be taken away indirectly by making a rule prescribing the kind of statement which the petitioner-appellant had made in each of the memoranda of appeals and which the petitioner wanted to amend. But, there is no r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Its elucidation, even by further evidence, which is permissible under rule 68(8), was possible as part of the right of hearing given to the appellant. Moreover section 9(5) of the Act confers the power upon the appellate authority specifically of admitting even time-barred appeals where sufficient cause for condonation of delay is shown as required by section 5 of the Limitation Act. For all these reasons the memoranda of appeals could not be rejected on the ground given by the Assistant Commissioner. The appellant could not be denied a decision on merits unless there was an incurable defect of such a character in the memoranda of appeals that it could be held that there were no appeals at all before the Assistant Commissioner. The more important question about which the Assistant Commissioner of Sales Tax said nothing was whether the provisions of rule 66(2), set out above, had been complied with. Apparently, this rule has been made so as to give effect to a statutory obligation of the assessee to satisfy the court that the appeal is maintainable on a ground apart from either the form of the appeal or the merits of the questions raised by the appellant in the grounds of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's right to be heard in appeal and the maintainability of the appeal are certainly curtailed by the first proviso to section 9, subsection (1). If this provision is not complied with, in the sense that the appellant does not give satisfactory proof of payment of the admitted amount of tax within the time given by law, an appeal has to be rejected on this ground. This is what a Full Bench of this court held recently in M/s. Janta Cycle and Motor Mart v. Assistant Commissioner, Sales Tax[1968] 22 S.T.C. 94; 1968 A.L.J. 547., following the law declared by the Supreme Court in M/s. Lakshmiratan Engineering Works' case(1). This question does not, therefore, require detailed consideration by us now. Mr. K.N. Singh, the Chief Standing Counsel, appearing for the opposite parties very rightly and properly conceded that the order of the Assistant Commissioner, Sales Tax, could not stand. He, however, prayed that the case should be sent back for a decision by the Assistant Commissioner, before hearing each appeal, whether the appeal was competent and could be heard in view of the first proviso to section 9, sub-section (1), of the Act. If the admitted tax had not been paid within the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute, are not relevant in applying laws dealing with taxation. For the reasons given above, the orders of the Assistant Commissioner, Sales Tax, must be quashed and a direction must also issue so that the appeals pending before the Sales Tax Commissioner now may be heard and disposed of in accordance with law in the light of the questions decided above. The interim order must also be vacated in each case in view of the undertaking of the learned counsel for the opposite parties that no further amounts of tax assessed for the three years will be realized from the petitioner until its appeals are disposed of by the Assistant Commissioner. The parties will bear their own costs. By the Court For the reasons set out in our respective judgments we allow the writ petitions in part and quash the orders of the Assistant Commissioner (Judicial) I, Sales Tax, Kanpur Range, Kanpur, dated 21st February, 1966, dismissing the appeals of the petitioner and direct him to hear them again and dispose them of in accordance with law. We also accept the undertaking given by the learned Chief Standing Counsel for the respondents that during the pendency of the aforesaid appeals the petitioner sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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