TMI Blog1969 (7) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... must be held that it was made for consumption, the Sales Tax Officer assessed the dealer-assessee on the turnover of this sale also. The dealer-assessee filed appeals (there were two appeals because there were two assessment orders, there being two assessment years). The assessee's appeals succeeded and the appellate authority excluded the turnover of the sale of oil-seeds from the assessable turnover of the dealerassessee. The Commissioner, Sales Tax, filed revision applications, which were dismissed by the Judge (Revisions), but, as already stated earlier, the instant references were made. The view taken by the Judge (Revisions) is "that the passing of Form III-A was sufficient to warrant that the purchases were for resale". Mr. Raja Ram Agarwal, who has appeared for the dealer-assessee, contends that the effect of rule 12-A is that once Form III-A is filed, no other material can be looked into and it must be held by the Sales Tax Officer that the sale was not made for consumption. Section 3-AA of the U.P. Sales Tax Act (hereinafter referred to as the Act) so far as relevant for our purposes reads: "3AA. Rate and point of tax in respect of certain goods.-(1) Notwithstandin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be read in a manner inconsistent with sub-section (2) of section 3-AA. Rule 12-A is subject to subsection (2) of section 3-AA. Therefore, when sub-section (2) of section 3-AA categorically provides for a presumption that every sale by a dealer is to a consumer and the burden of proving to the contrary is on the dealer, rule 12-A cannot be so read as to either destroy that presumption or to alter the burden of proof which sub-section (2) of section 3-AA of the Act places on the dealer. It cannot also take away the power or the jurisdiction of the Sales Tax Officer to require proof to his satisfaction so expressly and categorically conferred by section 3-AA(2) of the Act. It would be noticed that rule 12-A does not read as given below in which form it should have read if Mr. Raja Ram's submissions were correct. "A sale of any of the goods specified in section 3-AA shall be deemed to be a sale to the consumer, but if 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, it shall not be so deemed." The Legislature clearly has not used this language. If the idea was to make the certificate in Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f consumption, but for resale in the same condition. I have already said earlier that in my opinion the furnishing of Form III-A provides prima facie evidence to that effect and it was open to the Sales Tax Officer to look into other materials if he was of the opinion that the genuineness of the document or truth of its contents are open to doubt. It is true that the observations of the Judge (Revisions) seem to suggest that once Form III-A is filed, no other evidence can be gone into. I have already pointed out that this view is not correct. Inasmuch as a certificate in Form III-A was furnished, there was prima facie evidence that the goods were sold for to be resold in the same condition. In my opinion, the circumstance that they were sold to the mills is colourless and neutral and on its basis it cannot be said that the effect of the furnishing of certificate in Form III-A was in any way destroyed or reduced. I would answer the question referred to us in the negative, in favour of the dealer-assessee and against the Commissioner, Sales Tax. The Commissioner, Sales Tax, shall pay costs of these proceedings to the dealer-assessee at the rate of Rs. 50 in each reference. BE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire evidence, it transpired that the prescribed certificates, however honestly obtained, were incorrect because the purchaser had consumed the goods. Thus, the Division Bench view of this court was diametrically opposed to the revising authority's opinion that the bona fides of the seller, evidenced by the prescribed certificate and non-realization of the sales tax, was sufficient to entitle the seller to an exemption and that it did not matter what the seller actually did with the goods. Apparently, the Division Bench view and arguments advanced for and against the correctness occasioned a reference of this case to a Full Bench. The contention of the department seemed to be that the assessee's duty to satisfy the Sales Tax Officer, under section 3-AA(2), that certain sales were exempted from tax, extended to removing doubts so that the person claiming exemption had to prove a case beyond reasonable doubt for it. The stand taken on behalf of the department could be stated to be either that, even after the initial presumption against the assessee had been removed, as provided in rule 12-A, no exemption could be granted if the assessee had not performed the additional duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el dealers to produce account books and other documents relating to their businesses. Section 13 also empowers the sales tax authorities to make inquiries from dealers, to inspect, examine and make copies of documents produced. It goes on to provide for grant of powers to the Sales Tax Officers to enter and search premises and seize relevant documents if there are reasons to believe that they are being concealed with a view to evade tax. Section 14 of the Act provides for offences and penalties which can be imposed upon persons who act in contravention of the provisions of the Act and the Rules made thereunder or who refuse to give or neglect to furnish any information which may be in their knowledge or possession and which they have been required to furnish for the purpose of the Act or who give any false certificate or declaration. The sales tax authorities are, therefore, armed with ample powers to obtain relevant information and material from dealers as well as other persons who may be concerned with transactions about which the assessing authorities have to give decisions. Section 24 of the Act empowers the State Government to make rules for carrying out the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler issuing prescribed certificates will not violate the guarantee to resell in the same condition implied by the certificates, does not charge sales tax. It would certainly be unreasonable to require the selling dealer to keep a watch on what the purchasing dealer does with the goods purchased. It would be practically impossible for the selling dealer to do so. No provision of the Act or rule framed under it places such a duty upon the selling dealer. The first difficulty in the way of holding that the prescribed certificates completely protect the selling dealer is that it would make the prescribed certificates as conclusive pieces of evidence so far as the purchasing dealer's right to claim exemption is concerned, whereas rule 12-A does not specifically say so. If such was the intention of the rule-making authority, it could have been clearly provided in rule 12-A. The second and even more serious obstacle in the way of taking such a view is that section 3-AA(1) of the Act expressly excludes a sale from the exemption given when it is to a consumer. If a fictional element were inferred from the language of rule 12-A as suggested by my learned brother Gulati, J., so that sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates. In J.K. Manufacturers Limited, Kanpur v. Sales Tax Officer and Others (Civil Misc. Writ No. 265 of 1966 connected with Writ Petitions Nos. 373 and 374 of 1966 decided on 8th May, 1969) Since reported at page 310 supra., where the meaning of rule 12A came up for consideration before a Full Bench, I concurred with a view taken by Brijlal Gupta, J., in Mansey Lakhansey Co. v. State of U.P.[1962] 13 S.T.C. 898. that rule 12-A prescribes the only mode in which the presumption, laid down by section 3-AA(2) and repeated by the first part of rule 12-A, can be rebutted by an assessee-dealer by proving the required certification. I, however, observed there that if the view taken by Brijlal Gupta, J., implied that the prescribed certificates had to be produced before the assessing authority in every case, I respectfully differed from such a conclusion because all that rule 12-A requires for rebutting the presumption is proof of certification and not production of actual certificates before the assessing authorities in every case. Ordinarily, a dealer claiming exemption is expected to produce the certificates obtained by him of which he is required to give particulars with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not be thrown out in limine. The only reason why the validity of rule 12-A could be properly said to have been challenged in that case was that the Sales Tax Officer had purported to apply rule 12-A in order to exclude the prescribed certificates. But the rule, as it stood, could not be used by any stretch of imagination, to exclude the very evidence it prescribed. Again, in that case, it was the last sentence of rule 12-A, requiring the supply of particulars of certificates with returns in Form IV, which was really under consideration. It was this part of rule 12-A which had been misunderstood by the Sales Tax Officer and used as though it was a mandatory provision excluding certificates filed during assessment. There was really no need in that case to consider the validity of the rule at all on the intepretation adopted by all the Judges on that Full Bench, that rule 12-A did not operate as a bar to filing the prescribed certificates before the date on which the assessment was made. It is true that the question of the validity of the rules read as a whole was decided by us, as it had been raised and argued before us, but that did not mean that it was really necessary for us to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, Volume IV, page 301, paragraph 1173). Sometime later, Lord Chancellor Hardwicke, in the famous case of Omychuni v. Barker (1744) said: "The judges and sages of the law have laid it down that there is but one general rule of evidence, the best that the nature of the case will allow." The general principle of the law of evidence that the best evidence should be procured and produced can certainly be adopted for facilitating assessment proceedings under the Act. I consider rule 12-A to have such an object in view so that the best evidence of a sale to a registered dealer, who intends resale of goods in the same condition, may be procured at a time and in a manner which ensure that it is not lost and is above suspicion. The powers given to the assessing authorities by section 14 of the Act also make it possible to check the correctness of the certificates prepared in the prescribed form with necessary particulars. A presumption of correctness of the matters stated in the certificates so prepared should and does, in my opinion, attach to them. This presumption should be attached only to such certificates as are in proper form and the particulars of which are given in quarterly ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Orissa Sales Tax Rules, prescribing certain "true declarations" to be made by purchasing dealers as necessary conditions for obtaining deductions of certain sales from taxable turnover, had to be substantially complied with although it was not mandatory. As the rule was held to be only directory, in view of the provisions of the Act and its language, it was held that it was not always obligatory for the selling dealer to produce the prescribed declarations when claiming exemption. This decision was based upon the somewhat different language of the Orissa Sales Tax Act and the rule under consideration there. In Nowranglal Agarwala v. State of Orissa[1965] 16 S.T.C. 271. a Division Bench of the Orissa High Court held that statements contained in a declaration under the abovementioned rule 27(2) of the Orissa Sales Tax Rules would provide strong prima facie evidence which was not, however, conclusive. The declaration was held to be presumptive evidence in support of a claim for exemption, but, as it was not conclusive, it was open to the department to rebut the presumption. This is precisely the view we are taking of the evidentiary value of the prescribed certificates in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the case. If, in the course of the further inquiries, which the Sales Tax Officer can make to satisfy himself even after filing of the prescribed certificates and which he has been actually ordered by the appellate authority to undertake in this case, it transpires that the goods purchased were actually consumed by the purchaser, the assessee will not be entitled to the exemption claimed. I find from the assessment order that the Sales Tax Officer had held that the oil-seeds had been actually consumed by the purchaser but no material was mentioned to justify such a finding. If there is material on record which could reasonably constitute sufficient evidence to justify this finding the assessee will be liable to pay the tax. This is not because the assessee has to prove a claim for exemption beyond reasonable doubt but because the department would, in that case, have succeeded in displacing the presumption of correctness of the prescribed certificates. A misled assessee may sue a purchasing dealer for damages for breach of the guarantee to resell in the same condition contained in the certificates. The sales tax authorities may cancel the registration certificate of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A which embodies the second legal fiction that 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. On a combined reading of these provisions, it appears that the right of a dealer to prove that a particular sale is not a sale to the consumer has been whittled down to a very narrow field. In the case of an unregistered dealer it is not open to a dealer to prove by any means whatsoever that the sale was not a sale to the consumer. Such a sale would always be regarded as a sale to the consumer even if it is not so in fact. In the case of a sale to a registered dealer it shall again be deemed to be a sale to the consumer, unless the selling dealer furnishes a declaration in Form III-A from the purchasing dealer. Although sub-section (2) of section 3-AA gives the right to a dealer to prove that a particular sale is not a sale to the consumer, yet that right can be exercised only by the production from the purchasing dealer of a declaration in Form III-A. It follows, therefore, that the production of a certification in Form III-A is imperative, for the purpose of dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g dealer and the purchasing dealer would both escape tax, the selling dealer on the basis of Form III-A and the purchasing dealer because of the absence of a further sale by him. It is argued that the Act provides penalties and punishments in ample measures for a purchasing dealer who furnishes incorrect certificate and, therefore, the incorrectness of the certificate in Form III-A should not entail the levy of tax upon the selling dealer. This reasoning is clearly fallacious. Penalty and prosecution is no substitute for the sales tax itself. The main object of the Act is to levy and collect sales tax and that object cannot be allowed to be defeated. The law has to be interpreted so as to ensure that the tax does not escape even if someone in the process has to pay penalty or face prosecution. I am of the view, therefore, that if the sales tax authorities can establish on the material in their possession that a particular certificate in Form III-A is incorrect they can ignore the certificate and proceed to tax the selling dealer by virtue of the presumption contained in sub-section (2) of section 3-AA. But the burden in such cases would shift to the sales tax authorities. The dea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
