TMI Blog2013 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... arried 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y M/s Milk Food Ltd., hereinafter referred to either as the appellant or as the dealer under Section 81 of the Delhi Value Added Tax Act, 2004 relating to the assessment years 1983-84 and 1982- 83 respectively. 2. The appellant is a company engaged in the business of manufacture of pure ghee and milk powder of different kinds in its factory at Bahadurgarh (Patiala). It has offices all over India. 3. We may first take up the appeal in STA No.14/2011. The brief facts giving rise to the appeal are as follows. An assessment was framed on the appellant by order dated 28.03.1988 passed under Section 23(3) of the Delhi Sales Tax Act, 1975 (hereinafter referred to as DST Act‟). In the course of assessment proceedings the assessing authority noted that the appellant had sold most of the goods to registered dealers against ST-1 forms in Delhi. He conducted a cross verification of these sales and found that the purchasing dealers had given a different account of these forms in their ST-2 account. This was put to the appellant for explanation and it was asked to adduce proof of payments, delivery of the goods etc. The appellant filed statements showing the mode of paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m it, that the forms in ST-1 were printed and issued only by the authorities and on assurance that on production of the forms the exemption claimed would be allowed by the sales tax authorities, that once the forms are produced the exemption cannot be denied for extraneous reasons such as mode of payment of the sale price, mode of delivery etc., and that the reason given i.e., that the colour of the paper on which the forms were printed did not appear to be genuine was not substantiated by any clinching proof and in these circumstances the assessing authority and the first appellate authority were not justified in refusing the claim for exemption. It was further submitted that under the second proviso to Section 4(2)(a)(v) of the DST Act the burden is on the purchasing dealer and not upon the appellant who was the selling dealer, and if any breach is committed by the purchasing dealer in the matter of producing the ST-1 forms or in the matter of utilisation of the ST-2 accounts, then the selling dealer- appellant here-cannot be penalised by refusing to accord the exemption. In support of this submission the appellant relied upon several authorities before the Tribunal. It was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be allowed. The Tribunal relied on Section 6 of the DST Act which stated that the burden is upon the selling dealer. 7. For the above reasons, the Tribunal held that there was no merit in the appeal of the appellant in respect of the claim for exemption from tax on sales to the purchasing dealers, namely M/s Nawal Kishore Co., M/s Durga Trading Co. and M/s Rajan Co. The demands raised and penalties imposed under the Central Sales Tax Act were however set aside by the Tribunal. 8. It is against the above order passed by the Tribunal that the appellant has come in appeal before this Court. After hearing the parties the following substantial question of law is framed for decision: Whether the Tribunal was right in law in placing the burden upon the dealer to show that the forms issued by the registered purchasing dealers in ST-1 were genuine and in consequently upholding the assessment and the appellate orders refusing to allow deduction of the sales made by the appellant to them under section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975? 9. Section 4 of the DST Act, 1975 prescribes the rate of tax payable by a dealer on the sales effected by him. The tax is paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed the burden wrongly upon the appellant-dealer. This question first came up before the Supreme Court in The State of Madras v. M/s. Radio and Electricals Ltd. Anr., (1966) 18 STC 222 which arose under the Central Sales Tax Act, 1956 which contained similar provisions. The Court considered the burden of the selling dealer and observed as under: The Act seeks to impose tax on transactions, amongst others, of sale and purchase in inter-State trade and commerce. Though the tax under the Act is levied primarily from the seller, the burden is ultimately passed on the consumers of goods because it enters into the price paid by them. Parliament with a view to reduce the burden on the consumer arising out of multiple taxation has, in respect of sales of declared goods which have special importance in inter-State trade or commerce, and other classes of goods which are purchased at an intermediate stage in the stream of trade or commerce, prescribed low rates of taxation, when transactions take place in the course of inter-State trade or commerce. Indisputably the seller can have in these transactions no control over the purchaser. He has to rely upon the representations made to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rule should be so read as to facilitate the working out of the object of the rule. An interpretation which will make the provisions of the Act effective and implement the purpose of the Act should be preferred when possible without doing violence to the language. The genuineness of the certificate and declaration may be examined by the taxing authority but not the correctness or the truthfulness of the statements. The sales tax Authorities can examine whether certificate is farzi or not, or if there was any collusion on the part of selling dealer - but not beyond - i.e. how the purchasing dealer has dealt with the goods. If in an appropriate case it could be established that the certificates were farzi or that there was collusion between the purchasing dealer and the selling dealer, different considerations would arise. But in the facts of this case as noticed before, the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses mentioned in Sub- clause (v), the price of such goods shall none the less be deductible from the turnover of the selling dealer and instead, shall be included in the taxable turnover of the purchasing dealer. It indicates that the selling dealer is not responsible for ensuring that goods are used for the purpose for which they are sold (See also State of Madras v. Radio and Electricals Ltd. [1966] 18 STC 222 (SC). Such an investigation would be carried out by the Department and if misutilisation is detected, the value of the transaction will be added to the account of the purchasing dealer. Section 6 of the Act explicitly places the burden of proof on the selling dealer if its case is that any sale is not liable to the payment of tax; this provision rubs against the grain of the petitioners‟ contentions. 11. The judgments cited above establish the proposition that 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. This aspect ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade under section 23(6) of the DST Act. An appeal was filed by the dealer against the assessment so made before the Addl. Commissioner of Sales Tax. The appeal was disposed of by order dated 07.10.1985. The main point agitated by the dealer in the appeal was the refusal to allow deduction in relation to the sales made to (i) M/s. Naval Kishore Co., (ii) M/s. Golden Fruits and Dry Fruits Agencies, (iii) M/s. Raj Kamal Sales Corporation and (iv) M/s. New India Trading Co. u/s 4(2)(a)(v) of the Act. In the assessment order, 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. The dealer pleaded before the Addl. Commissioner, Sales Tax in appeal that it was not aware that the forms in its possession were fake or non-genuine, that it was brought to its notice by the enforcement branch of the sales tax department, that from the forms it was not obvious that they could be fake or non-genuine, that it had discharged its responsibility by ensuring that the entities to whom it sold goods possessed appropriate registration certificates which duly included the items sold to them and that in these circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the assessing authority. 18. In the fresh assessment order passed on 06.04.1992 the assessing authority found against the dealer and held that it was not entitled to the deduction under section 4(2)(a)(v) of the DST Act and accordingly completed the assessment in which an enhanced demand of ₹ 40,52,234/- was raised. This order was taken up in appeal by the dealer which was dismissed by the first appellate authority, being the Addl. Commissioner of Sales Tax, by order dated 16.11.1992. A further appeal was preferred by the appellant before the Tribunal which was also dismissed by order dated 28.10.2002. It would appear that the appellant filed a writ petition in W.P. (C) No.4980/2003 before this Court against the order of the Tribunal; it was however permitted to be withdrawn with liberty to the appellant to approach the Tribunal with a review or reference application. The order of this Court was passed on 06.07.2004. Thereafter, the appellant filed a review application before the Tribunal which was disposed of by the Tribunal by order dated 17.11.2004. Paragraphs 15 16 of this order are relevant and are as below: - 15. We may that this tax dispute has con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the date of assessment under section 23(3), viz., 19.6.85 during which such amounts remained unpaid and the rates of interest applied on those amounts, justifying an assessment of as much as ₹ 2503075/- as interest due under section 27(1). The interest of ₹ 2503075/- is liable to be deleted and is thus deleted. Appeal No.62/STT/94 against the order dated 8.2.94 of the Ld. Addl. CST confirming the imposition of penalty of ₹ 4281550/- by the order of Ld. STO dated 12.1.93 which is not yet disposed of shall come up for hearing on 11.7.05, subject to amendment of Memo of Appeal in ST 30 wherein there are errors in column 1 and 2. The order dated 28.10.2002 shall stand reviewed accordingly. 19. In the meantime, proceedings for levy of penalty were initiated by notice dated 08.12.1992 which resulted in an ex-parte order passed under Section 56, imposing penalty under section 50(1)(a) of the Act, of ₹ 42,81,550/- on the dealer for producing a declaration under the second proviso to section 4(2)(a) in Form ST-1 which it knew or had reason to believe to be false. An appeal was filed against the penalty order before the first appellate authority who rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich a person committing an offence u/s 50(1)(a) of the Local Act would have avoided, after giving a reasonable opportunity for hearing. As per section 50 (1) (a) of the Local Act holding a declaration under second proviso to clause (a) of sub-section (2) of section 4 which he knows or has reason to believe to be false is an offence. When the declaration forms found by the survey team in the premises of the appellant were found to be fake then it was for the appellant to at least show as to how it came into possession of these fake declaration forms because this was a fact within the specific knowledge of the appellant and as per judgment reported as Tirgugi Narayan Pandey V. Commissioner of Sales Tax : (2001) 123 STC 344, when there are facts, which are within the knowledge of the assessee, then the burden lies on the assessee to discharge the said burden. The fact that fake declaration forms were found by the survey team in the premises of the appellant, itself shows that the appellant was holding these fake declaration forms. Thus the authorities below did not commit any illegality in coming to the conclusion that the appellant had committed an offence u/s 50(1) (a) of the Local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.14/2011, 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. The Supreme Court recognised that the seller can have no control over the purchaser in such transaction and has to necessarily rely upon the representation made to him by the purchasing dealer (State of Madras v. M/s. Radio Electricals Ltd. and Anr.) (supra). According to the Supreme Court, the duty of the selling dealer is only to satisfy himself that the purchaser is a registered dealer and the goods purchased are specified in his registration certificates and no further. He is under no obligation to see that the application of goods for the purpose for which it was represented that they were intended to be used. 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. In A.D.M. Stores and Anr. v. Commissioner of Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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