TMI Blog2013 (5) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... too, the petitioner has relied upon such Forms and there is no material on record to suggest that the petitioner accepted the ST-1 Forms with the knowledge that the declarations made thereunder by the purchasing dealer were wrong, thus, unable to agree with the view that there was any “willful omission” on the part of the petitioner in making his return or that the return was made by the petitioner knowing that the particulars in the ST-1 Forms on the strength of which deduction in the taxable turnover was claimed were inaccurate. Thus, the answer to the first question whether the petitioner is guilty of willful omission must be answered in the negative. Admissibility of claim for deduction of sales against prescribed ST-1 Forms furnished by the purchasing dealer, in respect of goods which are not specified in the Registration Certificate of the purchasing dealer - Held that:- Third proviso to section 4(2) makes an express provision for collecting tax from the purchaser, in the event goods are purchased by him for the purposes mentioned in Section 4(2)(a)(v) but are not so utilized by him. Thus, whereas in the case of misutilization of goods by the purchaser, the amount of tax p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing dealer in respect of goods found during enquiry by the Assessing Authority, not specified in the Registration Certificate of the purchasing dealer, would render the selling dealer in law: (a) guilty of wilful omission; (b) dis-entitled for deduction in respect of those goods within the meaning of proviso-II to sub-clause (v) of clause (a) of sub Section(2) of Section 4 of the Delhi Sales Tax Act, 1975 and rules framed thereunder; and (c) liable for imposition of interest also within the meaning of Section 27 on the amount of due tax assessed under Section 23 of the Delhi Sales Tax Act, 1975 and Rules framed thereunder in respect of those goods from the date of submission of return itself? 2. The petitioner was assessed to sales tax by the Assessing Authority for the assessment year 1984-85 under the Delhi Sales Tax Act, 1975 (hereinafter also referred to as the Act ). The Assessing Authority made a demand of ₹ 1,98,590/- including interest in the sum of ₹ 85,053/-. The above demand was raised on the ground that nine ST-1 Forms submitted by the petitioner were held to be invalid as an inquiry had revealed that the said forms were issued by the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of electronic goods and the purchasing dealer could not have issued the ST-1 Forms. It is contended on behalf of the petitioner that the petitioner was under no obligation to verify whether the purchasing dealer issuing the ST-1 Forms in fact held a registration certificate in respect of the goods specified in the ST-1 Forms as the ST-1 Forms contained the declaration by the purchasing dealer that the goods purchased were covered under the registration certificate. The ST-1 Forms also contained the verification by the purchasing dealer that the statement made in the Forms was true to the best of his knowledge and belief. It is contended on behalf of the petitioner that once the ST-1 Forms had been issued by a registered dealer, it was not incumbent upon the selling dealer to make any further inquiry and the seller was entitled to rely on the declaration made by the purchasing dealer in the ST-1 Form that the purchasing dealer held a registration certificate in respect of the goods sought to be transacted. The counsel for the petitioner has also drawn our attention to Section 50(1)(d) of the Act which provides that whoever, being a registered dealer, falsely represents, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the purchasing dealer in the ST-I Forms and thus there was no omission on his part. 7. Section 4 of Act provides for the levy of Sales Tax on the taxable turnover of the assessee. The expression turnover is defined under Section 2(o) as under:- (o) turnover means the aggregate of the amounts of sale price receivable, or, if a dealer so elects, actually received by the dealer, in respect of any sale of goods, made during prescribed period in any year after deducting the amount of sale price, if any, refunded by the dealer to a purchaser in respect of any goods purchased and returned by the purchaser within the prescribed period: Provided that an election as aforesaid once made shall not be altered except with the permission of the Commissioner and on such terms and conditions as he may think fit to impose. 8. Sub-section (2) of Section 4 of the Act provides for certain deductions from the dealer s turnover to arrive at the taxable turnover for the purposes of the Act. Section 4(2)(a)(v) of the Act provides for excluding certain sales made by a registered dealer to another registered dealer from the taxable turnover of the selling dealer. Section 4(2)(a)(v) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rules is quoted below:- 7. Conditions subject to which a dealer may claim deduction from his turnover on account of sales to registered dealers.- (1) A dealer who wishes to deduct from his turnover the amount in respect of sales on the ground that he is entitled to make such deduction under the provisions of sub-clause (v) of clause (a) of sub-section (2) of section 4, shall produce- (a) copies of the relevant cash memos or bills according at the sales are cash sales or sales on credit; and (b) a declaration in Form ST-1 duly filled in and signed by the purchasing dealer or a person authorized by him in writing: Provided that no single declaration in Form ST-1 shall cover more than one transaction of sale except in cases where the total amount of sales made in a year covered by one declaration is equal to or less than ₹ 50,00,000/- or such other amount as the Commissioner may, from time to time, specify in this behalf in the Official Gazette: Provided further that where, in the case of any transaction of sales, the delivery of goods is spread over different years it shall be necessary to furnish a separate declaration in respect of goods as delivered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing authority is satisfied that the declaration forms have not been used bona fide by the applicant or that he does not require such forms bona fide, the appropriate assessing authority may reject the application or it may issue such lesser number of forms as it may consider necessary. (b) If the applicant for declaration forms has, at the time of making the application, failed to comply with an order demanding security from him under sub-section (1) of section 18, the appropriate assessing authority shall reject the application. (c) If applicant for declaration forms has, at the time of making application (i) defaulted in furnishing any return or returns in accordance with the provisions of the Act or these rules, or in payment of tax due according to such return or returns; or (ii) defaulted in making the payment of the amount of tax assessed or penalty imposed by assessing authority, in respect of which no orders for instalments/stay have been obtained from the competent authority under the provisions of law; or (iia) not filed proper Requisition Account of the declaration forms required by him; or (iib) not filed proper utilization account in Form ST-2B o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Bill(s)/Cash memo(s) Description Value of No. and date of goods goods Bill(s)/Cash memo(s) Description Value of No. and date of goods goods Date Signature ....... TOTAL . The above statements are true to the best of my knowledge and belief. Date Signature .. Name of the person signing the declaration and his status in relation to the purchasing dealer. Name and address of the purchasing dealer. 13. A bare perusal of Rule 8 does indicate that there are checks to ensure that the same are issued to bonafide dealers and can be relied upon by the selling dealers. In the first instance, ST-1 Forms are printed under the Authority of the Commissioner and are issued by the Assessing Authority of the purchasing dealer on an application made to him by the purchasing dealer. An application for issuance of forms may also be rejected by the Assessing Officer, if the Assessing Officer is satisfied that the declaration forms have not been used bonafide or if the conditions in sub-rule (4) of Rule 8 of the Rules are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose who have failed to pay full tax due, not with a view to evading the liability to pay tax, but because they believed that they were liable to pay the tax as assessed by them. The relevant extract from the said judgment in the case of J.K. Synthetics (supra) is quoted below:- 5.... In sub-section (2-A), by Amending Act 4 of 1979, the words tax according to his accounts were substituted for the words proportionate tax on the basis of the last return and the latter part of the sub-section was restructured by deleting the words [t]he difference, if any, of the tax payable according to the return and the advance tax paid shall be deposited with the return and making the sentence a running one. Sub-section (3) permits a dealer who discovers any error or omission in his return to submit a revised return in the prescribed manner before the time prescribed for the submission of the next return but not later. 6. Now Section 7(2) says that every such return, meaning thereby the return referred to in Section 7(1), shall be accompanied by a receipt showing the deposit of the full amount of tax due on the basis of the return . In other words the dealer is required to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be provisional and subject to necessary adjustments in pursuance of the final assessment. Section 7-AA empowers levy of penalty if the assessing authority is satisfied that any dealer has without reasonable cause failed to furnish the return under Section 7(1) within the time allowed. The use of the words without reasonable cause clearly implies that if the dealer can show reasonable cause for his lapse he cannot be visited with the penalty prescribed by Section 7-AA. To put it differently if reasonable cause is shown by the dealer for the lapse, he cannot be visited with penalty under this provision. This is also suggestive of the fact that the legislature desired to be harsh with wilful defaulters or those guilty of wilful omission of material information and not with dealers who failed to supply some information under the bona fide belief that the same was not necessary or those who had failed to pay the full tax due not with a view to evading or avoiding the liability to pay the tax but because they bona fide believed that they were liable to pay the tax assessed by them on the basis of the return and no more. If at a later date on the basis of a different interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has relied on the decision of the Supreme Court in the case of Radio and Electricals Ltd (supra) and strongly urged that the ratio of the decision of the Supreme Court is that a selling dealer can rely on the declaration (in that case, Form C) and that the selling dealer has no duty to examine the correctness of the forms submitted. The scheme of claiming reduction in tax, under the Central Sales Tax Act, on account of sales made against Form C is similar to the scheme of reducing the taxable turnover on account of sales made against ST-1 Forms under the Act. It is contended, as the Supreme Court has held that a misrepresentation made in Form C as to application of the goods by the purchasing dealer would not disable the selling dealer from claiming deduction in respect of the sales made against such forms subsequently found to be inaccurate, the petitioner would also be entitled to deduct the sales made against ST-1 Forms without any further enquiry. 19. We are unable to agree with this contention. In our view the reliance placed by petitioner on the decision of the Supreme Court in the case of Radio and Electricals Ltd (supra) also does not further the case of the petitioner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate: but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form 'C' the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under section 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer.... (underlining added) 20. Thirdly, we must add that the third proviso to section 4(2) of the Act makes an express provision for collecting tax from the purchaser, in the event goods are purchased by him for the purposes mentioned in Section 4(2)(a)(v) of the Act but are not so utilized by him. Thus, whereas in the case of misutilization of goods by the purchaser, the amount of tax payable can be collected from the purchaser, there is no such provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed. (2) Every registered dealer and every other dealer who may be required so to do by the Commissioner by notice served in the prescribed manner shall furnish such returns of turnover by such dates and to such authority as may be prescribed. (3) Every registered dealer required to furnish returns under subsection (2) shall pay into a Government Treasury or the Reserve Bank of India or in such other manner as may be prescribed, the full amount of tax due from him under this Act according to such return, and shall where such payment is made into a Government Treasury or the Reserve Bank of India furnish alongwith the return a receipt from such Treasury of Bank showing the payment of such amount. xxxx xxxx xxxx xxxx xxxx Section 27 Interest (1) If any dealer fails to pay the tax due as required by sub-section (3) of section 21, he shall, in addition to the tax (including any penalty) due, be liable of pay simple interest on the amount so due at one per cent per month from the date immediately following the last date for the submission of the return under sub-section (2) of the said section for a period of one month, and at one and a half per cent per month ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover as shown in the return. The relevant extract of the decision of the Supreme Court in the case of J.K. Synthetics (supra) is quoted below: 16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (See Whitney v. IRC, CIT v. Mahaliram Ramjidas, India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay and Gursahai Saigal v. CIT, Punjab). But it must also be realised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 'tax payable under Subsections (2) and (2A) of Section 7', that must be understood in the context of the aforesaid expressions employed in the two subsections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex-hypothesi on the turnover and taxable turnover 'shown in or based on the return'. The word 'payable' is a descriptive word, which ordinarily means 'that which must be paid or is due, or may be paid' but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due'. Therefore, the conjoint reading of Sections 7(1), (2) and (2A) and 11B of the Act leaves no room for doubt that the expression 'tax payable' in Section 11B can only mean the full amount of tax which becomes due under Sub-sections (2) and (2A), of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the furnishing of a return. Moreover, it has reference to the full amount of tax due from a dealer under the Act according to such return . In other words, the tax which is said to be due under section 27(1) of the said Act must be the tax which is due according to a return . It is obvious that if no return is filed then there could be no tax due within the meaning of section 27(1) of the said Act read with section 21(3) thereof. The tax which is ultimately assessed is the tax which becomes due on assessment and if this tax so assessed is not paid even after the demand is raised then the dealer would be deemed to be in default and would be liable to pay interest under section 27(2) of the said Act. But till such tax is assessed no interest can be levied on such a dealer, who has not filed a return under section 27(1) of the said Act. 30. The issue whether the petitioner is liable to pay interest on the taxes assessed under Section 23 of the Act from the date of submission of the return is thus covered by the decision of this court in the case of Pure Drinks (New Delhi) Ltd. (supra) and has to be answered in the negative. 31. Consequently, the impugned order, to the limi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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