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2015 (6) TMI 303 - DELHI HIGH COURT

2015 (6) TMI 303 - DELHI HIGH COURT - TMI - Whether the Tribunal and the authorities below failed to note and appreciate that the appellant having furnished valid and genuine declaration form ST-35 in terms of rule 11 (XXXIV) of the Delhi Sales Tax Rules, 1975 was legally and rightfully entitled to deduction under Section 4(2)(a)(v) of Delhi Sales Tax Act, 1975, on account of sales made to registered dealer - Held that:- Unless there is some material available to show complicity between the purc .....

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lied. It makes it clear that the benefit of deduction continues to inure for the benefit of selling dealer even if the purchasing dealer is found to have indulged in misutilisation.

The assessee explained in the proceedings under Section 23(3) of Delhi Sales Tax Act that the sale transactions herein were relatable to purchase order dated 27.06.2000. It is not the case of the Revenue that the ST-35 form is a fabricated document. Concededly, it was issued by the sales tax department of .....

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assessee cannot be inferred. - deduction of the value of the transaction represented by the ST-35 form has been wrongly disallowed by the Tribunal and the authorities below. - Decided in favour of assessee. - ST Appeal No. 78/2012 - Dated:- 23-3-2015 - S Ravindra Bhat And R K Gauba, JJ For the Appellants : Ms Prem Lata Bansal, Sr Adv. With Mr Ruchir Bhatia & Mr Naman Nayak, Advs. For the Respondents : Mrs Avnish Ahlawat With Ms Anchal Chaudhry, Advs. JUDGMENT Mr. Justice S. R. K. Gauba 1. Th .....

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by this Court:- "Whether the Tribunal and the authorities below failed to note and appreciate that the appellant having furnished valid and genuine declaration form ST-35 in terms of rule 11 (XXXIV) of the Delhi Sales Tax Rules, 1975 was legally and rightfully entitled to deduction under Section 4(2)(a)(v) of Delhi Sales Tax Act, 1975, on account of sales made to registered dealer?" 3. It may be mentioned at this stage that the dispute relates to Assessment Year (AY) 2000-01 when Delh .....

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the claim of the assessee that these sales were effected against purchase order dated 27.06.2000 by the purchasing dealer. The assessee relies on form ST-35 bearing No. 5AA-967198, for ₹ 1,53,50,908/- (hereinafter referred to as "the ST-35 form"), issued by the purchasing dealer. 6. There is no dispute that the purchasing dealer is registered with the Sales Tax Authorities for purposes of Section 4 of Delhi Sales Tax Act. It is not the case of the Revenue that the goods, thus sol .....

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order dated 28.09.2002, disallowed exemption claim with regard to the transaction represented by the ST-35 form, raising a demand of sales tax along with interest on such account. The copy of the remanded assessment order dated 28.02.2005 further reflects, and again there is no contest in this regard on the side of the appellant, that the assessing authority had called for verification report from the concerned ward, the report dated 03.09.2002 submitted whereupon reflected that the purchasing .....

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lant noting, inter alia, the substance of the verification report dated 03.09.2002 regarding doubtful activities of the purchasing dealer and the fact that, in the original assessment proceedings, there is no reference to the purchase order or to the specific ST-35 form. Crucially, the ST-35 form was found to be inadmissible for the reason it had been issued to the purchasing dealer on 31.07.2000 for AY 1999-2000 and had been taken by the assessee without it being dated and with impermissible en .....

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icate with regard to the goods thus sold to it by the appellant against the ST-35 form to its own assessing authority. 10. The appellant appealed against the order dated 28.02.2005 but unsuccessfully. The order dated 06.02.2010 of the first appellate authority was carried in appeal to the Tribunal which rejected the contentions of the appellant and upheld the assessment. 11. By virtue of Section 3 of Delhi Sales Tax Act, 1975, every dealer whose turnover during the assessment year exceeds the pr .....

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refunded. 12. The "taxable turnover", by virtue of Section 4(2), however, would be computed after allowing certain deductions from the aggregate turnover. The amounts deductible for calculating the "taxable turnover" include those mentioned in sub-clause (v) of clause (a) of Section 4(2) as follows:- "(v) sale to a registered dealer- (A) of goods of the class specified in the certificate of registration of such dealer, as being intended for use by him as raw materials in .....

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ocuments of title to such goods effected during the moveable of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; or (B) of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him in Delhi, or for sale by him in the court of inter-State trade or commerce or in the course of export outside India in the manner specified in sub-item (2) or sub-item (3) of item (A), as .....

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true declaration duly filled and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars in the prescribed form obtainable from the prescribed authority is furnished in the prescribed manner and within the prescribed time, by the dealer who sells the goods;Provided also that where any goods are purchased by a registered dealer for any of the purposes mentioned in sub-clause (v), but are not so utilised by him, the price of the goods so purchased shal .....

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le consideration in which regard there is a declaration obtained by him in form ST-35 issued to a registered dealer. The form ST-35 prescribed under the said rule 11 is in the nature of a declaration by a registered dealer holding valid licence with regard to purchases of specified goods. Noticeably, the declaration by the purchasing dealer would certify the bill/cash memo against which the purchase is made of such goods (properly described with value also indicated) as may attract the exemption .....

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hi Sales Tax Act clarified that the authorities under the law were not authorized to impose a tax on any sale or purchase of goods when such sale or purchase takes place (i) in the course of inter-State trade or commerce; or (ii) outside Delhi; or (iii) in the course of import of the goods into or export of the goods out of, the territory of India. 17. The department of Trade and Taxes of the Govt. of NCT of Delhi had issued instructions by circular No. 7 of 1995-96 dated 23.06.1995 (hereafter r .....

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to have his full quota of forms in one go, unless the AA has specific reasons to deny the full quota for reasons to be recorded in writing. (vii) All the statutory forms issued would be stamped for the particular year for which the transactions pertain. While issuing the forms it has to be ensured that the dealers' name, address & RC No. are reflected thereon through a stamp and it is also stamped and signed by the assessing authority. The process of issue of statutory forms on year to y .....

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the authorities below, have wrongly placed the burden of proving the genuineness of the transaction and the ST form on the selling dealer. It is submitted that the claim of the selling dealer for exemption under Section 4(2)(v) on the basis of the ST-35 form could not have been rejected for any defect in the said ST-35 form or for doubtful activities of the purchasing dealer or default on the part of the purchasing dealer in submitting proper utilization certificate. It is argued that the purch .....

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sive. It was submitted that the Tribunal has wrongly referred to the circular of the department to uphold the impugned assessment order and that material gathered behind the back of the assessee, with which it was not properly confronted, has been used to impose tax liability which is improper. 19. The argument of insufficient opportunity to explain does not survive in the case at hand inasmuch as the initial order rendered on 28.09.2002 was upturned by the first appellate authority by its order .....

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s v. M/s. Radio and Electricals Ltd. & Anr. (1996) 18 STC 222, questions as to the onus to explain had arisen, albeit in the context of similar provisions of Central Sales Tax Act, 1956, observations whereupon of the Supreme Court are germane to the issue at hand and, thus, may be quoted 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 bur .....

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ade or commerce. Indisputably the seller can have in these transactions no control over the purchaser. He has to rely 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 certificates: 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' .....

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he can collect that amount only in the light of the declaration mentioned in the certificate in Form 'C'. He cannot hold an enquiry whether the notified authority who issued the certificate of registration acted properly, or ascertain whether the purchaser, notwithstanding the declaration, was likely to use the goods for a purpose other than the purpose mentioned in the certificate in Form 'C'. There is nothing in the Act or the Rules that for infraction of the law committed by t .....

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re are three provisos to section 4(2)(a) of the Act, the penultimate declares that no deduction in respect of any sale referred to in sub-clause (v) shall be allowed unless a true declaration in the prescribed form duly filled and signed by a dealer is furnished to the selling dealer. The last proviso is also of immense import as it specifies that where goods are not utilized by the purchasing dealer for the purposes mentioned in Sub-clause (v), the price of such goods shall none the less be ded .....

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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." (emphasis supplied) 23. Relying, inter alia, upon the aforementioned cases, a Division Bench of this Court, of which one of us (S. Ravindra Bhat, J.) was a member, concluded in the case of Milk Food Ltd. v. Commissioner, VAT & Ors. S.T. Appeals 14-15/2011 decided on 04.02.2013 that "it is not the burden of the selling deal .....

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on report concerning the purchasing dealer, may be reflecting "doubtful activities" on his part, in the manner done. Unless there is some material available to show complicity between the purchasing dealer and the selling dealer vis-à-vis the alleged "doubtful" activities of the former, inferences adverse to the interest of the latter are impermissible. The default on the part of the purchasing dealer in submitting a proper utilization certificate respecting the goods .....

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