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2015 (9) TMI 314 - DELHI HIGH COURT

2015 (9) TMI 314 - DELHI HIGH COURT - TMI - Sale against ST-1 Form - DVAT - correctness of ST-1 - denial of deduction - The Assessing Authority (hereafter ‘AA’) had found that the relevant account (ST-2 account) filed by certain dealers ( hereafter referred to as ‘purchasing dealers’) who were stated to have purchased goods from the Appellant against the ST-1 Forms - Held that:- it is well established that a selling dealer would have no duty to examine the correctness of the Form ST-1 submitted; .....

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nsideration through bank drafts and cheques that would clearly establish the transactions claimed by the Assessee. The AA was unduly influenced by the ST-2 Account filed by the purchasing dealer and the fact that the purchasing dealers were not found in existence at the time of making the remand assessment order.

We find it difficult to sustain the denial of deduction claimed by the Assessee for the sales made against ST-1 Forms. - Decided in favor of assessee. - ST.APPL. 25/2013 - D .....

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e Tribunal ) in Appeal Nos. 877- 878/ATVAT/09-10 emanating from proceedings relating to the assessment year 1983-84. This Court admitted the present appeal on 1st November, 2013 and framed the following questions of law for consideration:- Whether the order of the Appellate Tribunal, Value Added Tax, Delhi holding that ST-I Forms should be ignored, is perverse and does not deal with several factual aspects relevant for consideration. 2. The Appellant/Assessee is aggrieved on account of being den .....

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eedings, the AA was of the view that the Appellant could not substantiate its claim with regard to the movement of goods sold and thus, concluded that the appellant had colluded with the purchasing dealers to arrange the ST-1 forms and consequently disallowed the exemption claimed by the Appellant in respect of the sales made against ST-1 forms. According to the Assessee, it had discharged its burden of proof for claiming deduction from its taxable turnover and the AA has wrongly disallowed the .....

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nover. The Assessee filed ST-1 Forms - 90 in number - in support of its claim. The AA took up 63 ST-1 Forms for cross-verification with the accounts furnished by the purchasing dealers (i.e. ST-2 Account). The AA obtained verification reports in respect of ST-1 Forms where a single transaction exceeded ₹ 1 lac. On verification, it was found that 9 ST-1 Forms did not reconcile with the ST-2 Accounts furnished by the purchasing dealers. 3.2 The Appellant was confronted with the discrepancies .....

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linquency on the part of the purchasing dealers. 3.3 The AA passed an Assessment Order dated 18th March, 1988 rejecting the Assessee s contention. The AA held that the Assessee could not substantiate its claim with reference to the movement of goods and concluded that the sales had, in fact, been made to unregistered dealer(s)/customer(s) and the declarations in ST-1 Forms had been arranged from the purchasing dealers in collusion. 3.4 The Assessee preferred an appeal before the Deputy Commissio .....

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amounting to ₹ 13,40,735/- against 7 ST-1 Forms which remained unverified because the concerned purchasing dealers had shown the said forms to be issued to persons other than the Assessee. The Assessee was also asked to produce documentary proof of the transfer of property in goods and to produce the concerned purchasing dealers with their Books of Accounts. The AA also issued notices to the concerned purchasing dealers, however, none of those dealers were found to be in existence at the .....

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r ST-1 Form As per ST-2 a/c Form issued to: - 1. A/5 541089 M/s Simple Traders (Wards-42) Rs.2,00,323/- Rs.82,535.71/- M/s Nirmal Metal Inds. 2. A/5 390986 M/s Metal & Metal Inds. (Wards - 42) Rs.1,76,245/- Rs.96,278.00/- Chandra Steel Wazirpur 3. A/5 541119 M/s R. K. Traders Rs.2,00,755/- Rs.14,747.60/- National Metal Inds. 4. A/6 145285 M/s Capital Agencies (Ward-42) Rs.2,00,846/- Rs.1,79,568.3 2/- Metal Indl. Co. 5. A/5 340952 M/s Metal Crafts Rs.1,90,905/- Rs.1,00,208.0 0/- UniBros(P) Lt .....

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nd upheld the remand assessment order. 3.7 Being dissatisfied with the order dated 24th September, 2004 of the FAA, the Assessee sought a review of the said order by filing a review petition. The Assessee contended that it had placed the deposit slips, bank statements, ledger accounts and duly receipted invoices on record to show the genuineness of the sales transactions in question. It was once again contended that the Assessee could not be held responsible for the misuse of the statutory decla .....

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Tribunal by a common order dated 19th March, 2013 which is impugned for the present appeal. 4. Mr. Mahna, learned counsel for the Assessee contended that the Tribunal and the Authorities below failed to consider the scheme of the Delhi Sales Tax Act, 1975 (hereafter Act ) as was in force at the material time. He submitted that there was no dispute that the ST-1 Forms were genuine and had been issued by the Sales Tax Department to the purchasing dealers. He further submitted that it was not in di .....

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013) 59 VST 1 (Delhi) and Powerlite Electricals India P Ltd vs. Commissioner Trade and Taxes Delhi: St. Appl. 78/2012, decided on 23rd March, 2015 in support of his contentions. 5. Mr. Peeyoosh Kalra, Addl. Standing Counsel for the Revenue submitted that there was no dispute as to the obligations of the dealer making sales against receipt of ST-1 Forms. He, however, emphasized that the present case was not one where the Assessee was being faulted for any defect in the Accounts maintained by the .....

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s, it would be relevant to refer to the relevant provisions of the Delhi Sales Tax Act, 1975 as were enforced at the material time. 7. Section 4 of Act provides for the levy of Sales Tax on the taxable turnover of an assessee. The expression turnover is defined under Section 2(o) of the Act 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 prescr .....

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t the taxable turnover for the purposes of the Act. Section 4(2)(a)(v) of the Act provides for exclusion of 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 the Act reads as under :- 4. Rate of Tax - (1) xxxx xxxx xxxx xxxx xxxx (2) For the purposes of this Act, "taxable turnover" means that part of a dealer's turnover during the prescribed period in any year which remains after deducting t .....

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ffected by transfer of documents of tile to such goods during the movement of such goods from Delhi; or (3) for sale by him in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents of title to such goods effected during the movement 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 certi .....

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sale or resale; 9. Rule 7 of the Delhi Sales Tax Rules, 1975 (hereinafter referred to as the Rules ) specifies the conditions subject to which a dealer may claim deduction from his turnover on account of sales made to a registered dealer. The relevant extract of Rule 7(1) 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 .....

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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 each year. 10. Rule 8 of the Rules mandate .....

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ds of such forms and matters incidental thereto.- (1) The declaration referred to in the second proviso to clause (a) of sub-section (2) of section 4 shall be in Form ST-1 which shall be printed under the authority of the Commissioner and shall be obtained from the appropriate assessing authority by the registered dealer intending to purchase goods on the strength of his certificate of registration. (2) No selling dealer shall accept any declaration from a purchasing registered dealer unless it .....

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1st March, 1979 with an up to date account of the forms received, used and surrendered. (2A) If the space provided in Form ST-1 is not sufficient for making the entries, the particulars specified in the said form may be given in a separate annexure attached to that form so long as it is indicated in the form that the annexure forms part thereof and such annexure is also signed by the person signing the declaration in Form ST-1. (3) For obtaining declaration Form ST-1, a registered dealer- (i) sh .....

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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 t .....

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issued to him in advance together with the returns for the period during which the form were utilized; or (iii) been found by an appropriate assessing authority having some adverse material against him, suggesting any concealment of sale or purchase or of furnishing inaccurate particulars in the returns, the appropriate assessing authority shall, after affording the applicant an opportunity of being heard, withhold, for reasons to be recorded in writing, the issue of declaration forms to him an .....

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hall be made over to the selling dealer. 11. A bare perusal of Form ST-1 indicates that it is in two parts; while one part is marked as duplicate the other part is marked as original. The portion marked as Original is issued by the purchasing dealer to the selling dealer and the counterfoil is retained by the purchasing dealer. 12. In the present case, it is not disputed that the Assessee had produced the declarations made by the purchasing dealer in the prescribed form (ST- 1 Form). The genuine .....

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Madras v. M/s. Radio and Electricals Ltd. &Anr.:(1996) 18 STC 222 had 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 to 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, provided in resp .....

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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 misa .....

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Electricals India P. Ltd. (supra) and Milk Food Ltd. (supra). 15. In view of the above, it is well established that a selling dealer would have no duty to examine the correctness of the Form ST-1 submitted; the selling dealer would also not be responsible for any misapplication of goods by the purchasing dealer or failure on the part of the purchasing dealer to maintain the correct records. Clearly, the Assessee could not be held responsible for any discrepancy in the ST-2 Account furnished by .....

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the AA had concluded that the Assessee had not been able to substantiate its claim regarding transfer of goods to the purchasing dealer. The remand assessment order had been upheld by the FAA. The Tribunal had also accepted the Revenue s contention that the genuineness of the sales claimed to have been made by the Assessee were not established. 16. In the aforesaid context, it would be important to note the documents produced by the Assessee in support of its claim. The Assessee had produced th .....

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dicate the receipt of consideration from the respective purchasing dealers and duly receipted invoices. The Order dated 3rd February, 2010 dismissing the Review Petition filed by the Assessee indicates that the aforesaid documents were referred to by the Assessee. 17. The AA had passed the remand assessment order concluding that the sales were not genuine, principally, for the reason that the Assessee had been unable to produce the purchasing dealers and according to the AA, it had also not esta .....

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chasing dealers were not found in existence at the time of making the remand assessment order. Insofar as the ST-2 Account furnished by the purchasing dealer is concerned, it is well established that the Assessee cannot be held responsible for any discrepancy in that regard. As indicated above, the originals of ST-1 Forms in the name of the Assessee had been produced and the Assessee could not be penalised for any contrary return filed by the purchasing dealers. As regards the existence of the p .....

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purchasing dealers was doubted at that time. Clearly, if the purchasing dealers were not found in existence almost a decade after the transactions in question had been completed, the Assessee cannot be held responsible on that count. Particularly, when there is no dispute that such dealers were registered by the Department at the relevant time and, therefore, their existence at the material time cannot be questioned by the Department, unless on investigation, it is found that ST-1 Forms itself .....

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of the purchasing dealer indicated that in some cases, advance payments had been received prior to the dates of invoice, in our view, could not possibly lead to the conclusion that the transactions were not genuine. Photocopies of ledger accounts of two purchasing dealers, which were handed across by Mr. Mahna indicate that bulk of the amounts had been received in advance and only small amounts - in one case ₹ 323.00 - had been received after the date of invoice. The Tribunal assumed that .....

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h is based on such an assumption would be wholly perverse and bereft of merits. 20. The Tribunal had further concluded that the transfer of property in goods had not been established. We find the aforesaid conclusion to be unmerited in view of the fact that the Assessee had produced invoices which were duly receipted by the purchasing dealers. The ST-1 Forms, in addition to the other particulars, also specifically recorded the receipt of goods by the purchasing dealer. In addition, the receipt o .....

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by the Assessee against ST-1 Forms. No investigations had been conducted by the AA at the material time on the purchasing dealers - the Assessment Order had been passed without summoning the purchasing dealers or making any further enquiries as to the correctness of the ST-2 Account submitted by them. 22. In view of the above, we find it difficult to sustain the denial of deduction claimed by the Assessee for the sales made against ST-1 Forms. 23. Under Rule 7(1) of the Rules, the Assessee is re .....

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