State of Orissa Vs. M.A. Tulloch And
Co [1964] INSC 131 (21 April 1964)
21/04/1964 SIKRI, S.M.
SIKRI, S.M.
SUBBARAO, K.
SHAH, J.C.
CITATION: 1966 AIR 365 1964 SCR (7) 816
ACT:
Sales Tax-Sale to Registered dealer-Claim for
deductionProduction of declaration under r. 27(2) if obligatoryOrissa Sales Tax
Act, 1947 (Orissa 14 of 1947), s. 5(2)(a) (ii), Orissa Sales Tax Rules, 1947 r.
27(2)-Orissa Sales Tax (Amendment) Act (Orissa 10 of 1957).
HEADNOTE:
Assessment orders were passed by the Sales
Tax Officer allowing the deductions of two amounts claimed by the
respondent-dealer under s. 5(2)(a)(ii) of the Orissa Sales Tax Act in respect
of goods sold to a registered dealer.
The respondent-dealer filed appeals to the
Assistant Collector Sales Tax, challenging the assessment on grounds which were
not relevant and against those decisions revisions were filed by the dealer.
While the revisions were pending the Orissa Sales Tax Act was amended by Orissa
Sales Tax (Amendment) Act (Orissa Act, 10 of 1957) with the result that
revisions were treated as appeals to the Sales Tax Tribunal, and it enabled the
Government to file crossobjections. In pursuance, the State filed
cross-objections challenging the deductions on the ground that the dealer had
not produced any declaration as required under r. 27(2) of the Orissa Sales Tax
Rules, 1947. The Tribunal upheld this objection and directed that fresh
assessments be made. On statement of the case, the High Court answered that the
assessing officer was not wrong in allowing the deductions.
On appeal by special leave).
Held:(i) There is nothing in s. 5 (2) (a)
(ii) itself that disentitles a selling dealer to a deduction, but if the
contingency provided in the proviso occurs, then the price of goods is included
in the taxable turnover of the buying dealer.
(ii)The production of a declaration under r.
7(2) is not always obligatory on the part of a selling dealer when claiming the
exemption. It is open to him to claim exemption by adducing other evidence so
as to bring the transaction within the scope of s. 5(2)(a)(ii). Rule 27(2) must
be reconciled with the section and the rule can be reconciled by treating it as
directory. But the rule must be substantially complied with in every case. It
is for the Sales-tax Officer to be satisfied that, in fact. the certificate of
registration of the buying dealer contains the requisite statement, and if he
has any doubts about it, the selling dealer must satisfy his doubts. But if he
is satisfied from other facts on the record, it is not necessary that the
selling dealer should produce a declaration in the form required in r. 27(2).
before being entitled to a deduction.
Member Sales-tax Tribunal, Orissa v. Mls. S.
Lai & Co.
(1961) 12 S.T.C. 25, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 507-508 of 1963. Appeal by special leave from the judgment and order dated
November 4, 1950, of the Orissa High Court in Special Jurisdiction Cases Nos.
38 and 39 of 1958.
R.Ganapathy Iyer and R. N. Sachthey, for the
appellant (in both the appeals).
817 B.Sen and S. N. Mukherjee, for the
respondents (in both the appeals).
April 21, 1964. The Judgment of the Court was
delivered by SIKRI, J.-The respondent, hereinafter referred to as the dealer,
filed a return for the quarter ending June 30, 1951, under the Orirsa Sales Tax
Act (Orissa Act XIV of 1947) (hereinafter referred to as the Act). He claimed a
deduction of Rs. 2,40,000/under s. 5(2)(a)(ii) in respect of the goods sold to
a registered dealer, named M/s. Lal & Co. Ltd., BA 1335. Similarly, for the
quarter ending September 30. 1951, he claimed a deduction of Rs.
15,677/1/3. By two assessment orders passed
under s. 12(2) of the Act, the Sales Tax Officer, Cuttack III circle, Jaipur,
Orissa, determined the tax payable allowing the deduction of Rs. 2,40,000/and
Rs. 15,677/l/3, under s. 5(2)(a)(ii). The dealer filed appeals to the Assistant
Collector, Sales Tax, challenging the assesment on grounds which are not
relevant. The dealer later filed revisions against the decision of the
Assistant Collector. While the revisions were pending, the legislature amended
the Orissa Sales Tax Act, in 1957, by Orissa Sales Tax (Amendment) Act (Orissa
Act XX of 1957). The effect of this amendment was that revisions were treated
as appeals to Sales Tax Tribunal, and it enabled the Government to file
cross-objections. The State of Orissa, in pursuance of this amendment, filed
memorandum of cross-objections challenging the deduction of Rs. 2,40,000/and
Rs. 15,677/l/3, on the ground that the dealer had not produced any declaration,
as required under r. 27(2) of the Orissa Sales Tax Rules, 1947, as evidenced
from the Check Sheet kept on record. The Tribunal upheld this objection and
directed that fresh assessments be made. Certain other questions were raised
before the Tribunal by the dealer, but as nothing turns on them as far as these
appeals are concerned, they are not being mentioned. The Tribunal stated a case
to the High Court and one of the questions referred to was "whether the
assessing officer was not wrong in allowing deduction of Rs. 2,40,000/for the
quarter ending on 30-6-51 and Rs. 15,677/1/3 for the quarter ending on 30-9-51
from the respective gross turnover of the applicant." The High Court,
following its earlier decision in Member, Sales-tax Tribunal, Orissa v. Messrs
S. Lal & Co. Limited (1) answered the question in the affirmative. The
State of Orissa having obtained special leave from this Court, these appeals
are now before us for disposal.
Mr. Ganapathy lyer, on behalf of the State of
Orissa, has contended before us that it is clear that r. 27(2) was not complied
with, and, therefore, the Sales Tax Officer was wrong (1) (1961) 12 S.T.C. 25.
818 in allowing the said deduction. The
answer to the question referred depends on the correct interpretation of s. 5(2)(a)(ii),
Co. and r. 27(2). They read thus: "s. 5(2)(a)(ii)-sales to a registered
dealer of goods specified in the purchasing dealer's certificate of
registration as being intended for resale by him in Orissa and on sales to a
registered dealer of containers or other materials for the packing of such
goods.
Provided that when such goods are used by the
registered dealer for purposes other than those specified in his certificate of
registration, the price of goods so utilised shall be included in his taxable
turnover." "Rule 27(2). Claims for deduction of turnover under
sub-clause (ii) of clause (a) of subsection (2) of section 5A dealer who wishes
to deduct from his gross turnover on sales which have taken place in Orissa the
amount of a sale on the ground that he is entitled to make such deduction under
sub-clause (ii) of clause (a) of sub-section (2) of section 5 of the Act, shall
produce a copy of the relevant cash receipt ,or bill according as the sale is a
cash sale or a sale .on credit in respect of such sale and a true declaration
in writing by the purchasing dealer or by such responsible person as may be
authorised in writing in this behalf by such dealer that the goods in question
are specified in the purchasing dealer's certificate of registration as being
required for resale by him or in the execution of any contract:
Provided that no dealer whose certificate of
registration has not been renewed for the year during which the purchase is
made shall make such a declaration and that the selling dealer shall not be
entitled to claim any deduction of sales to such a dealer." It is, plain
from the terms of s. 5(2)(a)(ii) that a selling ,dealer is entitled to a
deduction in respect of sales to a registered dealer of goods, if the goods are
specified in the purchasing dealer's certificate of registration as being
intended for re-sale by him in Orissa. No other condition is imposed by the
above section. The proviso deals with consequences that follow if the purchasing
dealer uses them for purposes other than those specified in his certificate of
registration, and ,directs that, in that event, the price of goods so utilised
shall 819 be included in his turnover. Therefore, there is nothing in the
section itself that disentitles a selling dealer to a deduction, but if the
contingency provided in the proviso occurs, them the price of goods is included
in the taxable turnover of the buying dealer. But Mr. Ganapathy lyer says, be
it so, but the rule making authority is entitled to make ruler, for carrying
out the purposes of the Act, and r.
27(2) is designed to ensure that a buying
dealer's certificate of registration does, in fact, mention that the goods are
intended for resale by him, and for that purpose it has chosen one exclusive
method of proving the fact before a Sales Tax Officer. He further urges that no
other method of proving that fact is permissible. Rule 27(2) is mandatory and
if there is breach of it the selling dealer is not entitled to deduction. The learned
counsel for the respondent, on the other hand, contends that r. 27(2) is
directory. He points out that the word 'shall' should be read as 'may', in the
context. He further says that supposing the selling dealer brought the original
certificate of registration of a buying dealer and produced it before the Sales
Tax Officer, according to the appellant, this would not be enough, but this
could never have been intended. In our opinion, r. 27(2) must be reconciled
with the section and the rule can be reconciled by treating it as directory.
But the rule must be substantially complied with in every case. It is for the
Sales Tax Officer to be satisfied that, in fact, the certificate of
registration of the buying dealer contains the requisite Statement, and if he
has any doubts about it, the selling dealer must satisfy his doubts. But if he
is satisfied from other facts on the record, it is not necessary that the
selling dealer should produce a declaration in the form required in r. 27(2),
before being entitled to a deduction.
We are, therefore, of the opinion that the
High Court came to a correct conclusion. The High Court is correct in holding
that the production of a declaration under r. 27(2) is not always obligatory on
the part of a selling dealer when claiming the exemption. It is open to him to
claim exemption by adducing other evidence so as to bring the transaction
within the scope of s. 5(2)(a)(ii) of the Act.
In this case, the Sales Tax Officer was
satisfied by a mere statement of the dealer and it has not been shown that in
fact the registration certificate of the buying dealer, M / s S. Lal & Co.,
did not contain the statement that the goods were intended for resale by him in
Orissa.
The appeals accordingly fail and are
dismissed with costs.
One set of hearing fee.
Appeals dismissed.
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