India Age. (Reg),
Bangalore Vs. Addl. Commnr. of Com. Taxes,
Bangalore
[2004] Insc 761 (16 December 2004)
S.N.Variava,Dr.AR.Lakshmanan&S.H.Kapadia Dr. AR. Lakshmanan, J.
In the above appeal, the appellant has impugned the judgment dated
12.11.1998 passed by the High Court of Karnataka whereby the order of the
Additional Commissioner of Commercial Taxes dated 22.05.1998 was upheld. By
this order, the Additional Commissioner of Commercial Taxes disallowed the
claim of the appellant for concessional rate of tax on the inter-state sales
effected by the appellant on the basis of portions of "Form-C" marked
as duplicate and the indemnity bonds furnished by the appellant for the loss of
portions of Form-C marked as original.
The Assessing Authority has disallowed the benefit of concessional rate of
tax corresponding to duplicate C-Forms filed on the ground that the appellant
did not file original of the C-Forms issued by the purchasing dealers for the
inter-state sales effected by the appellant. The main contention before the
authorities was with regard to non-consideration of duplicate portion of
C-Forms filed in support of the claim for benefit of concessional rate of tax
under Section 8(2)(a) of the Central Sales Tax, 1956. The appellant challenged
the order of the Deputy Commissioner of Commercial Taxes, Bangalore on various
grounds before the Joint Commissioner of Commercial Taxes, Bangalore. The Joint
Commissioner for the reasons recorded in his order was of the opinion that the
assessing authorities should not have rejected the duplicate portion of the
C-Forms and the indemnity bonds filed by the appellant and should not have
denied the benefit of concessional rate of tax on such turnover covered by
duplicate C-Forms.
The Assessing Authority was directed to accept the duplicate C-Forms and
allow the benefit of concessional rate of tax under Section 8(2)(a) of the
Central Sales Tax, 1956.
In the light of the above direction, the assessment order was modified and
the Assessing Authority was directed to issue revised demand notice
accordingly.
Aggrieved by the order passed by the Joint Commissioner of Commercial taxes
(Appeals), the matter was taken up before the Additional Commissioner of
Commercial Taxes who, by his order, dated 22.05.1998 rejected all the objections
filed by the appellant/controller and confirmed the proposal made by the
authorities in the show- cause notice dated 11.14.1998. The Additional
Commissioner allowed the appeal and set aside the order of the Joint
Commissioner to the extent it allowed concessional rate of tax on the
inter-state sales effected by the controller on the basis of the portions of
the C-Forms marked as duplicate and the indemnity bonds furnished by the dealer
for the loss of the portions of the C-Forms marked as original. Aggrieved by
the above order, the appellant filed sales tax appeal No. 75 of 1998 before the
High Court of Karnataka. The High Court refused to interfere with the order
passed by the Additional Commissioner of Commercial Taxes and dismissed the
appeal accordingly. Aggrieved by the judgment and order passed by the High
Court, the above appeal was filed in this Court by the dealer.
We heard Mr. A.B. Saharya, learned senior counsel for the appellant and Mr.
Sanjay R. Hegde, learned counsel for the respondent. Mr. A.B. Saharya made
the following propositions at the time of hearing: - 1) The prescribed Form C
is executed in several identical parts marked 'Original', 'Duplicate' and
'Counterfoil' respectively. Where the part marked 'Original' is lost but, the dealer
selling the goods furnishes to the prescribed authority the other part marked
'Duplicate' which is also primary evidence of the said document by virtue of
the principles enshrined in Sec 62 of the Evidence Act, 1872, the same should
be accepted as complete compliance of the requirement under Rule 12(1) of the
Central Sales Tax (Registration and Turnover) Rules, 1957 (Central Rules) and
Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules 1958 (State Rules) for
levy of tax @ 4% under sub-section(1) and (4) of Section 8 of the Central Sales
Tax Act, 1956 (Central Act).
2) In any event, filing of the 'Original' portion of the C Form is not
mandatory, but directory; and, filing 'Duplicate' part thereof is sufficient
compliance for levy of lower rate of tax under Rule 12 (1) Central Rules read
with Rule 6(b)(ii) of the State Rules and Section 8 of the Central Act.
{Maganese Ore (India) Limited vs. Commissioner of Sales Tax, Madhya Pradesh
1991 (83) STC 116 Para 10 and 13} In the Alternative 3) Where the portion
marked 'Original of the C Form is lost and the selling dealer furnishes the
indemnity bond together with the portion marked 'Duplicate' of the C Form,
which would be the best secondary evidence of the lost counterpart of the
original C Form, the same should be accepted as sufficient compliance of the
alternative requirement of Rule 12 (2) and (3) of the Central Rules and Rule
6(b)(ii) of the State Rules for the levy of tax @ 4% under Sub-section (1) read
with Sub-section (1) and (4) of Section 8 of the Central Act.
Justification for the alternative proposition:
(a) When lower rate of 4% tax would be admissible on production of
additional duplicate of the C Form with the prescribed endorsement recorded in
red ink on all the three portions of such declaration Form, that too on the
basis of the third part of the Form marked 'Counterfoil' retained by the
purchasing dealer; it should be admissible where the selling dealer produces
the 'Duplicate' part of the very same declaration form duly received by him
from the buying dealer in normal course of the sale transaction in the first
instance.
(b) Where only the first part marked Original is lost, but, the portion
marked 'Duplicate' of the declaration form furnished by the purchasing dealer
is in existence and is produced by the selling dealer, together with the
indemnity bond, the requirement is fulfilled under Rule 12(1) and 12(2); and,
the additional provision made for production of another duplicate declaration
Form would not be attracted under Rule 12(3) of the Central Rules.
4) Where both the parts marked "Original" and
"Duplicate" of the declaration form furnished by the dealer
purchasing the goods are lost, the dealer selling the goods would have the
option, in addition to furnish the indemnity bond, he "may" demand
from the dealer who purchased the goods another duplicate of the declaration
form, and the same shall be acceptable as sufficient compliance of the
requirement under Rule 12(2) and (3) of the Central Rules read with Sub-section
(1) and (4) of Section 8 of the Central Act.
5) Central Sales Tax vs. Delhi Automobiles (1981 (48) STC 333) upheld by the
Hon'ble Supreme Court in (1997 (10) SCC 486) was a case where both portions
marked 'Original' and 'Duplicate' were lost and the dealer claimed benefit of
lower rate of tax on the basis of photocopies of the 'Counterfoil' of the C
Forms, which was rejected. This case is clearly distinguishable on facts.
There is no conflict between the observations made in this case by Delhi
High Court in (1981 (48) STC 333) or in the judgment of the Hon'ble Supreme
Court in (1997 (10) SCC 486) and the observations made in Commissioner of Sales
Tax, M.P., Indore vs. Gajanan Bidi Leaves Co. (1986 (62) STC 203) and also the
ratio in Manganese Ore (India) Limited vs.
Commissioner of Sales Tax, Madhya Pradesh (1991 (83) STC 116) where
'Duplicate' portion of the C Form was accepted as sufficient compliance under
Rule 12(1) of the Central Rules.
Mr. Saharya has also made the following submissions at the time of hearing:
a) That the High Court has failed to note that the fact of bona fides of the
loss of original portion of the statutory form is not disputed and as such Rule
6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 is not applicable;
b) The bonafides of the appellant in the matter of loss of original portion
of the C-Forms is not in dispute and also when the bonafides of the efforts
made by the appellant to obtain duplicate C-Forms from its customers in terms
of Rule 12(3) of the Central Rules which proved to be only marginally
successful is also not in dispute, the view of the High Court that even in such
a situation the appellant is not entitled to concessional rate of tax on the
basis of the duplicate portion of the C-Form is inequitable and works great
hardship on the appellant;
c) The appellant has collected only the lower rate of tax from its customers
and has paid the same to the Government the High Court ought to have been less
rigid in interpreting Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules,
1957;
d) Section 8(4) or Rule 12(1) does not say which part of the form was
required to be filed before the Assessing Authority. It is the form itself,
which by use of the words "original", "duplicate" and
"counter foil" gives an indication as to which part of the form is
required to be filed before the Assessing Authority. All the three parts are
identical in terms and they all form part of Form-C. Therefore, filing the
duplicate marked portion there was sufficient compliance of the provisions of
the Act and rules so as to entitle the assessee to get the benefit of
concessional rate of tax under Section 8(1) of the Central Act;
e) The High Court and the Assessing Authority is not justified in rejecting
the claim for concessional rate of tax on the disputed turnover rejecting the
duplicate portions of the original C-Forms without considering the facts and
circumstances under which the appellant have produced the duplicate portions of
the C-Form;
f) Rule 12(1) of the Central Sales Tax (R&T) Rules, 1957, prescribes
that the declaration and the certificate referred to in sub-section (4) of
section 8 shall be in Form C and D respectively, it does not say that the
original portion of C form only to be accepted and that under no circumstances
the duplicate portion should not be accepted. Nowhere in the Act or Rules it is
specified that duplicate portion of the form is not admissible by the assessing
authority under any circumstances. The duplicate portion is meant to be used in
extraneous circumstances by the dealer to claim the concessional rate as a
proof of quantity of the transactions.
g) The duplicate C-Form is nothing but a replica of the original C-Form is
meant for extreme circumstances. The act itself has provided what procedure to
be followed in the event of loss of C-Form. This having been fulfilled the High
Court and the Assessing Authority have grossly erred in not considering the
same and rejected the concessional rate of tax. It is submitted that all
possible efforts have been made in order to confirm the transactions from the
purchaser like obtaining attested copies on the triplicate and also a letter
from them confirming the transactions.
This is full compliance of Rule 12(2) as well as Rule 12(3). The appellant
has also lodged a police complaint for having lost the forms. Having done all
these acts, which are humanly possible, the appellant should not have been
denied the option of getting the concessional rate of tax.
h) Placing reliance on Section 62 primary evidence of the Evidence Act, it
is submitted that where a number of documents are made by a uniform process,
namely, printing, photocopy, cyclostyle they are not copies in the legal sense
of the term and that they are of counter part originals and each is primary
evidence of the contents of the rest but only secondary evidence of the common
original.
Mr. Sanjay R. Hegde, learned counsel appearing for the respondent, submitted
that the order passed by the High Court does not call for any interference and
no case is also made out by the appellant for such interference.
In the above background, the High Court was called upon to answer the
question as to whether the appellant is entitled to claim concessional rate of
tax without complying with the requirement contemplated under Rule 6(b)(ii) of
the Central Sales Tax (Karnataka) Rules, 1957. The High Court answered it in
the negative and in favour of the revenue. The assessee is in appeal before us.
The provisions of law involved in the present matter are as under: -
"8. Rates of tax on sales in the course of inter-State trade or commerce (1)
Every dealer, who in the course of inter-State trade or commerce (a) sells to
the Government any goods; or (b) sells to a registered dealer other than the
Government goods of the description referred to in sub-section (3) shall be
liable to pay tax under this Act, with effect from such date as may be notified
by the Central Government in the Official Gazette for the purpose which shall
be two per cent, of his turnover or at the rate applicable to t he sale or
purchase of such goods inside the appropriate State under the sales tax law of
that State, or as the case may be, under any enactment of that State imposing
value added tax, whichever is lower:
Provided that the rate of tax payable under this sub-section by a dealer
shall continue to be four per cent, of his turnover, until the rate of two per
cent, takes effect under this sub-section (2) The tax payable by any dealer on
his turnover in so far as the turnover or any part thereof relates to the sale
of goods in the course of inter-State trade or commerce not falling within
sub-section (1) (a) In the case of declared goods, shall be calculated at
twice the rate applicable to the sale or purchase of such goods inside the
appropriate State;
(b) In the case of goods other than declared goods, shall be calculated at
the rate of ten per cent or at the rate applicable to the sale or purchase of
such goods inside the appropriate State, whichever is higher; and (c) In the
case of goods, the sale or, as the case may be, the purchase of which is, under
the sales tax law of the appropriate State, exempt from tax generally shall be
nil, and for the purpose of making any such calculation under clause (a) or
clause (b), any such dealer shall be deemed to be a dealer liable to pay tax
under the sales tax law of the appropriate State, notwithstanding that he, in
fact, may not be so liable under that law.
Explanation For the purposes of this sub-section, a sale or purchase of any
goods shall not be deemed to be exempt from tax generally under the sales tax
law of the appropriate State if under that law the sale or purchase of such
goods is exempt only in specified circumstances or under specified conditions
or the tax is levied on the sale or purchase of such goods at specified stages
or otherwise than with reference to the turnover of the goods.
(3) The goods referred to in clause (b) of sub-section (1) (b) are goods of
the class or classes specified in the certificate of registration of the
registered dealer purchasing the goods as being intended for re-sale by him or
subject to any rules made by the Central Government in this behalf, for use by
him in the manufacture or processing of goods for sale or in the
tele-communications network or in mining or in the generation or distribution
of electricity or any other form of power;
(c) are containers or other materials specified in the certificate of
registration of the registered dealer purchasing the goods, being containers or
materials intended for being used for the packing of goods for sale;
(d) are containers or other materials used for the packing of any goods or
classes of goods specified in the certificate of registration referred to in
clause (b) or for the packing of any containers or other materials specified in
the certificate of registration referred to in clause (c).
(4) The provisions of sub-section (1) shall not apply to any sale in the
course of inter-State trade or commerce unless the dealer selling the goods
furnishes to the prescribed authority in the prescribed manner - (a) a
declaration duly filled and signed by the registered dealer to whom the goods
are sold containing the prescribed particulars in a prescribed form obtained
from the prescribed authority; or (b) if the goods are sold to the Government,
not being a registered dealer, a certificate in the prescribed form duly filled
and signed by a duly authorized officer of the Government Provided that the
declaration referred to in clause (a) is furnished within the prescribed time
or within such further time as that authority may, for sufficient cause,
permit" (5) Xxxxxx (6) Xxxxx (7) Xxxx (8) The provisions of sub-sections
(6) and (7) shall not apply to any sale of goods made in the course of
inter-State trade or commerce unless the dealer selling such goods furnishes to
the prescribed authority referred to in sub-section (4) a declaration in the
prescribed manner on the prescribed form obtained from the authority specified
by the Central Government under sub-section (6) in sub-section (5), duly filled
in and signed by the registered dealer to whom such goods are sold.
Explanation.- For the purposes of sub-section (6), the expression
"special economic zone" has the meaning assigned to it in clause
(iii) to Explanation 2 to the proviso to section 3 of the Central Excise Act,
1944 (1 of 1944)" Sec.13 (1) (a) (aa) (b) & (3) read as under:-
"13. Power to make rules (1) The Central Government may, by notification
in the Official Gazette, make rules providing for (a) the manner in which application
for registration may be made under this Act, the particulars to be contained
therein, the procedure for the grant of such registration, the circumstances in
which registration may be refused and the form in which the certificate of
registration may be given;
(aa) the form and the manner for furnishing declaration under sub- section
(8) of Section 8;
(b) the period of turnover, the manner in which the turnover in relation to
the sale of any goods under this Act shall be determined, and the deductions
which may be made under clause (c) of sub-section (1) of section 8A in the
process of such determination;
(c) ..
(d) (2) (3) The State Government may make rules, not inconsistent with the
provisions of this Act and the rules made under sub-section (1), to carry out
the purposes of this Act." Rule 12 of the Central Sales Tax (Registration
and Turnover) Rules, 1957 reads thus:
"12(1) the declaration and the certificate referred to in sub-section 4
of section 8 shall be in Forms C and D respectively:
Provided that Form C in force before the commencement of the Central Sales
Tax (Registration and Turnover) (Amendment) Rules 1974, or before the
commencement of the Central Sales Tax (Registration and Turnover) (Amendment)
Rules 1976, may also be used upto the 31st December 1979 with suitable
modifications;
Provided further that a single declaration may cover all transactions of
sale, which take place in one financial year between the same two dealers.
Provided also (2) Where a blank or duly completed form of declaration is
lost, whether such loss occurs while it is in the custody of the purchasing
dealer or in transit to the selling dealer, the purchasing dealer shall furnish
in respect of every such form so lost an indemnity bond in Form G to the
notified authority from whom the said form was obtained, for such sum as the
said authority may having regard to the circumstances of the case, fix.
Such indemnity bond shall be furnished by the selling dealer to the notified
authority of his State if a duly completed form of declaration received by him
is lost, whether such loss occurs while it is in his custody or while it is in
transit to the notified authority of his State Provided that where more than
one form of declaration is lost, the purchasing dealer or the selling dealer,
as the case may be, may furnish one such indemnity bond to cover all the forms
of declaration so lost (3) Where a declaration form furnished by the dealer
purchasing the goods or the certificate furnished by the Government has been
lost, the dealer selling the goods, may demand from the dealer who purchased
the goods or, as the case may be, from the Government, which purchased the
goods, a duplicate of such form or certificate, and the same shall be furnished
with the following declaration recorded in red ink and signed by the dealer or
authorized officer or the Government, as the case may be, on all the there
portions of such form or certificate "I hereby declare that this is the
duplicate of the declaration form/certificate Nosigned on .and issued to .who
is registered dealer of ..(State) and whose registration certificate number is"}
Rule 6(a)(i) of the Central Sales Tax (Karnataka) Rules, 1957 reads thus:
"6. (a) (i). A registered dealer, who wishes to purchase goods from
another such dealer on payment of tax at the rate applicable under the Act to
sales of goods by one registered dealer to another, for the purpose specified
in the purchasing dealer's certificate of registration, shall obtain on payment
of {fifty paise per form or Rs.12.50 per book of 25 forms or Rs.45-00 per book
of 100 forms} from the assessing authority in whose jurisdiction the principal
place of business is situated, a blank declaration Form prescribed {under
sub-rule (1) of Rule 12} of the Central Sales Tax (Registration and Turnover)
Rules, 1957 for furnishing it to the selling dealer. Before furnishing the
declaration to the selling dealer the purchasing dealer, or any responsible
person authorized by him in this behalf, shall fill in all required particulars
in the Form, and shall also affix his usual signature in the space provided in
the Form for this purpose.
Thereafter, the counterfoil of the Form shall be retained by the purchasing
dealer and the other two portions marked "original" and
"duplicate" shall be made over by him to the selling dealer.
**** **** (b)(i) The procedure for advance payment of tax shall be for the
same as that prescribed by the rules framed under the Karnataka Sales Tax Act,
1957, and for this purpose, every dealer shall submit every month, to the
assessing authority, a statement in the form prescribed by the rules framed
under the Karnataka Sales Tax Act, 1957, and it shall be accompanied by a
receipt from a Government treasury or crossed postal order or crossed cheque or
crossed demand draft in favour of the assessing authority for the amount of the
tax paid in advance.
(ii) A registered dealer who claims to have made a sale to another
registered dealer or to Government shall, in respect of such claim, attach to
his return to be filled in Form IV the portion marked 'original' of the
declaration or the certificate in Form D, received by him from the purchasing
dealer or Government, as the case may be. The assessing authority may, in his
discretion, also direct the selling dealer to produce for inspection the
portion marked 'duplicate' of the declaration or certificate in Form D, as the
case may be.
**** **** (d) Every declaration form obtained from the assessing authority
by a registered dealer shall be kept by him in safe custody and he shall be
personally responsible for the loss, destruction or theft of any such form or
the loss of Government revenue, if any, resulting directly or indirectly from
such theft or loss.
(e)(i) Every registered dealer to whom any declaration form is issued by the
assessing authority shall maintain, in a register in Form III a true and
complete account of every such form received from the assessing authority. If
any such form is lost, destroyed or stolen, the dealer shall report the fact to
the said assessing authority immediately, shall make appropriate entries in the
remarks column thereto and take such other steps to issue public notice of the
loss, destruction or theft as the assessing authority may direct." We have
carefully considered the elaborate submissions made by the learned senior
counsel. It is contended on behalf of the appellant that in respect of the
inter- state sales transactions, the appellant had collected 279 original
C-Forms and duplicates and that the appellant had separated original C-Forms
for submitting the same to the Assessing Officer and kept the duplicate
separately. The entire file containing the original had thereafter been
misplaced and, therefore, the appellant could file only the duplicate. It is
submitted that under Rule 12(2) of the Central Sales Tax (Registration and
Turnover) Rules, 1957 in case of loss of original C-forms, if he complies with
the above rule, the appellant will be eligible for the concessional rate of
sales-tax. It is stated that when the appellant had complied with the said
rule, there is no reason for denial of the concessional rate. The impugned
order passed by the respondent was, therefore, erroneous and it is set aside
restoring the order of the Assessing Authority. In our opinion, the said
contention is not tenable and has no force.
We have already extracted Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
Rules, 1957 and Rule 12(2) and 12(3) of the Central Sales Tax (Registration and
Turnover) Rules, 1957. In our view, the Rule has to be strictly construed.
Admittedly, the appellant has not complied with the said provisions and,
therefore, he is not entitled to the concessional rate of tax under Section 8
of the Central Sales Tax. Section 8(4) specifically provides that the
provisions of sub-section (1) shall not apply to any sale in the course of
inter-state trade or commerce unless the dealer selling the goods furnishes to
the prescribed authority in the prescribed manner. Rule 8(4)(a) also provides
that a declaration duly filled and signed by the registered dealer to whom the
goods are sold containing the prescribed particulars in a prescribed form
obtained from the prescribed authority. On the above provision, a registered
dealer will not be entitled to the concessional rate of tax in respect of
inter-state sales made by him without the production of the declaration
referred under clause (a) of sub-section (4) noted above.
Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is required
to submit along with his return the original of the prescribed forms. As could
be seen from the rule extracted above a registered dealer who claims that he
has made a sale to another registered dealer is required to attach the original
of the declaration forms on the certificate in the prescribed form received by
him from the prescribed dealer along with his return filed by him. We have
already extracted Section 13 of the Central Sales Tax Act,
which deals with the power of the Central Government to make rules, the form
and the manner for furnishing declaration under sub-section (8) of Section 8.
Sub- clause (3) of Section 13 provides that the State Government may make rules
not inconsistent with the provisions of the Central Sales Tax
Act, 1956 and the rules made under sub-section (1) to carry out the
purposes of the Act. In exercise of the powers conferred by sub-section 3,4,
and 5 of Section 13 of the Central Sales Tax, 1956, the Government of Karnataka
made the Central Sales Tax (Karnataka) Rules, 1957. Under rule 6(b) (ii) of the
Karnataka Rules, the State Government has prescribed as to the procedures to be
followed and the documents to be produced for claiming concessional rate of tax
under Section 8(4) of the Central Sales Tax
Act. Thus, the dealer has to strictly follow the procedure and the Rule
6(b)(ii) and produce the relevant materials required under the said rule.
Without producing the specified documents as prescribed thereunder a dealer
cannot claim the benefits provided under Section 8 of the Act.
Therefore, we are of the opinion that the requirements contained in Rule
6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory.
Section 12(1)(2) and (3) of the Central Sales Tax (R&T) Rules, 1957
provides that the registered dealer is required to file the declaration and the
certificate referred to in Section 8(4) in Form-C and D respectively. Form-C is
a declaration divided into three parts. All the three parts are identical, the
first part of the form being the counter foil and the second part being the
duplicate and the third part being the original. The counter foil is to be
retained by the purchasing dealer. The original is to be filed before the
Assessing Officer by the selling dealer to claim the concessional rate. The
duplicate is to be retained by the selling dealer. If the C-Form or the
original part of it is lost whilst in the custody of the purchasing dealer or
in transit, the purchasing dealer shall have to furnish an indemnity bond for
the same as fixed by the concerned authority. If the original part of C-Form is
lost by the selling dealer whilst it is in his custody or in transit, the
selling dealer shall furnish an indemnity bond as fixed by the concerned
authority and follow the procedure prescribed under Rule 12(3).
We are of the view that the Rule 6(b)(ii) of the Central Sales Tax
(Karnataka) Rules, 1957 which provides for furnishing of the original C-Form in
order to claim the concessional rate of tax is consistent with the provisions
of the Central
Sales Tax Act and there is no conflict between the provisions of Rule 12(2)
and (3) of the Central Sales Tax Rules and Rule 6(b)(ii) of the Central Sales
Tax (Karnataka) Rules, 1957 as contended by the appellant. Rule 12 of the rule
is intended to prevent mis-use of C- Forms by unscrupulous and mischievous
dealers and makes it obligatory for the dealer to furnish indemnity bond. In
other words, in order to claim concessional rate of tax, the original C-Form
has to be attached to the return as provided under Rule 6(b)(ii) of the Central
Sales Tax (Karnataka) Rules, 1957. It is not a mere formality or technicality
but it is intended to achieve the object of preventing the forms being mis-used
for the commission of fraud and collision with a view to evade payment of
taxes. In our opinion, Rule 6(b)(ii) which is clear and categoric cannot be
liberally construed but it should be construed strictly. We, therefore, hold
that without producing the original of the C-Form as prescribed under Rule
6(b)(ii) of the Rules the appellant is not entitled for concessional rate of
tax under sub-section (4) of Section 8 of the Act.
The very purpose of prescribing the filing of C-Forms is that there should
not be suppression of any inter-state sales by a selling dealer and evasion of
tax to the State from where the actual sales are affected. Secondly, the
purchasing dealer also cannot suppress such purchases once he issues C-Form to
the selling dealer. Since the dealer should issue C-Form has to maintain a
detailed account of such C-Forms obtained from the department prescribed under
the States Taxation law. The C-Form is a declaration to be issued only by the
sales tax authorities of concerned States. By issuing declaration in C-Form the
purchasing dealer would be benefited as he is entitled to purchase goods by
paying only concessional rate of tax of 4% as prescribed by the concerned State
of purchasing dealer otherwise the purchasing dealer has to pay tax at a higher
rate besides additional taxes on such sales effected within the State where
selling dealer is situated.
The authorities cited and relied on by learned senior counsel for the
appellant to support his views that concessional rate of tax at 4% should be
allowed even on the basis of the duplicate portion of C-Form cannot be accepted
and the judgments relied on by the learned counsel for the appellant are
distinguishable on facts and law and particularly in view of the specific
provisions contained in Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
Rules, 1957 which requires that the portion of C-Form marked original should be
furnished by the selling dealer to avail the concessional rate of tax on his
inter-state sales. It is not open to the Assessing Officers under the Act to go
into the rationale of Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules,
1957. Their duty is to simply implement it without going into the question of
any hardship that may be caused even to an honest dealer.
We shall now consider the rulings and pronouncements made by this Court on
the very subject.
In Kedarnath Jute Manufacturing Co. vs. Commercial Tax Officer, Calcutta and
Ors., [1965] 3 SCR 626, the question that arose in this case was whether under
Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, the furnishing
of declaration forms issued by the purchasing dealers was a condition for
claiming the exemption thereunder. This Court held as under:
"Section 5(2)(a)(ii) of the Act in effect exempts a specified turn-over
of a dealer from sales tax. The provision prescribing the exemption shall,
therefore, be strictly construed. The substantive clause gives the exemption
and the proviso qualifies the substantive clause. In effect the proviso says
that part of the turnover of the selling dealer covered by the terms of sub-
clause (ii) will be exempted provided a declaration in the form prescribed is
furnished. To put it in other words, a dealer cannot get the exemption unless
he furnishes the declaration in the prescribed form. It is well settled that
'the effect of an excepting or qualifying proviso, according to the ordinary
rules of construction, is to except out of the preceding portion of the
enactment, or to qualify something enacted therein, which but for the proviso
would be within it.
There is an understandable reason for the stringency of the provisions. The
object of s. 5(2)(a)(ii) of the Act and the rules made thereunder is
self-evident.
While they are obviously intended to give exemption to a dealer in respect
of sales to registered dealers of specified classes of goods, it seeks also to
prevent fraud and collusion in an attempt to evade tax. In the nature of
things, in view of innumerable transactions that may be entered into between
dealers, it will wellnigh be impossible for the taxing authorities to ascertain
in each case whether a dealer has sold the specified goods to another for the
purposes mentioned in the section. Therefore, presumably to achieve the twofold
object, namely, prevention of fraud and facilitating administrative efficiency,
the exemption given is made subject to a condition that the person claiming the
exemption shall furnish a declaration form in the manner prescribed under the
section. The liberal construction suggested will facilitate the commission of
fraud and introduce administrative inconveniences, both of which the provisions
of the said clause seek to avoid." In State of Madras vs. R. Nandlal and
Co., AIR 1967 SC 1758, this Court while construing the rule making power of
Central Government has observed as under:- "The Central Government has, in
exercise of the power under S.
13(1)(d), prescribed the form of declaration and the particulars to be
contained in the declaration. A direction that there shall be a separate declaration
in respect of each individual transaction may appropriately be made in exercise
of the power conferred under S.13(1)(d). The State Government is undoubtedly
empowered to make rules under sub-ss.(3) and (4) of S.13; but the rules made by
the State Government must not be inconsistent with the provisions of the Act
and the rules made under sub-s.(1) of S.13 to carry out the purposes of the
Act." In a similar matter - Commissioner of Sales Tax, Delhi vs. Delhi
Automobiles (P.) Ltd., STC Vol. 48 1981, the Delhi High Court held that the
production of a declaration form is a condition precedent for the availability
of the concession. The Bench also has observed that these detailed provisions
are intended as a measure of safeguard against possible mis-utilisation of the
forms and also to ensure that relief is not obtained by more than one selling
dealer in respect of the same declaration form by using the various parts of it
differently.
This Court has further held that the essence of these rules and regulations
is that before a selling dealer is able to claim the benefit of concessional
tax he should be able to produce the original and duplicate issued by him by
the purchasing dealer in the first instance or the duplicate which will also
contain these two portions of the forms issued along with a declaration
subscribed to by the purchasing dealer subsequently on the strength of his
earlier records and his personal knowledge and for which he will have to count
in due course to the Sales Tax Authorities from whom he obtained these
declarations. The bench was of the opinion that the production of the Photostat
copy of the counter foil cannot be said to be strict or even substantial
compliance of Rule 12(3) and that by merely producing the photostat copy of the
counter foil, it cannot be said that the Act and the Rules have been complied
with.
The case of Manganese Ore (India) Ltd. vs. Commissioner of Sales Tax, Madhya
Pradesh STC Vol.83 1991 was relied on by learned counsel for the appellant.
In the above case, in order to obtain the benefit of Section 8(1) of the Central Sales Tax Act, it
was argued before the High Court that Form-C consists of three parts original,
duplicate and counter foil and all the three parts are identical in terms of
them and form part of form-C and that Section 8(4) or Rule 12(1) does not say
which part of the form is required to be filed before the Assessing Authority.
In that case, the dealer filed the duplicate part of form-C instead of the
original, the High Court held that there was sufficient compliance with the
provisions of Section 8(4) of the Central Sales Tax
Act and those of Rule 12(1) of the Central Sales Tax (R&T) rules so as
to entitle the dealer to get the benefit of concessional rate of tax under
Section 8(1) of the Central Sales Tax Act. The
High Court as a result of their discussion held that the filing of original
parts of declaration in C-Form is not mandatory but directory under the Central Sales Tax
Act, 1956
read with rules thereunder and in the facts and circumstances of the case, the
assessee was entitled to the concessional rate of tax as if it had filed the
original parts of the declaration in C-Form as it had filed the original parts
in Maharashtra. The Assessing Authority which was also sought to be summoned by
an application for their production and further the duplicate parts thereof
were filed before the Assessing Authority in Madhya Pradesh.
The above judgment does not help the appellant in the present case. The
facts in the above case and the case on hand are different. This apart, there
is no similar rule in this case to the one found in the case on hand, namely,
Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 that makes of
the difference for it is the rule 6(b)(ii) imposes the condition in the instant
case.
Against the decision in Commissioner of Sales Tax, Delhi vs. Delhi
Automobiles (P.) Ltd., (supra) of the High Court of Delhi, the Delhi
Automobiles (P) Ltd. preferred an Appeal in this Court - Delhi Automobiles (P)
Ltd. vs. Commissioner of Sales Tax, Delhi (1997) 10 SCC 486 which was dismissed
by this Court. The learned judges of this Court has observed in para 7 as
under:
In our view, in the first place, the assessee had not done all that it
could; it could, and should, have preferred an appeal against the order of the
learned Single Judge and persisted in his application for obtaining from the
Official Liquidator duplicates of the 'C' Form declarations, as required by
Rule 12(3).
Since it did not, in the face of the clear language of the rule, its case
can hardly be said to be a hard case. The judgment cited by the learned counsel
has no application because that was a case where the language of the statute
was found to be ambiguous The language of the provision here is clear and was
rightly applied by the High Court.
The learned senior counsel for the appellant submitted that there is no
suggestion anywhere that there is anything wrong with the genuineness of the
transaction or any doubts as to the possession by the purchasing dealer on a
certificate enabling the sellers to obtain the concessional rate of tax under
Section 8 of the Act.
Under such circumstances, the authorities should not have taken the strict
view in rejecting the claim of the concessional rate of tax. At first sight,
the argument of the learned counsel for the appellant appears to be genuine and
acceptable but considering the mandatory nature of the provisions of the Act
and Rules, this Court is called upon to decide the questions involved in this
case. The provisions being mandatory they should have been complied with. The
appellant made no attempt to comply with Rule 12(3) till after his claim was
rejected by the Assessing Authority. Having made no attempt to comply with the
mandatory provisions, he disentitled himself from getting the concessional
rate. Even otherwise, in our view, it is a pure question of law as to the
proper interpretation of the provisions of Section 8 of the Central Sales Tax
Act and the provisions of Rule 12 of the Central Sales Tax (Registration
and Turnover) Rules, 1957 and Rule 6(b)(ii) of the Central Sales Tax
(Karnataka) Rules, 1957. In view of the decision of this Court in the case of
Kedarnath Jute Manufacturing Co. (supra) and of the decision in Delhi
Automobiles (P) Ltd. (supra), it is clear that these provisions have to be
strictly construed and that unless there is strict compliance with the
provisions of the statute, the assessee was not entitled to the concessional
rate of tax.
We are of the opinion that a liberal construction was not justified having
regard to the scheme of the Act and the Rules in this regard and if there was
any hardship, it was for the legislature to take appropriate action to make
suitable provisions in that regard. It is also settled rule of interpretation
that where the statute is penal in character, it must be strictly construed and
followed.
We also realize that the section and the rules as they stand may conceivably
cause hardship to an honest dealer. He may have lost the declaration forms by a
pure accident and yet he will be penalized for something for which he is not
responsible but it is for the legislature or for the rule making authority to
intervene soften the rigour of the provisions and it is not for this Court to
do so where the provisions are clear, categoric and unambiguous.
There is no merit in the appeal and the same shall stand dismissed. We say
no costs.
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