1966 (4) TMI 59 - SC - VAT and Sales Tax

When a purchasing dealer in one State furnishes in Form 'C' prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957, to the selling dealer in another State a declaration, certifying that the goods ordered, purchased or supplied are covered by the certificate of registration obtained by the purchasing dealer in Form 'B' prescribed under rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 is it open to the Sales Tax Authority under the Central Sales Tax Act to deny to the selling dealer the benefit of concessional rates under section 8(1) of the Central Sales Tax Act, 1956? Held that - Appeal dismissed. Observation of the High Court that the selling dealer may not enquire whether the requirement is not within the certificate of registration of the purchasing dealer is not accurate. But whether the goods specified in the registration certificate in Form 'B' can be used for the purpose is not for the selling dealer to determine. That is a matter which has already been determined by the notified authority issuing the certificate of registration.

Issues Involved:

1. Applicability of concessional rate of sales tax to inter-State sales under the Central Sales Tax Act, 1956.
2. Validity of Form 'C' certificates specifying multiple purposes for the use of purchased goods.
3. Authority of Sales Tax Officers to scrutinize the validity and application of Form 'C' certificates.
4. Legal interpretation of sections and rules under the Central Sales Tax Act and the Central Sales Tax (Registration and Turnover) Rules, 1957.

Issue-wise Detailed Analysis:

1. Applicability of Concessional Rate of Sales Tax to Inter-State Sales:

The appeals addressed whether a selling dealer can be denied the benefit of concessional rates under section 8(1) of the Central Sales Tax Act, 1956, when the purchasing dealer furnishes a Form 'C' declaration. The High Court held that if the selling dealer produces a Form 'C' certificate setting out one or more purposes in section 8(3)(b) and the Sales Tax Authorities do not deny that the purchasing dealer is a registered dealer, the selling dealer should not be denied the concessional rate of tax, even if the goods are used for purposes other than those mentioned in the certificate of registration.

2. Validity of Form 'C' Certificates Specifying Multiple Purposes:

The Court examined whether a Form 'C' certificate specifying multiple purposes for the use of purchased goods is valid. The judgment clarified that it is not necessary for the purchasing dealer to declare that goods are intended to be used for one purpose only. A purchasing dealer may use goods for multiple purposes, and the Act and Rules do not require separate certificates for each purpose. The certificate in Form 'C' complies with the requirements if it declares that goods are purchased for all or any of the purposes mentioned.

3. Authority of Sales Tax Officers to Scrutinize the Validity and Application of Form 'C' Certificates:

The Court discussed the extent of the authority of Sales Tax Officers to scrutinize Form 'C' certificates. It was held that the Sales Tax Officer can verify the genuineness of the certificate and whether the goods are specified in the purchasing dealer's registration certificate. However, the Officer cannot hold an inquiry into whether the goods can be used for the declared purposes or if they were actually used for those purposes. The responsibility of ensuring the correctness of the application of goods lies with the purchasing dealer, and any misapplication incurs penalties under section 10 of the Act.

4. Legal Interpretation of Sections and Rules under the Central Sales Tax Act and the Central Sales Tax (Registration and Turnover) Rules, 1957:

The judgment provided a detailed interpretation of sections 8, 10, and related provisions of the Central Sales Tax Act, 1956, and the Central Sales Tax (Registration and Turnover) Rules, 1957. It emphasized that the legislative intent was to grant concessional rates to registered dealers for goods specified in their registration certificates and intended for resale, manufacture, contract execution, or packing for resale. The Court also highlighted the procedural aspects of issuing and verifying Form 'C' certificates and the roles of the purchasing and selling dealers in this process.

Conclusion:

The appeals were dismissed, affirming that the selling dealer is entitled to the benefit of concessional rates under section 8(1) upon producing a valid Form 'C' certificate, provided the goods are specified in the purchasing dealer's registration certificate. The Sales Tax Officer's authority is limited to verifying the genuineness of the certificate and its compliance with the registration details, without delving into the actual use of the goods. The judgment reinforced the procedural and substantive requirements for availing concessional tax rates under the Central Sales Tax Act, 1956.

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