1971 (7) TMI 134 - SC - VAT and Sales Tax

Whether the refusal of the Tribunal to allow the claim for deduction from the gross turnover on account of aggregate sales to registered dealers for reasons given by it is legally valid? Held that - Allow these appeals, set aside the order of the High Court and direct the High Court to readmit the tax cases. There can be hardly any doubt that the question whether the assessee is entitled to deduct under the provisions of the Act from his total turnover, the turnover relating to the sales to the registered dealers is a question of law. But the High Court before deciding that question, may have to decide whether the decision on that question is barred in view of the decision of the Board of Revenue referred to earlier. The question of law formulated by the assessee is broad enough to include that question also.

Summary

Issues:
1. Interpretation of the Bihar Sales Tax Act, 1947 regarding deduction from taxable turnover for sales to registered dealers.
2. Dispute over compliance with Rule 18 of the Rules framed under the Act for claiming deductions.
3. Validity of the decision by the Board of Revenue on the deduction claimed by the assessee.
4. Review of the High Court's summary dismissal of the assessee's application under section 25(2) of the Act.

Analysis:

The Supreme Court heard appeals by the assessee against the dismissal of its applications under section 25(2) of the Bihar Sales Tax Act, 1947. The key question raised was whether the refusal by the Tribunal to allow the deduction from the gross turnover on account of sales to registered dealers was legally valid. The assessee, a registered dealer, claimed deductions for sales to registered dealers under the explanation to section 5 of the Act for the relevant assessment periods. However, the assessing authority rejected the claim, citing non-compliance with Rule 18 of the Rules framed under the Act, which specifies the requirements for claiming such deductions.

The explanation to section 5 defines the taxable turnover and allows for deductions from the gross turnover for sales to registered dealers under certain conditions. Rule 18 mandates that a dealer wishing to deduct cash sales to registered dealers must provide specific documentation, including a copy of the relevant cash memo and a declaration by the purchasing dealer. Despite the non-compliance with Rule 18, the assessee contended that it should still be entitled to the deduction under the Act. The Board of Revenue held that compliance with Rule 18 is mandatory, and failure to adhere to it disqualifies the assessee from claiming the deduction under the explanation to section 5.

The assessee pursued the matter through various levels of appeal, including to the Deputy Commissioner of Commercial Taxes, the Sales Tax Tribunal, and ultimately to the High Court. The Tribunal and the Appellate Tribunal rejected the assessee's plea based on the previous decision of the Board of Revenue. However, the Supreme Court emphasized that the question of whether the assessee is entitled to deduct the turnover from sales to registered dealers is a legal issue. The Court directed the High Court to reexamine the tax cases and decide on the validity of the deduction claimed by the assessee in accordance with the law, overturning the High Court's summary dismissal of the application.

In conclusion, the Supreme Court allowed the appeals, set aside the High Court's order, and instructed the High Court to reconsider the tax cases and make a decision on the assessee's entitlement to the claimed deductions. The Court highlighted the legal nature of the issue and the need for a proper legal assessment of the deduction under the Act.