1988 (7) TMI 376 - SC - VAT and Sales Tax

Whether the purchase of pulses effected by the assessee prior to May 1, 1977, could be subjected to tax under section 3-D(2) of the Sales Tax Act? Whether a provision in statute or rule is mandatory or directory? Held that - We are clearly of the opinion that the learned single Judge, while holding that the law contemplates and entitles the assessee to lead evidence to the satisfaction of the assessing authority had not correctly appreciated the mode of proof provided under the rules for rebutting the presumption in order to get benefit of tax exemption. The result of the aforesaid discussion is that sub-section (7)(a) of section 3-D of the Act is mandatory in nature and unless the proof is given, as required therein, it cannot be said that onus has been discharged and the assessee would not be entitled to exemption by examining other evidence. In conclusion we hold that the view taken by the sales tax authority does not suffer from any legal infirmity. The sales tax revision is accordingly dismissed but there shall be no order as to costs.

Issues Involved:
1. Taxability of pulses purchased prior to May 1, 1977, under section 3-D(2) of the U.P. Sales Tax Act.
2. Entitlement of the assessee to tax exemption based on evidence other than form III-C(2) under section 3-D(7)(b) of the U.P. Sales Tax Act.

Issue-wise Detailed Analysis:

1. Taxability of Pulses Purchased Prior to May 1, 1977:
The first issue before the High Court of Allahabad was whether the purchase of pulses effected by the assessee prior to May 1, 1977, could be subjected to tax under section 3-D(2) of the U.P. Sales Tax Act. The Tribunal held that these purchases could be subjected to tax. The High Court referred to Notification No. S.T.-II-2712/X-6(8)-77-U.P. Act XV-48-Order-77 and held that the contention of the assessee could not be accepted that he had purchased the pulses in question before May 1, 1977. There was no dispute on this contention raised subsequently.

2. Entitlement to Tax Exemption Based on Evidence Other Than Form III-C(2):
The primary contention urged before the High Court was that the Assistant Commissioner (Judicial) had granted relief to the assessee in respect of his turnover on pulses to the extent of Rs. 3,19,679 based on certain evidence produced before the assessing authority and the Assistant Commissioner. The Tribunal was of the view that since the assessee had not furnished form III-C(1), he was not entitled to any exemption under section 3-D of the Act.

In the case of Abdul Ghani Banney Khan v. Commissioner of Sales Tax 1982 UPTC 665, a learned single Judge of the High Court of Allahabad held that on the language of section 3-D(7)(b), the assessee was entitled to lead evidence to the satisfaction of the assessing authority that the sale was made to a registered dealer and was not confined only to furnishing form III-C(2). However, there was an earlier decision to the contrary in the case of Commissioner of Sales Tax v. Kailash Trading Co. 1981 UPTC 821, which has been referred to in this case.

The High Court, in the judgment under appeal, was of the view that as the Tribunal had not gone into the proof furnished by the assessee before the assessing authority and the Assistant Commissioner (judicial) in support of his claim for exemption, which according to the decision in Abdul Ghani Banney Khan 1982 UPTC 665, should be examined by the Tribunal, it remitted the matter to the Tribunal. The High Court allowed the revision and directed the Tribunal to consider whether the dealer was entitled to get any exemption based on the evidence furnished.

According to the appellant, the Revenue, the High Court was wrong because, in view of section 3-D(7)(b) of the Act, the assessee was not entitled to lead any other evidence apart from submitting to the registered dealer form III-C(2). Clause (b) of sub-section (7) of section 3-D provides that every sale within Uttar Pradesh by a dealer shall, for the purposes of sub-section (2), be deemed to be a sale to a person other than a registered dealer, unless the dealer selling the goods proves otherwise to the satisfaction of the assessing authority after having furnished such declaration or certificate, obtained from the purchaser of such goods, in such form and manner and within such period, as may be prescribed.

Under the said section, declaration forms have been prescribed by rule 12-B. This question stands concluded so far as the U.P. is concerned, by a Bench decision of the said High Court in the case of Govind Ram Tansukh Rai & Co. v. Commissioner of Sales Tax 1985 UPTC 1060. The Division Bench held that if the assessee had not furnished the required declaration forms to be entitled to exemption, the assessee could not file any other evidence which required to be considered by the taxing authorities.

This also follows logically from the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. Commercial Tax Officer [1965] 16 STC 607, where the Supreme Court held that the dealer could claim exemption on the sales to the registered dealer by furnishing the declaration form and unless such declaration forms are furnished, the dealer was not entitled to any exemption. The provisions of this nature should be construed as mandatory.

In that view of the matter, the High Court in the impugned order was in error in directing the Tribunal to consider the matter on other evidence. The assessee is entitled to exemption only on furnishing declaration forms. Since the assessee did not do so, he was not entitled to exemption.

Conclusion:
The appeal is allowed, and the decision of the High Court is set aside, restoring the order of the Tribunal. There will be no order as to costs. The judgment of the Division Bench of the Allahabad High Court in Govind Ram Tansukh Rai & Co. v. Commissioner of Sales Tax is also noted, where it was held that section 3-D(7)(a) of the Act is mandatory, and the assessee would not be entitled to exemption by examining other evidence.

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