1952 (5) TMI 10 - HC - VAT and Sales Tax

Summary

Issues:
Disallowance of exemption claim from sales tax on sales made to a registered dealer. Verification of declarations for sales made to a specific dealer. Assessment based on untraceable purchasing dealer. Compliance with Sales Tax Act and Rules.

Analysis:
The petitioners claimed exemption from sales tax on sales to a registered dealer, Chandmal Agarwala. The Commercial Tax Officer initially found the claim to be in order and allowed it. However, a subsequent assessment raised concerns about the sales to Agarwala amounting to Rs. 24,150, as he was reported to be untraceable. The officer increased the taxable turnover based on the inability to verify declarations and doubts regarding the genuineness of the sales. The revised assessment was influenced by the untraceability of the purchasing dealer, leading to the disallowance of the claimed exemption.

The Commercial Tax Officer's decision was based on the inability to verify declarations due to the untraceability of the purchasing dealer. This raised a novel legal proposition as the Sales Tax Act only requires sales to be made to a registered dealer with specified goods for resale. The petitioners had provided similar declaration forms for other transactions with registered dealers, indicating compliance with the Act and Rules. The Assistant Commissioner added to the taxable turnover, suspecting manufactured declarations and suggesting potential prosecution for false declarations.

The Assistant Commissioner introduced new facts not supported by the record, alleging that the petitioners failed to comply with orders to obtain fresh declarations from the purchasing dealer. The Commissioner upheld the decision, emphasizing the onus on the seller to prove declaration genuineness. However, the petitioners' inability to verify the purchasing dealer's signature due to distance and lack of access to the original signature was considered reasonable. The petitioners' consistent compliance with tax requirements and straightforward conduct supported their claim for exemption.

The judgment highlighted that a seller cannot be held accountable for a purchaser's actions, such as untraceability. Lack of evidence to prove the declarations as false or manufactured led to the revision of the assessment, allowing the deduction of Rs. 24,150 from the gross turnover for tax calculation purposes. The petition for revision was granted, affirming the petitioners' claim for exemption and necessitating a revised assessment in their favor.