1964 (5) TMI 44 - HC - VAT and Sales Tax

Issues Involved:
1. Responsibility of the dealer regarding the correctness of the certificate of registration.
2. Validity and correctness of declarations for claiming deductions.
3. Applicability of estoppel against the State in tax matters.
4. Burden of proof for permissible deductions.

Issue-wise Detailed Analysis:

1. Responsibility of the dealer regarding the correctness of the certificate of registration:
The court examined whether the dealer has any responsibility to verify the correctness of the certificate of registration of the purchasing dealer. The Tribunal held that the word "true" in the declaration required by Rule 27(2) must mean that the purchasing dealer must exist as a legal person and carry on business as a dealer. However, the court found that the statute does not impose such a burden on the dealer. The dealer is not required to investigate beyond the production of a valid certificate of registration. The court concluded that the law does not cast on the assessee any responsibility to be satisfied about the correctness of the certificate of registration, but the dealer runs the risk of losing the claim for deduction if the Department shows that the purchasing dealers were not, in law, registered dealers.

2. Validity and correctness of declarations for claiming deductions:
The court analyzed the requirements for a valid declaration under Rule 27(2) of the Orissa Sales Tax Rules. The declaration needs to state that the goods purchased are specified in the purchasing dealer's certificate of registration as being required for resale. The Tribunal's interpretation that the declaration must also confirm the existence and business operation of the purchasing dealer was found incorrect. The court emphasized that the declaration's truth is limited to the contents of the certificate and does not need to confirm the purchasing dealer's business intentions or existence.

3. Applicability of estoppel against the State in tax matters:
The court considered whether the principle of estoppel could prevent the State from challenging the validity of the registration certificates. The court referred to several precedents, including Supreme Court judgments, which established that estoppel by record does not apply to taxation matters. The court held that the principles of estoppel are not applicable against the Government in taxation matters, as the Government cannot be estopped from proving that the so-called purchaser was not a registered dealer in the eye of law. The court noted that any mistake or negligence by the Sales Tax Authorities in issuing registration certificates does not create an estoppel against the Government.

4. Burden of proof for permissible deductions:
The court addressed the burden of proof for claiming deductions under Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act. The court stated that the initial burden of proving the deduction lies on the assessee. The production of a certificate of registration serves as presumptive evidence in favor of the assessee. However, the Department can rebut this presumption by proving that the registration was not effected in accordance with law. The court emphasized that the mere production of a declaration is not conclusive, and it is open to the Department to challenge the validity of the registration.

Conclusion:
The court answered the questions as follows:
- Question (a): The law does not impose a responsibility on the assessee to verify the correctness of the certificate of registration, but the assessee risks losing the deduction claim if the Department proves the purchasing dealers were not legally registered.
- Question (b): The declaration stating the purchasing dealer is registered is strong presumptive evidence but not conclusive. The Department can rebut this presumption by showing the purchasing dealer was not validly registered.

The court concluded with a consolidated cost for all references and a hearing fee fixed at Rs. 100.

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