1974 (5) TMI 108 - HC - VAT and Sales Tax

Summary

Issues:
Assessment under Bengal Finance (Sales Tax) Act, 1941 - Disallowance of exemption claim under section 5(2)(a)(ii) - Appeal before Assistant Commissioner of Commercial Taxes - Dismissal of appeal - Legality of disallowance - Compliance with declaration form requirements - Retrospective effect of cancellation of registration certificates - Onus of proving genuineness of transactions - Adverse inference based on payment method - Definition of "sale" under the Act.

Analysis:
The petitioner, a company dealing in iron and steel, was assessed by the Commercial Tax Officer under the Bengal Finance (Sales Tax) Act, 1941 for the quarters ending December 1967, 1968, and 1969. The officer disallowed the exemption claim under section 5(2)(a)(ii) based on incomplete declaration forms and cancelled registration certificates of purchasing dealers. The petitioner appealed, but the Assistant Commissioner upheld the assessment, questioning the bona fides of the transactions due to missing information in the forms and absence of purchase orders.

The petitioner argued that the provisions should be treated as directory, citing precedents where subsequent cancellation of registration did not invalidate prior declaration forms. The court emphasized that the seller's duty is to ensure the purchaser is registered and goods are specified in the certificate, shifting the burden of proof to the tax officer. The court highlighted that mere suspicion or payment method should not lead to adverse inferences regarding transaction genuineness.

The judgment distinguished cases where purpose omission in declaration forms post-cancellation affected exemption claims from instances where substantial compliance was evident pre-cancellation. Referring to a Supreme Court decision, the court clarified that a dealer filing a declaration form had fulfilled their obligation, with the onus on the tax officer to disprove genuineness. The court quashed the assessment orders for 1967 and 1968, emphasizing that retrospective cancellation of registration certificates did not invalidate prior transactions. No relief was granted for 1969 as no assessment had been made yet.

In conclusion, the court allowed the petition, setting aside the impugned orders and permitting withdrawal of the furnished security deposit. The judgment underscored the importance of proper compliance with declaration forms, shifting the burden of proof to tax authorities, and avoiding adverse inferences based on payment methods.