1978 (4) TMI 216 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether rule 8-D of the Madhya Pradesh Sales Tax (Central) Rules, 1957, is directory or mandatory.
2. Whether the assessee was entitled to exemption under section 6(2) of the Central Sales Tax Act, 1956, without producing C form declarations from the purchasing dealer.

Issue-Wise Detailed Analysis:

1. Whether rule 8-D of the Madhya Pradesh Sales Tax (Central) Rules, 1957, is directory or mandatory.
The central question for determination was whether rule 8-D of the Madhya Pradesh Sales Tax (Central) Rules, 1957, which requires the production of C form declarations in addition to E-I form for claiming exemption under section 6(2) of the Central Sales Tax Act, 1956, is directory or mandatory.

The Tribunal held that since section 6(2) of the Central Sales Tax Act, 1956, does not require the production of C form declarations, rule 8-D could only be considered directory and not mandatory. The Tribunal's view was that the assessee was entitled to the exemption claimed under section 6(2) based on the production of E-I form alone.

Section 6(2) of the Central Sales Tax Act, 1956, provides an exemption from tax for "subsequent sales" to registered dealers, with the condition that the dealer effecting the sale furnishes a certificate (E-I or E-II form) from the registered dealer from whom the goods were purchased. Rule 12(2) of the Central Sales Tax (Registration and Turnover) Rules, 1957, prescribes the form of the certificate required for claiming exemption under section 6(2).

Rule 8-D of the Madhya Pradesh Sales Tax (Central) Rules, 1957, requires the dealer making the subsequent sale to furnish both the E-I form and the C form declaration received from the purchasing dealer. However, the court noted that this additional requirement was not mandated by section 6(2) or the Central Sales Tax (Registration and Turnover) Rules, 1957.

The court concluded that rule 8-D, while potentially valid, should be construed as directory rather than mandatory. This interpretation avoids introducing a new condition for exemption that is not specified in section 6(2) or the Central Rules. The court emphasized that substantial compliance with rule 8-D, such as satisfying the assessing authority that the subsequent sale was made to a registered dealer, is sufficient.

2. Whether the assessee was entitled to exemption under section 6(2) of the Central Sales Tax Act, 1956, without producing C form declarations from the purchasing dealer.
The assessee, a dealer in foodgrains, oil-seeds, and forest produce, complied with the requirement of providing the E-I form but did not produce the C form declarations. The Tribunal found that the assessee was entitled to the exemption under section 6(2) of the Central Sales Tax Act, 1956, despite not producing the C form declarations.

The court examined the relevant legal provisions and concluded that the requirement of furnishing a C form declaration is not a condition precedent for claiming exemption under section 6(2). The Central Sales Tax (Registration and Turnover) Rules, 1957, only require the E-I or E-II form for claiming exemption.

The court referred to several authorities and precedents, including the decisions in State of Orissa v. M.A. Tulloch and Co. Ltd. and Kedarnath Jute Manufacturing Co. Ltd. v. Commercial Tax Officer, which supported the view that additional requirements imposed by state rules should be treated as directory to avoid inconsistency with the central provisions.

The court also noted that the substantial compliance with rule 8-D was found in the present case, as there was no dispute that the subsequent sales were made to registered dealers in the course of inter-State trade.

Conclusion:
The court upheld the Tribunal's view that rule 8-D of the Madhya Pradesh Sales Tax (Central) Rules, 1957, is directory and not mandatory. Consequently, the assessee was entitled to the exemption under section 6(2) of the Central Sales Tax Act, 1956, even without producing the C form declarations. The reference was answered in favor of the assessee and against the revenue, with each party bearing its own costs.