1980 (2) TMI 237 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sub-rule (14) of rule 32 of the Kerala General Sales Tax Rules, 1963.
2. Validity of form 25 prescribed under sub-rule (14).
3. Petitioner's claim for exemption from tax on sales of tapioca.
4. Interpretation of the mandatory or directory nature of sub-rule (14).

Detailed Analysis:

1. Validity of Sub-Rule (14) of Rule 32:
The petitioner challenged sub-rule (14) of rule 32 of the Kerala General Sales Tax Rules, 1963, asserting its invalidity. The court reviewed the statutory provisions, including section 5 of the Kerala General Sales Tax Act, 1963, which is the charging provision for tax on the sale or purchase of goods. The court noted that tapioca is listed under entry 72 of the First Schedule, which specifies that tax is payable by the last purchaser in the state who is liable to tax under section 5. The court concluded that sub-rule (14) serves as a rule of evidence to ensure compliance with entry 72 and is thus intra vires the statute and valid.

2. Validity of Form 25:
Form 25, prescribed under sub-rule (14), requires a purchasing dealer to declare that they are liable to pay tax under section 5, including their registration certificate number and other relevant details. The petitioner argued that the form is arbitrary as it excludes the possibility of proving exemption through other means. The court found that form 25 is specific and necessary to establish the seller's claim for exemption under entry 72. The form's requirements ensure that the transaction supports the claim for exemption, making it valid and not arbitrary.

3. Petitioner's Claim for Exemption from Tax:
The Sales Tax Officer disallowed the petitioner's claim for exemption from tax on sales of tapioca for failing to meet the requirements of rule 32(14). The court emphasized that to qualify for exemption, the petitioner must prove that the sale was to another dealer liable to pay tax under section 5. This necessitates obtaining a declaration in form 25 from the purchaser. The court upheld the officer's decision, stating that the petitioner did not provide the necessary declarations, thus failing to establish their claim for exemption.

4. Interpretation of the Mandatory or Directory Nature of Sub-Rule (14):
The petitioner argued that sub-rule (14) should be interpreted as directory rather than mandatory, allowing for other means of proving exemption. The court distinguished this case from a previous ruling where sub-rule (13) was considered directory because it was possible to verify tax payment through other documents. In contrast, sub-rule (14) involves goods that have not yet suffered tax, requiring the production of a registration certificate to verify the purchaser's status as a dealer liable to tax. The court concluded that sub-rule (14) is mandatory, as it is the most effective means of verifying the claim for exemption.

Conclusion:
The court dismissed the petition, affirming that sub-rule (14) of rule 32 and form 25 are valid and intra vires the statute. The petitioner's claim for exemption was rightly disallowed due to non-compliance with the mandatory requirements of sub-rule (14). The court emphasized the necessity of registration and proper documentation to establish claims for tax exemption under entry 72. The parties were ordered to bear their respective costs.