1988 (7) TMI 396 - HC - VAT and Sales Tax

Issues Involved:
1. Non-acceptance of Form 32 declarations.
2. Interpretation and application of Explanation II of the Fourth Schedule.
3. Burden of proof under Section 6A of the Karnataka Sales Tax Act.
4. Compliance with Rule 26(9) and Form 32 requirements.
5. Validity and sufficiency of evidence for tax exemption claims.

Issue-wise Detailed Analysis:

1. Non-acceptance of Form 32 declarations:
The petitioner challenged the assessment orders for the years ending 30th June 1973 to 30th June 1978, arguing that the assessing authority improperly refused to accept Form 32 declarations. The Deputy Commissioner (Appeals) had remanded the cases twice, directing re-examination of the exemptions allowed based on purchase bills, which the petitioner claimed showed that the raw materials had already suffered tax. The assessments were completed following the Deputy Commissioner's remand order, but the petitioner contended that the declarations in Form 32 should suffice for proving the tax payment on the raw materials.

2. Interpretation and application of Explanation II of the Fourth Schedule:
The petitioner argued that the literal application of Explanation II of the Fourth Schedule was contrary to judicial precedents. Explanation II provides that no tax shall be levied on the sale of steel semis or re-rolled products if the dealer furnishes proof of levy and payment of tax by the previous or earliest of successive dealers. The petitioner contended that the insistence on additional proof beyond Form 32 was ultra vires Section 6A and exceeded the statutory requirements.

3. Burden of proof under Section 6A of the Karnataka Sales Tax Act:
Section 6A places the burden on the dealer to prove that the sale or purchase of goods had already been subjected to tax. The petitioner cited several decisions, including Sha Pannalal Pemraj & Co. v. Commercial Tax Officer, S. Narayana Setty v. State of Karnataka, and Srinivasa Traders v. Commercial Tax Officer, to argue that the burden of proof is satisfied by producing Form 32, and no further proof of actual tax payment by the selling dealers is required. The court agreed, noting that the dealer need not prove the actual payment of tax by the seller but must show that the turnover was liable to tax.

4. Compliance with Rule 26(9) and Form 32 requirements:
The court examined whether the declarations in Form 32 complied with Rule 26(9). Rule 26(9) mandates that the dealer furnish a declaration in Form 32 obtained from the registered dealer who sold the goods. The petitioner had provided declarations from both first and second sellers, including necessary details such as names, addresses, and registration numbers. The court found that these declarations met the requirements of Rule 26(9) and that no further proof of tax payment was necessary unless the assessing authority had positive proof to the contrary.

5. Validity and sufficiency of evidence for tax exemption claims:
The court emphasized that the declarations in Form 32, along with purchase bills, should suffice to establish the claim for tax exemption. The court noted that the petitioner was willing to produce all relevant purchase bills to support the declarations. The court held that the assessing authority should accept Form 32 and the purchase bills as sufficient evidence unless there was positive proof that the selling dealers were not liable to pay tax.

Conclusion:
The writ petitions were allowed, and the assessment orders were set aside. The cases were remanded to the assessing authority to redo the assessments in light of the court's findings. The petitioner was directed to cooperate with the assessing authority and appear before them on the specified date to expedite the reassessment process.

Writ Petitions allowed.

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