1991 (7) TMI 326 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether form 25 declaration conclusively proves the purchaser is the last purchaser under section 5(1) of the Kerala General Sales Tax Act, 1963.
2. Validity of sales transactions covered by form 25 declarations for the assessment years 1983-84 and 1984-85.
3. Registration status and business activities of Janatha Enterprises, Jyothi Traders, and Bhaskar Traders.
4. The obligation of the assessing authority to verify the genuineness of transactions covered by form 25 declarations.
5. The impact of the cancellation of registration certificates on form 25 declarations.
6. The validity period of registration certificates under section 14 of the Kerala General Sales Tax Act.

Detailed Analysis:

1. Form 25 Declaration and Last Purchaser Status:
The primary issue was whether the form 25 declaration conclusively proves that the purchaser is the last purchaser under section 5(1) of the Kerala General Sales Tax Act, 1963. The court held that form 25 declarations should not be treated as providing conclusive proof of the genuineness of the transactions covered by them. The assessing authority must enquire into the genuineness of the transactions before accepting the form 25 declaration and making the assessment.

2. Validity of Sales Transactions for 1983-84 and 1984-85:
For the year 1983-84, the assessee sold pepper to Janatha Enterprises, which was covered by a form 25 declaration. For 1984-85, sales to Janatha Enterprises, Jyothi Traders, and Bhaskar Traders were also covered by respective form 25 declarations. The assessing authority was not satisfied with the genuineness of these transactions and issued pre-assessment notices, which led to the inclusion of these sales in the taxable turnover. The Tribunal, however, directed the assessing authority to redo the assessments, finding that the assessee was not the last purchaser.

3. Registration Status and Business Activities:
The court noted that Janatha Enterprises and Jyothi Traders did not have the requisite registration during 1984-85. Bhaskar Traders was found to be dealing only in groceries, which raised doubts about their transactions in pepper. The court emphasized that the registration status of these entities at the time of the transactions needed to be verified.

4. Obligation of the Assessing Authority:
The court highlighted that the assessing authority must verify the genuineness of transactions covered by form 25 declarations. This includes possibly requisitioning the services of counterparts in the jurisdiction of the purchaser and conducting an enquiry. The burden of proving that a transaction is not liable to tax lies on the dealer.

5. Impact of Cancellation of Registration Certificates:
The court referred to the Division Bench ruling in Deputy Commissioner of Sales Tax v. Debi Prasad Shyam Sunder & Sons, stating that the cancellation of a registration certificate subsequent to the issuance of a form 25 declaration does not invalidate the declaration if the dealer was registered at the time of the transaction.

6. Validity Period of Registration Certificates:
The court examined sub-sections (5) and (7) of section 14 of the Kerala General Sales Tax Act, concluding that a registration certificate is valid for one year and must be renewed annually. Failure to renew within the prescribed period results in the certificate's invalidity, and a fresh certificate must be obtained.

Conclusion:
The court set aside the assessment order and the orders of the appellate authorities, directing the assessing authority to redo the assessment for 1984-85, keeping in view the principles stated in the judgment. The assessment for 1983-84 was confirmed, while the assessment for 1984-85 was remanded for de novo consideration. The exemptions already granted were not to be reopened. The petitions were allowed with no costs.