2002 (7) TMI 770 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of Rule 8(4)(c) of the Delhi Sales Tax Rules, 1975.
2. Liability of selling dealers for sales tax when purchasing dealers fail to provide ST-1 forms.
3. Interpretation of provisions under the Delhi Sales Tax Act, 1975 and related rules.
4. Legal recourse for selling dealers when purchasing dealers default.

Summary:

1. Constitutionality of Rule 8(4)(c) of the Delhi Sales Tax Rules, 1975:
The petitioners challenged Rule 8(4)(c) on the grounds that it is ultra vires the provisions of section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975. The court held that the rule is not ultra vires as it aligns with the Act's objective to levy and collect tax. The court emphasized that the rule-making power under section 71(1) of the Act is broad and includes the authority to implement rules for the full realization of the Act's provisions.

2. Liability of Selling Dealers for Sales Tax When Purchasing Dealers Fail to Provide ST-1 Forms:
The court ruled that selling dealers are liable to pay sales tax if they cannot provide ST-1 forms for transactions. The petitioners argued that they should not suffer due to the purchasing dealers' failure to provide forms. However, the court maintained that the State should not lose its tax entitlement and that the selling dealers must absorb the purchasing dealers' failure to fulfill their responsibilities under the Act.

3. Interpretation of Provisions Under the Delhi Sales Tax Act, 1975 and Related Rules:
The court interpreted section 4(2)(a)(v) and related rules, emphasizing that the selling dealer's taxable turnover must include all transactions unless a declaration in the prescribed form (ST-1) is furnished. The court rejected the petitioners' argument that registered dealers are prohibited from charging sales tax from other registered dealers, stating that the Act and rules do not support such a proposition.

4. Legal Recourse for Selling Dealers When Purchasing Dealers Default:
The court noted that selling dealers have legal recourse against purchasing dealers who fail to provide ST-1 forms. The appropriate action is to file a suit for the recovery of sales tax from the purchasing dealer. The court highlighted that the Act and rules do not prohibit the simultaneous furnishing of ST-1 forms and that the forms should be obtained in advance of transactions.

Conclusion:
The petitions were dismissed, and the court upheld the validity of Rule 8(4)(c) of the Delhi Sales Tax Rules, 1975. The court emphasized that selling dealers are responsible for ensuring compliance with the Act and rules, and they must bear the consequences if purchasing dealers fail to provide the necessary forms. The court also clarified that the selling dealers have legal remedies against defaulting purchasing dealers.