2008 (5) TMI 615 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the declaration furnished by the selling registered dealer in form of ST-14 is sufficient compliance of the proviso of section 18 of the Act? Whether, on the facts and in the circumstances of the case, the non-deposit of tax by the selling registered dealers during currency of their registration certificate makes the purchasing registered dealer liable to pay the tax, in spite of the fact that the selling registered dealer has furnished declaration to the effect that tax has been paid? Whether, on the facts and in the circumstances of the case, the department can only proceed against the selling registered dealer in view of the fact the registered dealer has been furnished a false certificate and tax has been paid? Whether, on the facts and in the circumstances of the case, the Tribunal is right in law to maintain order of the Assessing Authority when the requirements of section 18 have been fully complied with by the petitioner-assessee? Held that - For claiming deduction from payment of tax on a subsequent sale of goods on which tax has been paid by the first seller, the dealer (second seller) has to furnish the certificate in the prescribed form and manner and signed by the registered dealer from whom the goods were purchased to the effect that the tax on such goods has been paid at the first stage. As per requirement of section 18 of the Act, there was no further step required to be taken by the petitioner to verify the payment of tax. In view of the law laid down by the Madras High Court in Raichael Chacko s case 1983 (12) TMI 272 - MADRAS HIGH COURT and Raman & Co. case 1990 (10) TMI 364 - Supreme Court of India , the dealer is entitled to claim deduction from the payment of sales tax on a subsequent sale for goods on which tax has been paid at the stage of first sale and it is not the duty of the subsequent seller to pay tax if the first seller has not paid the tax. Thus, we are of the view that the aforementioned questions of law do arise in the present case and, therefore, we direct the Sales Tax Tribunal, Haryana to draw a statement of the case and refer to this court for its decision the questions of law as aforementioned which arise out of the order of the Tribunal dated February 10, 1992.

Summary

Issues:
1. Interpretation of section 18 of the Haryana General Sales Tax Act regarding the claim of deduction for tax paid on subsequent sale of goods.
2. Validity of the declaration in form ST-14 furnished by the selling registered dealer.
3. Liability of purchasing dealer if the tax is not paid by the first seller.
4. Authority of the department to proceed against the selling dealer in case of false certificate.

Analysis:
1. The petitioner, a registered dealer, purchased vegetable ghee and claimed tax deduction under section 18 of the Haryana General Sales Tax Act. The Assessing Authority disallowed the claim, leading to subsequent appeals before higher authorities, which were also dismissed. The petitioner filed a petition seeking reference on questions of law arising from the Tribunal's order dated February 10, 1992.

2. The main contention was whether the declaration in form ST-14 provided by the selling registered dealer was sufficient compliance with the proviso of section 18 of the Act. The petitioner argued that once a proper declaration is furnished, the assessing authority should allow the claim, and any non-payment of tax by the first seller should be addressed by the department.

3. The Additional Advocate-General argued that if the tax was not paid by the first seller, the subsequent sale would not be exempt from tax unless a certificate confirming tax payment at the first stage is furnished. However, the petitioner had submitted the required declaration, and no action had been taken against the first seller for tax recovery.

4. The court analyzed section 18 of the Act, emphasizing the requirement for the second seller to furnish a certificate signed by the first seller confirming tax payment at the first stage of sale. Citing precedents, the court held that the duty to pay tax lies with the selling dealer, and the purchasing dealer fulfilling the conditions of section 18 should not be held liable for the first seller's non-payment of tax.

5. Relying on judgments from the Madras High Court and the Supreme Court, the court concluded that the petitioner was entitled to claim deduction for tax paid on subsequent sales, and it was not the duty of the subsequent seller to pay tax if the first seller had not paid. Consequently, the court directed the Sales Tax Tribunal to refer the questions of law raised by the petitioner for decision.