2010 (9) TMI 964 - HC - VAT and Sales Tax

Whether it is the responsibility of the present dealer who accepted the form to ensure that the presenter of forms is a dealer entitled to present the forms by going behind the forms to enquire whether the presenter had a title to present the forms or not? Held that - Finding recorded by the Tribunal clearly shows that the forms carried the seal of the issuing office and initials of the issuing authority. They also carried the name and address of the purchasing dealer and its alleged registration number. The Department did not take any action against the purchasing dealer. It is not a case where the Department was not satisfied about genuineness of the stand of the assesseedealer that he had satisfied himself about the genuineness of the forms and the purchasing dealer. In such circumstances deduction allowed by the assessing authority as upheld by the Tribunal could not be held to be illegal. Accordingly we answer the question proposed against the State and in favour of the respondent. The reference is disposed of accordingly.

Summary

Issues:
1. Interpretation of section 27 of the Haryana General Sales Tax Act, 1973 regarding deduction claim for sales to registered dealers.
2. Validity of claim based on forms stolen from the department.
3. Responsibility of the selling dealer to verify the genuineness of the purchasing dealer.

Issue 1: Interpretation of section 27 of the Haryana General Sales Tax Act, 1973 regarding deduction claim for sales to registered dealers:
The Haryana Tax Tribunal referred a question of law under section 42 of the Act regarding the claim of sales made to registered dealers in terms of subclause (ii) of clause (a) of sub-section (1) of section 27 of the Act. The dealer claimed deduction for sales to registered dealers based on prescribed forms. The revisional authority disallowed the claim, stating that the buyer-dealer was unregistered and non-existent, having used stolen forms. However, the Tribunal reversed this decision, emphasizing that the forms were genuine, and the dealer had no means to verify the registration status of the purchasing dealer.

Issue 2: Validity of claim based on forms stolen from the department:
The contention raised was that since the forms used were stolen, the respondent-dealer should not benefit from the sales to registered dealers. The State relied on judgments from the Supreme Court, but the court did not accept this argument. The court emphasized that the selling dealer needed to ensure the purchasing dealer's genuineness. As the forms carried the seal and details of the purchasing dealer, and the Department took no action against the purchasing dealer, the deduction allowed by the assessing authority was deemed legal.

Issue 3: Responsibility of the selling dealer to verify the genuineness of the purchasing dealer:
The court highlighted that the selling dealer must satisfy themselves about the genuineness of the purchasing dealer. As long as the purchasing dealer provided genuine declarations issued by the Department, the selling dealer could not be considered negligent. The court noted that the forms in question contained all necessary details and were not questioned by the Department, indicating that the selling dealer had taken reasonable steps to verify the genuineness of the purchasing dealer.

In conclusion, the court ruled in favor of the respondent-dealer, stating that the deduction claim for sales to registered dealers was valid based on the circumstances presented. The reference was disposed of accordingly, affirming the legality of the deduction allowed by the assessing authority and upheld by the Tribunal.