2003 (1) TMI 695 - HC - VAT and Sales Tax

Summary

Issues involved:
1. Legality of exemption claimed against Form 3-Kha by the selling dealer.
2. Interpretation of Section 4-B of U.P. Trade Tax Act regarding recognition certificate.
3. Precedents related to the liability of the selling dealer in cases of exemption claims based on certificates issued by purchasing dealers.

Detailed Analysis:

1. The primary issue in this case is the legality of the exemption claimed by the selling dealer against Form 3-Kha issued by the purchasing dealer. The Tribunal allowed the exemption, which was contested in the revision filed by the Commissioner of Trade Tax. The key question raised was whether the Tribunal was justified in exempting the sale when the purchasing dealer was not entitled to purchase goods at a concessional rate and was not registered under Section 4-B of the Act during the relevant period.

2. Section 4-B of the U.P. Trade Tax Act provides for special relief to manufacturers regarding the levy of sales tax. It mandates that a manufacturer may obtain a recognition certificate for goods required as raw material for manufacturing purposes. The Act outlines the procedure for obtaining recognition certificates and the issuance of Form 3-B to manufacturers holding such certificates. The selling dealer, in turn, claims exemption based on Form 3-B during assessment proceedings. The Act aims to ensure that the selling dealer is not held liable for any wrong committed by the purchasing dealer.

3. Several legal precedents were cited to support the Tribunal's decision. In the case of Commissioner of Sales Tax v. M/s. Metal Cans, a similar exemption claim was upheld by the Tribunal and subsequently by the Court. The judgment emphasized that the selling dealer's liability is limited to verifying the authenticity of the forms received and does not extend to verifying the genuineness of the purchasing dealer or the recognition certificate. Other cases such as State of Madras v. Radio and Electricals Limited and M/s. Bharat Iron Stores v. Commissioner of Sales Tax further supported the principle that the selling dealer acts as a careful businessman and cannot be burdened with extensive verification responsibilities.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the revision filed by the Commissioner of Trade Tax. The judgment reaffirmed that the selling dealer's responsibility is to act diligently based on the information provided in the forms received and that any discrepancies or liabilities related to the purchasing dealer should be addressed separately.